Re Geoffrey W Edelsten v Health Insurance Commission; John Nearhos; Nicholas J Radford; John Horgan: Arthur Waterhouse; Stella Kwong; William Rose; Neil Blewett (The Minister of Community Services and Health); and Edward Geoffrey Dash [1990] FCA 17 (5 February 1990)

FEDERAL COURT OF AUSTRALIA

Re: GEOFFREY W. EDELSTEN
And: HEALTH INSURANCE COMMISSION; JOHN NEARHOS; NICHOLAS J. RADFORD;
JOHN HORGAN: ARTHUR WATERHOUSE; STELLA KWONG; WILLIAM ROSE;
NEIL BLEWETT (THE MINISTER OF STATE FOR COMMUNITY SERVICES AND HEALTH);
and EDWARD GEOFFREY DASH
Nos. V G203 and 210 of 1989
FED No. 14
Administrative Law - Social Security

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Jenkinson J.(1)

CATCHWORDS

Administrative Law - Rules of natural justice and breach thereof - Existence of duty to observe rules of natural justice - Under legislation - Particular cases - Ministerial decision whether to refer to a Medical Services Committee of Inquiry question whether excessive services rendered by medical practtioner - right of practitioner to be heard.

Social Security - National health legislation - Committee of Inquiry - Power to refer to a Committee - "Excessive services" by a medical practitioner - Criteria for exercise of power.

Health Insurance Act 1973 Part V, Division 3

Health Insurance Commission Act 1973 s 8E

Health Insurance Commission Regulations, reg. 3(2)(b)

Brayson Motors Pty. Ltd. (In Liq.) v. Federal Commissioner of Taxation [1985] HCA 20; (1985) 156 CLR 651

Jackson v. Hall (1980) AC 854

Kioa v. West [1985] HCA 81; (1985) 159 CLR 550

Minister For Health v. Thomson [1985] FCA 208; (1985) 8 FCR 213

National Companies and Securities Commission v. Sim (No. 2) (1986) 4 ACLC 719

Re Guardian Investments Pty Ltd.; Wade v. Guardian Investments (1984) VR 1019

Webster v. McIntosh [1980] FCA 128; (1980) 49 FLR 317

HEARING

MELBOURNE
5:2:1990

Applicant in person

Counsel for the Respondents : Mr. T.J. North

Solicitor for the Respondents : Australian Government Solicitor

DECISION

Hearing of applications for an order of review in respect of each of two administrative decisions.

2. Both decisions were made in administration of the legislative scheme for monetary payments by way of medical benefits to Australian residents and certain other persons. The benefits are called medicare benefits in the Health Insurance Act 1973, in which the scheme is principally enacted. The benefits are payable in respect of medical and like expenses each of which has been incurred in respect of "a professional service". The definition in the Act of that phrase comprehends, inter alia, a medical service which is rendered by or on behalf of a medical practitioner and which falls within a description contained in one of more than eight thousand categories, each called an item and assigned a number, in a table of medical services in Schedule 1 to the Act, or in a substituted table prescribed by regulation in exercise of power conferred by s.4 of the Act and having effect, by force of that section, as if the substituted table were set out in Schedule 1. The benefit payable is a percentage, fixed in the Act, of the fee specified in respect of that item in the table for the State in which the service was rendered. Division 3 of Part V of the Act is concerned with Medical Services Committees of Inquiry. The first, definitional section of that Division includes sub-section 79(1B), which provides:
"A reference in this Division to excessive

services is a reference to professional
services (other than pathology services),
being services in respect of which medicare
benefit has become or may become payable and
which were not reasonably necessary for the
adequate medical or dental care of the patient
concerned."

Section 80 provides that the Minister of State administering the Act "shall establish for each State a Committee to be called a Medical Services Committee of Inquiry for that State and may establish two or more such Committees for a State". Each Committee must consist of five medical practitioners. The respondents other than Neil Blewett ("the Minister") are the members of such a Committee for the State of Victoria. Section 82 provides:

"A Committee shall inquire into, and submit to
the Minister its report and recommendations
on, any matter referred to the Committee by
the Minister, being a matter that -
(a) is relevant to the operation or
administration of this Act or the
National Health Act 1953 (other than Part
VII of that Act); and
(b) arises out of or relates to the rendering
of a professional service (other than a
pathology service), on or after 15 April
1977, in the State for which the
Committee is established."

The applicant is a medical practitioner. The decision which is the subject of the proceeding No. VG210 of 1989 is a decision made on 9 June 1989 by a delegate of the Minister, Dr. Edward Geoffrey Dash, to refer to the Committee "for inquiry into and submission of a report and recommendations to the Minister of State for Community Services and Health on matters relevant to the operation or administration of the said Act, which arise out of the rendering of professional services in the State of Victoria after 15 April 1977, namely, whether each professional service rendered to a patient by Geoffrey Walter EDELSTEN, medical practitioner, particulars of which are set out in Annexure marked 'B', patients numbered 1 to 544, being a service for which Medicare benefit has been paid, was an excessive service within the meaning of section 79(1B) of the said Act". The decision which is the subject of the other proceeding (No. VG203 of 1989) was made by a member of the staff of the Health Insurance Commission, Dr. John Peter Nearhos. This was a decision to refer to the Minister's delegate the question whether the applicant may have rendered excessive medical services.

3. Although in Division 3 of Part V direction is given for the course to be taken by a Medical Services Committee of Inquiry when, after consideration of a matter referred to it by the Minister and of any documents that accompany the reference supplied by the Minister, it appears to the Committee that a medical practitioner may have rendered "excessive services", and although direction is also given in that Division for the course to be followed when, after completion by a Committee of a hearing in relation to a matter referred to it, the Committee expresses in the report it is required by s.104 to make to the Minister the opinion that a medical practitioner has rendered "excessive services", there is no explicit reference in the Act to any power conferred, or duty imposed, on the Minister to concern himself with any question about "excessive services" when he is exercising the power conferred on him, again impliedly, by s.82 to refer to a Committee a matter of a description contained in paragraphs (a) and (b) of that section. So far as the Act is concerned any such a power or duty is found by implication from a consideration of the whole of Division 3. On the other hand there is an explicit legislative direction that in reaching a decision of the kind Dr. Nearhos made a central concern shall be whether "excessive services" may have been rendered. By the Health Insurance Commission Act 1973 a body corporate is established, the name of which supplies the name of that Act. It is a corporation aggregate, consisting of not less than three nor more than nine members called Commissioners. Section 5 of the Health Insurance Commission Act 1973 provides:

"The medicare functions of the Commission are -
(a) the planning and establishment of the
organization required to enable the
Commission to perform the functions that
will, on and after 1 February 1984, be
conferred on it by or under the Health
Insurance Act 1973; and
(b) on and after that date, such functions as
are conferred on the Commission by or
under the Health Insurance Act 1973."

That section is in Part II of the Act. Part IIA confers on the Commission "the functions of conducting a private health benefits fund in respect of a State or of the Northern Territory, in accordance with rules determined by the Commission". In Part IIB the following sections appear:

"8C. The functions conferred on the
Commission by this Part are in addition to the
functions conferred on the Commission by Parts
II and IIA.
8E. (1) The Commission shall perform such
functions in relation to health insurance as
are prescribed and such functions in relation
to other matters relating to health as are
prescribed.
(2) The regulations may prescribe the
manner in which the Commission is to carry out
a function prescribed under sub-section (1)."

Prescription was made by the Health Insurance Commission Regulations, paragraphs (a) and (b) of Regulation 3(2) of which provide:

"For the purposes of sub-section 8E(1) of the
Act the following functions are prescribed:
(a) to devise and implement measures intended -
(i) to prevent the rendering of
excessive services by a
practitioner or an optometrist;
(ii) to facilitate the detection of
cases where excessive services
have been so rendered and the
identification of those services;
(iii) to prevent, or facilitate the
detection of, activities related
to claims for payment, or the
receipt, of medicare benefits that
may constitute an offence under
the Health Insurance Act or the
Crimes Act 1914;
(b) to investigate cases where there are
reasonable grounds to suspect that a
practitioner or an optometrist may have
rendered excessive services and, where an
investigation discloses that there is
sufficient evidence to warrant a referral
of the case investigated to a Committee
established under Division 3 or 3A of
Part V of the Health Insurance Act, as
the case may be, to refer the case and
the information obtained in the course of
the investigation, with appropriate
comments and recommendations, to the
Minister or the delegate of the Minister."

The expression "practitioner" is so defined in the Health Insurance Act 1973 and in the Health Insurance Commission Regulations as to comprehend a medical practitioner. Section 8H of the Health Insurance Commission Act 1973 empowers the Commission to delegate to a member of the staff of the Commission all or any of its powers under that Act or under any other law of the Commonwealth, other than that power of delegation. It was in exercise of power so delegated, as I infer, that Dr. Nearhos made the decision in respect of which an order of review is sought.

4. Dr. Edelsten has been practising medicine for about twenty years. In December 1988 he began to carry on general practice in a Melbourne suburb. Less than a month later he received a request by the Health Insurance Commission ("the Commission") to meet a medical adviser employed by the Commission, "to discuss your practice statistics and matters in general". The discussion took place on 25 January 1989, between Dr. Edelsten and a medical practitioner named Dr. Lewis, who was an officer of the Commission. The claims for medicare benefits made in respect of professional services rendered in the course of his practice by Dr. Edelsten, like the claims in respect of all other medical practitioners' professional services, were received by the Commission in its administration of the medicare benefits scheme. From those claims information about that practice was obtained by abstracting the information from the Commission's computer records; and comparison was made by the Commission's officers between patterns of that practice and the normal patterns of practice by medical practitioners in general medical practice. It appeared by those comparisons that in several respects Dr. Edelsten's practice was unlike normal practice. The number of professional services in respect of which claims for medicare benefits had been made was greater for Dr. Edelsten than for any other medical practitioner in general practice in Victoria. Particular kinds of professional services were the subjects of abnormally numerous claims : investigation by a technique called ultrasound, by another called echocardiography, and the surgical repair of deep wounds are examples. The unusual patterns of practice were discussed by Dr. Lewis and Dr. Edelsten, who explained that he had been devoting many hours every day to the practice of his profession, that he had been trained, as few general practitioners were, in the techniques of ultrasound and echocardiographical investigation, and had been employing those techniques and undertaking the more serious wound repairs in order to provide, at the clinic where he practised, a more comprehensive range of professional services than was common in general practice.

5. During March and April 1989 Dr. Edelsten was requested in writing by Dr. Lewis, and by another medical practitioner who was an officer of the Commission, Dr. Poddar, to furnish "clinical details" in respect of a substantial number of claims for medicare benefits in respect of professional services rendered by Dr. Edelsten. Dr. Edelsten complied with some of the requests, and some of the questioned claims were in consequence accepted by the Commission. But Dr. Edelsten complained in writing to Dr. Poddar of the burden imposed on him and his clerical staff of finding time to comply with the requests. During March and April 1989 there had been consultation about aspects of the patterns of Dr. Edelsten's practice between Dr. Poddar and Dr. Nearhos, who was a more senior officer of the Commission stationed in Canberra. When by letter dated 20 April 1989 Dr. Edelsten suggested to Dr. Poddar that they should meet with a view to reducing by discussion the number of medicare claims in respect of which Dr. Edelsten was being requested to furnish "clinical details", the letter dated 26 April 1989 in reply was from Dr. Nearhos, in these terms:

"Your correspondence dated 20 April to Dr A.
Poddar has been forwarded to Central Office
for attention.
It is noted that a number of your claims for
Medicare benefits have been pended for more
detailed assessment by Medical Advisers in
Victoria. This was done because of concerns
by the Advisers that these claims may have
been for health screening services, which are
proscribed under Section 19(5) of the Health
Insurance Act.
You have given your assurance in your letter
that the services claimed were reasonably
necessary for the adequate medical care of the
patients concerned. As you are aware, in
cases where there is doubt as to the medical
necessity of services which are claimed for
Medicare benefits, consideration must be given
for referral of such services to a Medical
Services Committee of Inquiry. The claims in
question, together with other services which
have been claimed for Medicare benefits by
you, will be presented to the appropriate
delegate of the Minister with a view to
preparation of a reference to MSCI in relation
to these services.
In view of these circumstances, it would
appear that nothing could be achieved by a
meeting with you at this stage."

6. The decision by Dr. Nearhos to refer to the delegate of the Minister what in his statement furnished under s.13 of the Administrative Decisions (Judicial Review) Act 1977 he called "the question whether Dr. Geoffrey W. Edelston may have rendered excessive medical services" has been described in documents filed in these proceedings as a decision made on 8 May 1989, because the memorandum by which Dr. Nearhos made the reference to Dr. Dash bore that date. Upon the terms of the letter I have set out above Dr. Edelsten based the submission that the decision was in fact made not later than 26 April 1989.

7. More than three thousand professional services, rendered by Dr. Edelsten to more than 300 patients, were the subjects of the decision Dr. Nearhos made. Dr. Dash, in his turn, decided to refer to the Medical Services Committee of Inquiry for the State of Victoria ("the Committee") the questions whether each of 4,011 professional services rendered by Dr. Edelsten to 544 patients was an excessive service within the meaning of s.79(1B) of the Health Insurance Act 1973. That decision was made on 9 June 1989 and comprehended professional services in respect of which claims for medicare benefits were made after the time at which claims considered by Dr. Nearhos had been made.

8. The grounds of each application for an order of review raise questions of law as to what the circumstances are which justify a decision of the kind Dr. Nearhos made and what the circumstances are which justify a decision of the kind Dr. Dash made.

9. As has been observed, it is only by implication from other sections of Division 3 of Part V of the Health Insurance Act 1973 that the conclusion may be drawn that questions concerning the rendering of "excessive services" may be involved in the exercise of the power conferred by s.82 of that Act to refer a matter to the Committee. In that Division provision is made for the constitution of such Committees, for the appointment, removal and resignation of members of those Committees. It is provided that each Committee shall elect a "Chairperson" and a "Deputy Chairperson" (s.83), that members are to be remunerated (s.89), that the meetings of the Committee shall be held in private (s.91(2)), that a Committee "may, for the purpose of its inquiry into a matter the subject of a reference, inform itself in such manner as it thinks fit" (s.92), and that, with the approval of the Minister, the Chairperson of a Committee may, on behalf of the Commonwealth, engage as consultants to the Committee persons having suitable qualifications and experience (s.93). Relevant provisions of s.94 are:

"94. Where, after consideration of a matter
referred to a Committee by the Minister and of
any documents that accompany the reference
supplied by the Minister, it appears to the
Committee that -
..............................................
(c) a practitioner may have rendered
excessive services;
(d) a person may have caused or
permitted a practitioner employed by
the person to render excessive services;
(e) a person, being an officer of a body
corporate, may have caused or
permitted a practitioner employed by
the body corporate to render
excessive services;
(f) a practitioner may have initiated
excessive pathology services;
(g) a person may have caused or
permitted a practitioner employed by
the person to initiate excessive
pathology services; or
(h) a person, being an officer of a body
corporate, may have caused or
permitted a practitioner employed by
the body corporate to initiate
excessive pathology services,
the Committee shall -
(j) unless paragraph (k) applies -
conduct a single hearing into the
matter; or
(k) if it is satisfied that it is
appropriate to do so - conduct 2 or
more hearings into the matter, each
hearing being a hearing into the
matter in so far as the matter
relates to one or more of the
circumstances referred to in
papragraphs (a) to (h) (inclusive)."

Some of the further proceedings ordained by Division 3 after a Committee has incurred the obligation imposed by s.94 to conduct a hearing are sumarised by Beaumont J. in Minister For Health v. Thomson [1985] FCA 208; (1985) 8 FCR 213 at 219-220; [1985] FCA 208; 60 ALR 701 at 708, in terms which I gratefully adopt:

"The Committee shall give notice of the
proposed hearing to the practitioner (s.95(1))
and the notice shall give particulars of the
matter to which the hearing relates (s.95(2)).
A practitioner may attend the hearing in
person or by his representative (s.96A(2)) and
he shall be given the opportunity to give
evidence and to call witnesses, to examine
other witnesses appearing at the hearing and
to address the committee (s.96B). The rules
of evidence do not apply in relation to a
hearing and the procedure for conducting the
hearing is, subject to the Act and the
Regulations, within the discretion of the
member presiding (s.97(3)).
..............................................
After completion of a hearing under s.94, the
Committee shall report to the Minister its
opinion on the matter and, in a case where the
Committee, in the report, expresses the
opinion that a practitioner has rendered
'excessive services', being services that 'are
not reasonably necessary for the adequate
medical care of the patient' (s.79(1B)(A)),
the report shall identify those services
(s.104). Where a Committee has, in a report
under s.104, expressed the opinion that a
practitioner has rendered excessive services
and a medical benefit has been paid in respect
thereof, the Committee may, in the report,
make one or more of the following
recommendations: that the practitioner be
reprimanded; that he or she be counselled; and
that the amount of any medical benefit paid be
payable to the Commonwealth (s.105(2)). Where
a Committee makes a recommendation in
accordance with s.105(2), the Minister may
make a determination, in writing, in
accordance with that recommendation (s.106(1))."

Written notice of such a determination must be served on the practitioner, who is given by Part VA of the Act a right to have the determination reviewed by a Medical Services Review Tribunal. The determination takes effect only after the time for exercising that right has expired and after the determination of any appeal brought by the practitioner. If set aside on appeal, the determination does not take effect. If varied on appeal, it takes effect as varied.

10. In determining what, if any, criteria are disclosed, by reference to which the exercise of the power conferred on the Minister by s.82 is to be regulated, it is not in my opinion permissible to allow an influence to the Health Insurance Commission Regulations. Dr. Edlesten submitted that, because Regulation 3(2)(b) distinguishes between the existence of "reasonable grounds to suspect that a practitioner ... may have rendered excessive services", whereupon investigation by the Commission is to be undertaken, and "sufficient evidence to warrant a referral of the case investigated to a Committee", upon disclosure of which by the investigation the case is to be referred to the Minister, what was required to justify referral to the Committee, and so by the Commission to the Minister, must be something more persuasively suggestive of the rendering of excessive services than a suspicion, reasonably grounded, that excessive services may have been rendered. But even if the Health Insurance Commission Regulations were accepted to be an essential part of a legislative scheme of which the two Acts under consideration are part also, so that the regulations might be considered "to ascertain what the scheme is", as Mason J. observed in Brayson Motors Pty. Ltd. (In liq.) v. Federal Commissioner of Taxation [1985] HCA 20; (1985) 156 CLR 651 at 652, Regulation 3(2) is an exercise of a delegated legislative power to specify "functions in relation to health insurance" to be performed by the Commission and to prescribe the manner in which the Commission is to carry out specified functions, not a power to regulate, or to make any other provision for, the exercise of a function conferred on the Minister by s.82. Further, Dr. Edelsten's submission does not invoke Regulation 3(2) to resolve any ambiguity in the language of s.82 or of any other provision of either of the two Acts. The submission rather suggests that a criterion given by regulation in respect of the exercise of an ancillary administrative function should be taken to govern also the exercise of a Ministerial function to which the other is ancillary and which was given by Parliament. The intention of Parliament concerning the exercise of the function it conferred on the Minister is not to be ascertained by reference to the terms in which a delegated power to legislate has been exercised, in my opinion. (See Webster v. McIntosh [1980] FCA 128; (1980) 49 FLR 317; Jackson v. Hall (1980) AC 854.)

11. The question may now be considered whether Regulation 3(2)(b) does provide a criterion satisfaction of which is required of the Commission for referral of the case investigated to the Minister. The investigation which is to precede referral is directed to be undertaken "where there are reasonable grounds to suspect that a practitioner may have rendered excessive services". The grammatical object of the required suspicion mirrors the object of the conclusion of the Committee which s.94(c) requires. If that is all that is required to oblige the Committee to hold an inquiry, that must in my opinion be sufficient to justify a reference by the Minister under s.82, and therefore sufficient to justify referral by the Commission to the Minister under Regulation 3(2)(b). It follows that the phrase in Regulation 3(2)(b), "sufficient evidence to warrant a referral of the case to a Committee", requires no more than sufficient evidence to justify a conclusion that the practitioner may have rendered excessive services. The question is whether less than that may satisfy the requirement expressed by the phrase. As has been noted, Dr. Edelsten argued that the phrase must be taken to require more than the existence of reasonable grounds to suspect that the practitioner may have rendered excessive services, because if no more were required there would be no occasion for the requirement of Regulation 3(2)(b) that the investigation disclose "sufficient evidence to warrant a referral .... to a committee". But, even if that submission were accepted, it does not necessarily follow that the "sufficient evidence" must, in order to "warrant a referral", have induced in the Commission a conclusion that the practitioner may have rendered excessive services.

12. In Re Guardian Investments Pty. Ltd.; Wade v. Guardian Investments (1984) VR 1019 Ormiston J., and in National Companies and Securities Commission v. Sim (No. 2) (1986) 4 AC LC 719 Nicholson J., considered the shades of meaning with which in several statutory contexts the phrase "reasonable grounds to suspect" and similar expressions have been invested by superior courts. When the object of the verb "suspect" is not a fact, as it was in Queensland Bacon Pty. Ltd. v. Rees [1966] HCA 21; (1966) 115 CLR 266, but merely a possibility, as it is in Regulation 3(2)(b), the application to this case of the observation of Kitto J. in that case - "A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to 'a slight opinion, but without sufficient evidence', as Chambers's Dictionary expresses it" (115 CLR at 303) - is perhaps unwise. But in my opinion it ought to be concluded that what is required to warrant referral by the Commission to the Minister is evidence which the Commission thinks may be sufficient to justify such a conclusion by the Committee, if the Minister refers the matter to a Committee, as satisfies the requirement expressed in s.94(c). Regulation 3(2)(b) ought not in my opinion to be understood to require that the Commission should find the evidence sufficient to bring the Commission to the conclusion which s.94(c) requires. That would be to confer on the Commission the same function as the Act confers on the Committee. It would be enough to warrant referral that the Commission thought that it might, on that evidence, appear to the Committee that the practitioner may have rendered excessive services. The provisions of s.82 confer on a Minister of State, who is not required by law, nor commonly found, to be a medical practitioner, a power of reference without any qualification except those expressed in paragraphs (a) and (b) of that section. I find nothing in the Health Insurance Act 1973 to indicate that the power conferred by s.82 may be exercised by the Minister, in a matter relating merely to the possibility of the rendering of excessive services, only if the Minister (or his delegate) has formed the conclusion that the evidence before him would justify a finding or belief that the practitioner may have rendered excessive services. Section 94(c) demonstrates the legislative intention that a Committee of five medical practitioners, not the Minister or a delegate of his, shall conclude whether a practitioner may have rendered excessive services and that the Committee shall form that conclusion on a consideration of the matter referred to it by the Minister and of any documents that accompany the reference. It would be expected that the evidence before the Minister or a summary of that evidence would be contained in the documents accompanying the reference. It is in my opinion consistent with those provisions of s.94(c), and with the rest of the Act, that the Minister should be free, if he thought fit, to refer such a matter to a Committee without having formed his own opinion that the evidence before him would justify the conclusion specified in s.94(c). No doubt the Minister would err in law if he referred such a matter when he had been persuaded that a medical practitioner could not reasonably reach the specified conclusion on the evidence before him, if that were the only evidence he could transmit to the Committee. But if he were in doubt whether the evidence would justify the conclusion specified in s.94(c), he would not in my opinion lack power, derived from s.82, to refer the matter to a Committee. If that be so, what shall be "sufficient evidence" for the purposes of Regulation 3(2)(b) could be what the Minister advised the Commission that he regarded as sufficient, either generally or in respect of particular classes of matter. (There was no evidence to suggest that any such advice had in fact been given. Section 8J of the Health Insurance Commission Act 1973 provides:

"(1) The Commission, in performing its
functions or exercising its powers, is subject
to any written directions given by the Minister.
(2) A direction received by the Commission
under sub-section (1) shall be set out in the
report of the Commisson under section 42 with
respect to its operations during the year in
which the direction was received.
(3) Sections 48, 49, 49A and 50 of the Acts
Interpretation Act 1901 apply in relation to
directions under sub-section (1) as if in
those sections references to regulations were
references to directions, references to a
regulation were references to a direction and
references to a repeal were references to a revocation."

There was no evidence concerning any written direction by the Minister.) The powers in exercise of which Regulation 3(2)(b) was made included power to "prescribe the manner in which the Commission is to carry out a function". But a conclusion, if it were drawn, that the power quoted would authorise prescription of the criteria for referral to the Minister, does not demonstrate that such a prescription was in fact made. It is my opinion that, on its proper construction, the expression "sufficient evidence" in Regulation 3(2)(b) means evidence which has such sufficiency as the Minister may have specified to the Commission or, failing such a specification, as the Commission shall think might induce in a Committee the conclusion specified in s.94(c).

13. It was a ground of the application for an order of review in respect of Dr. Nearhos's decision that the decision involved an error of law, which the letter dated 26 April 1989 from Dr. Nearhos to Dr. Edelsten (already quoted) could be seen to disclose. The statement in the letter, that "where there is a doubt as to the medical necessity of services which are claimed for Medicare benefits, consideration must be given for referral of such services to a Medical Services Committee of Inquiry", was said to demonstrate that Dr. Nearhos had proposed to himself an erroneous criterion by which he decided to refer the services in question to the Minister's delegate. I do not think that the language used does demonstrate error of the kind suggested. If it did, the language used may have suggested itself to Dr. Nearhos's mind as a courteous euphemism rather than as a precise statement of a legal requirement. The penultimate sentence of the statement Dr. Nearhos furnished, in pursuance of s.13 of the Administrative Decisions (Judicial Review) Act 1977, of his reasons for his decision was also said to demonstrate error of the same kind. That sentence reads:

"Following my investigation of Dr Edelsten's
claims for Medicare benefits, I made a
decision that there were reasonable grounds to
suspect that Dr Edelsten may have rendered
excessive services on certain patients to whom
Medicare benefits had been paid or may have
become payable for the types of services
mentioned above."

Here, Dr. Edelsten submitted, Dr. Nearhos proposes as the criterion for referral what Regulation 3(2)(b) proposes as the criterion for investigation. But, for the reasons I have given, Dr. Nearhos might without error have decided to make the referral if he considered that a Committee might, on the evidence before him, conclude that Dr. Edelsten may have rendered excessive services. Although the impugned sentence does not state what I take to be the criterion of referral, the making of the statement contained in the sentence does not in my opinion demonstrate that Dr. Nearhos failed to propose to himself that criterion. Reasonable grounds to suspect that a practitioner may have rendered excessive services may, if the grounds (or evidence) be sufficient, provide an adequate basis for a conclusion expressed by the words, "it appears to" him whose state of mind is in question "that a practitioner may have rendered excessive services", in my opinion.

14. One of the grounds of the application for an order of review in respect of the decision Dr. Nearhos made was that a breach of the rules of natural justice had occurred in connection with the making of the decision.

15. It was not submitted on behalf of a respondent that Dr. Nearhos's decision did not answer the description "decision to which this Act applies" in the Administrative Decisions (Judicial Review) Act 1977. Regulation 3(2)(b) expressly contemplates the making of "appropriate comments and recommendations" by the Commission which should accompany the referral to the Minister, and the memorandum of referral dated 8 May 1989 contains a recommendation and what may be called a report. Sub-section 3(3) of the Administrative Decisions (Judicial Review) Act 1977 provides:

"Where provision is made by an enactment for
the making of a report or recommendation
before a decision is made in the exercise of a
power under that enactment or under another
law, the making of such a report or recommendation
shall itself be deemed, for the purposes of
this Act, to be the making of a decision."

The decision to make the referral was, I conclude, a decision to which that Act applies. It was not, however, in my opinion a decision before the making of which any reference to Dr. Edelsten was required by any principle of natural justice so that he could communicate to Dr. Nearhos anything in opposition to making the referral. If it be assumed that the decision of the Minister or of a delegate of his to refer such matters to the Committee was one which could not without breach of the rules of natural justice be made unless the medical practitioner concerned had been first afforded an opportunity to dissuade the decision maker from making the decision, the prior decision under Regulation 3(2)(b) is nevertheless no more than a step - and not an essential step - in the administrative process of reaching the Ministerial decision, and a step which in my opinion works against the interests of the medical practitioner no such a prejudice as would require that he be afforded an opportunity to dissuade the Commission from taking that step. Neither the Commission's decision nor any comment, report or recommendation accompanying the referral is given by law any particular effect, evidentiary or persuasive, in relation to the exercise of the Ministerial function conferred by s.82. It is merely a step which increases the risk that consideration will be given by the Minister or his delegate to the question whether the power conferred on the Minister by s.82 should be exercised, a risk to which every medical practitioner rendering professional services is at all times subject. Referral under Regulation 3(2)(b) is not a condition precedent to the exercise of that power.

16. It was Dr. Edelsten's submission that, if upon any of the grounds alleged the decision of Dr. Nearhos were held to have been "unlawful", it would follow that the decision of Dr. Dash was legally flawed as lacking what Dr. Edelsten submitted was a legal prerequisite to the exercise of the power conferred by s.82. I cannot accept that submission. In my opinion a failure by the Commission, or a delegate of the Commission, to perform, or lawfully and effectively to perform the function conferred on the Commission by Regulation 3(2)(b) has in itself no effect on the legal efficacy of the exercise by the Minister or his delegate of the function conferred by s.82. Of course that is not to deny that the legal efficacy of the performance of the latter function may in a particular case be impaired in consequence of the Minister's reliance, in performing his function, on some erroneous action of the Commission in relation to the performance of the function conferred on it by Regulation 3(2)(b).

17. Grounds of each of the applications were founded on the submissions first, that of each function - that conferred by Regulation 3(2)(b) and that conferred by s.82 - it was required that there be a separate conclusion of the required character about each professional service in respect of which the question whether it may have been excessive arose, and, second, that the evidence before the Court demonstrated that no such a separate conclusion had been reached. Further, it was a ground of each application that, considered separately, each decision that a professional service may have been excessive was one to justify the making of which there was no evidence or other material.

18. Putting to one side a very small number of the thousands of professional services to which each of the two impugned decisions relate, the evidence showed that the professional services in question were grouped by each decision maker into several classes. In respect of each class the decision maker formed the opinion that the incidence of the rendering of that service (sometimes an incidence in relation to a period of time, sometimes an incidence in relation to the same patient during a period of time, sometimes an incidence in relation to the rendering of another professional service at or about the same time to the same patient) suggested the conclusion that a substantial proportion of the services of that class had been excessive. The information which the decision maker had about each service did not enable him, at any rate in any significant number of cases, to form any opinion as to whether that particular service had been excessive. His opinion in relation to the particular service was that it may have been excessive, and he based that opinion on the opinion he had formed that a substantial proportion of the services of that class had been excessive. The latter opinion rested on his judment as to what the incidence would be, in the conduct of general medical practice, of occasion for the rendering of a particular kind of professional service, or for the rendering of a particular kind of service more than once to the same patient during a particular period, or for the rendering to the same patient of two particular kinds of service at the same time.

19. Dr. Edelsten supported his submission, that a professional service could be the subject of a referral by the Commission to the Minister, or the subject of a reference by the Minister to a Committee, only if a conclusion of the required character were reached about that particular service, by pointing to the distinction drawn in Regulation 3(2)(b) between "cases where there are reasonable grounds to suspect", in the plural, and "sufficient evidence to warrant a referral of the case investigated", in the singular. Further, although the expression "excessive services" seems to be used only in the plural in Division 3 of Part V of the Health Insurance Act 1973, the provisions of s.105 relating to a Committee's power to recommend that a single "medicare benefit" cease to be payable, or that it be repaid to the Commonwealth, suggest that the obligations cast on a Committee by Division 3 relate to each professional service included in a matter referred under s.82. It may be - I need express no concluded opinion - that Dr. Edelsten's first submission in support of these grounds of the application should be upheld. But in my opinion the other submissions should not be accepted.

20. When dealing with the phrases "reasonable grounds to suspect" and "sufficient evidence to warrant a referral" I made some reference to that which is the object clause of "suspect" in Regulation 3(2)(b) and of "appears" in s.94(c) : "that a practitioner ... may have rendered excessive services". It is in my opinion of great importance to recognise that what is in question in those provisions, and therefore in s.82 also, is not the occurrence of any event or other circumstance, but only the possibility that an event of a particular description has occurred. No doubt the clause should be so construed as to exclude a possibility which has a very low probability, of a kind sometimes described as remote or fanciful or merely theoretical. But, subject to that qualification, a possibility of the occurrence of the rendering of an excessive service is all that is required by the clause. If that be so, evidence which justifies an opinion that among a number of instances of professional services a substantial proportion was excessive, but which affords no, or no sufficient, means of identifying the instances that were excessive, may justify a conclusion in respect of each instance that it may have been excessive.

21. Dr. Edelsten gave to officers of the Commission various statements of fact and his medical opinions before the decision by Dr. Dash was made, and those statements formed part of the material taken into consideration in the making of that decision. Some, but not all, of those statements were also part of the material taken into consideration in the making by Dr. Nearhos of his decision. Dr. Nearhos was cross-examined by Dr. Edelsten. There were grounds of each application that the decision maker had taken irrelevant considerations, and had failed to take relevant considerations, into account, and that the decisions concerning all the professional services were so unreasonable that no reasonable person could have so decided. Under these grounds were advanced arguments involving expert medical opinion, both that of the decision maker and that of Dr. Edelsten. I have been unable to conclude that any of those grounds were made out.

22. There was advanced in support of those and other grounds of both applications the submission that, because no worthwhile medical judgment could be made as to the reasonable necessity of any of the services rendered for the adequate medical care of the patient concerned without substantially more information than the decision maker had when he made the decision, the failure to obtain substantially more information had in each case vitiated the decision. Not every class of service which was the subject of referral by Dr. Nearhos was included in the reference by Dr. Dash to the Committee. Dr. Dash had received more information in respect of one class of service, which he omitted from his reference, than Dr. Nearhos had received. Upon that, and upon other circumstances which by evidence or by submission Dr. Edelsten suggested, there was grounded a strong argument by Dr. Edelsten that the exiguous information upon which each decision was based should have been supplemented by a substantial body of further information before he was subjected to what he asserted were the expensive, worrying and protracted processes of inquiry by a Committee.

23. That submission has an undeniable attraction. But neither the legislation nor the medical and social environment in which the legislation operates affords any very persuasive consideration in favour of the submission, except the consideration urged by Dr. Edelsten that medical practitioners should be protected from inquiry which might be shown to be unnecessary. In so far as the further information which might resolve suspicion of excessive services consists of clinical information about the patient - and according to Dr. Edelsten's submission that was in most cases the necessary information - neither the patient nor the suspected medical practitioner would, generally, be a satisfactory source of the information for the Commission's delegate or for the Minister's delegate. Unlike a Committee, the delegates could not compel disclosure of information by the patient, much less information on oath. Unlike a Committee, the delegates could not compel a suspected practitioner, who chose to give information, to give further information on the subject, much less further information on oath. Further, the allocation of financial resources and the subjection of patients to inquisition (even without compulsion) in order to provide for two, not to say three, successive inquiries in detail into each question of a suspected excessive medical service would obviously impose very substantial financial and social burdens on a community in which more than one hundred and forty million medical services are rendered annually. And the terms of the legislation strongly suggest that only one inquiry in detail into such a question was intended, in my opinion.

24. It was a ground of each application that a breach of the rules of natural justice occurred in connection with the making of the decision. I have already stated my conclusion that those rules are inapplicable in relation to the decision made by Dr. Nearhos. I am of the opinion that there is a duty to accord a medical practitioner procedural fairness in relation to the making of a decision as to whether a matter, involving a question whether he may have rendered excessive services, should be referred to a Medical Services Committee of Inquiry under s.82.

25. The legislative intention is plainly to be discerned in the provisions of Division 3 of Part V that a hearing to be held by such a Committee into a question concerning excessive services shall conform to the detailed provisions ensuring procedural fairness to the medical practitioner which are contained in that Division. Division 3 answers both the question whether the principles of natural justice are to apply and the question as to what the particular requirements of those principles are in relation to such a hearing. All the proceedings which precede publication of the Minister's determination giving effect to any finding and recommendation of the Committee adverse to the medical practitioner are held in private. It was submitted by Mr. T. North, who appeared for the respondents other than the members of the Committee, that, because ample procedural fairness is statutorily accorded the medical practitioner in relation to the only inquiry from which perceptible prejudice to his interests may result, no basis exists for allowing him a role in the preliminary inquiries of the Commission and the Minister. On the other hand the Minister's reference and, perhaps more important, the transmission of "documents that accompany the reference", to the Committee expose the medical practitioner to several substantial disadvantages. Upon the contents of those documents will be decided the question whether "it appears to the Committee that" .... the practitioner "may have rendered excessive services" and must submit to a hearing by the Committee. Once the Committee falls under the obligation imposed by s.94 to conduct a hearing, the practitioner is liable to suffer not only the expense, the inconvenience and, commonly no doubt, the embarrassment of participating in the hearing, but also the further embarrassment and the harm to his professional reputation of having patients of his called before the Committee to give evidence. If patients are called to give evidence, the provision that meetings of the Committee shall be held in private may afford but limited protection of the practitioner's professional reputation. The professional reputation of a medical practitioner, particularly the reputation of a practitioner in general practice among those who are, or who may be minded to become, his patients, is commonly of very great economic as well as personal value to him. My conclusion is that there is a requirement that a medical practitioner, in respect of whose rendering of a professional service the Minister or his delegate is considering whether to make a reference under s.82 on the ground that it may have been an excessive service, have the opportunity to be informed what is the substance of the case for a reference and the opportunity to state his case against a reference.

26. It will be recalled that at, or immediately before, the time of Dr. Nearhos's decision, Dr. Edelsten was discouraged from meeting Dr. Nearhos by the letter dated 26 April 1989. However, after Dr. Nearhos had made the referral to the Minister's delegate further communications between Dr. Edelsten and Dr. Nearhos took place, both in writing and at a meeting on 25 May 1989. Notes of the meeting and copies of correspondence between the two doctors were considered by Dr. Dash in making his decision. But for circumstances to which I have not yet referred I would have concluded that no breach of the rules of natural justice had occurred in connection with the making of Dr. Dash's decision because a sufficient opportunity had been afforded Dr. Edelsten to learn what the substance of the case for a reference to the Committee was and to state his case against a reference. But it was revealed by Dr. Nearhos during his cross-examination on the hearing of these applications that in making his decision he had taken into account statements made to him by Dr. Lewis. The substance of these statements was that some of the claims for medicare benefits under consideration by Dr. Nearhos in making his decision were for professional services said by the patients not to have been rendered. (The claims were made, not by the patients, but by Dr. Edelsten, under the provisions of the legislative scheme called "bulk billing".) Dr. Nearhos was told, he swore, that some patients in respect of whom claims were made for laser treatment of tattoos had told investigating officers of the Commission that some of the treatments specified in claims had not in fact been given; and he swore that he had also been told that each of several patients had informed investigating officers of the Commission that a wound in respect of the surgical repair of which a claim for a medicare benefit had been made was not a wound the repair of which would fall within the description assigned to the particular item, in the table of medical services, under which the claim had been made by Dr. Edelsten. By way of example Dr. Nearhos gave evidence that he was told by Dr. Lewis that a patient had identified the subject of a claim for a medicare benefit as the repair of a small cut below the eye. The claim was for the repair of a full thickness laceration of the eyelid, under an item in the table for which the specified fee was much greater than the fee for repair of a small cut below the eye. No reference to these statements by Dr. Lewis to Dr. Nearhos, or to the statements Dr. Lewis alleged that patients had made to officers of the Commission, was made to Dr. Edelsten until Dr. Nearhos gave the evidence I have summarised on the hearing of these applications. No reference to those statements appears in the statement by Dr. Nearhos, or in the statement by Dr. Dash, in each case pursuant to s.13 of the Administrative Decisions (Judicial Review) Act 1977, of reasons for the decision under review.

27. Dr. Nearhos gave evidence that he told Dr. Dash what Dr. Lewis had told him. I infer that the conversation between Dr. Nearhos and Dr. Dash occurred before Dr. Dash made his decision.

"A person whose interests are likely to be
affected by an exercise of power must be given
an opportunity to deal with relevant matters
adverse to his interests which the repository
of the power proposes to take into account in
deciding upon its exercise: Kanda v.
Government of Malaya (1962) AC 322, at
p 337; Ridge v. Baldwin (1964) AC, at pp
113-114 per Lord Morriss; De Verteuil v.
Knaggs (1918) AC, at pp 560, 561. The
person whose interests are likely to be
affected does not have to be given an
opportunity to comment on every adverse piece
of information, irrespective of its
credibility, relevance or significance.
Administrative decision-making is not to be
clogged by inquiries into allegations to which
the repository of the power would not give
credence, or which are not relevant to his
decision or which are of little significance
to the decision which is to be made.
Administrative decisions are not necessarily
to be held invalid because the procedures of
adversary litigation are not fully observed.
As Lord Diplock observed in Bushell v.
Environment Secretary (1981) AC, at p 97.
'To "over-judicialise" the inquiry
by insisting on observance of the
procedures of a court of justice
which professional lawyers alone are
competent to operate effectively in
the interests of their clients would
not be fair.'
Nevertheless in the ordinary case where no
problem of confidentiality arises an
opportunity should be given to deal with
adverse information that is credible, relevant
and significant to the decision to be made.
It is not sufficient for the repository of the
power to endeavour to shut information of that
kind out of his mind and to reach a decision
withour reference to it. Information of that
kind creates a real risk of prejudice, albeit
subconscious, and it is unfair to deny a
person whose interests are likely to be
affected by the decision an opportunity to
deal with the information. He will be neither
consoled nor assured to be told that the
prejudicial information was left out of
account."

(per Brennan J. in Kioa v. West [1985] HCA 81; (1985) 159 CLR 550 at 628-629.)

28. It will be observed that the reported allegations of patients are not that any professional service rendered by Dr. Edelsten was not reasonably necessary for the adequate medical care of the patient concerned. The allegations are of two kinds : that a claim for a service was false in that the service was not rendered, and that a claim was false in that the service for which claim was made was not the service rendered. But the allegations, if credible, are in my opinion relevant and significant to the decision to be made by Dr. Dash. They are allegations of conduct concerning which an inference arises that it was designed to increase the practitioner's income from medicare benefits by dishonesty. The existence of a propensity to engage in such conduct increases the probability that the person displaying that propensity may at about the same time have rendered excessive services, which is also conduct likely to increase a practitioner's income from medicare benefits. Further, in a case where the decision maker is of the opinion that excessive services have been rendered, but is uncertain whether that has been caused by honest medical misjudgment or by dishonesty, the existence of that propensity increases the probability of dishonesty, and may reasonably influence the decision maker to refer the matter to a Committee rather than to attempt to convince the practitioner that he has been making errors of medical judgment.

29. On the material which the evidence discloses the patients' allegations could not in my opinion be thought unworthy of credence. Dr. Dash was not called to give evidence on any of the issues which Dr. Nearhos's evidence raised. I infer that Dr. Dash took into account in making his decision what Dr. Nearhos told him that Dr. Lewis had said about the allegations.

30. In my opinion Dr. Dash was under an obligation, derived from the principles of natural justice, to inform Dr. Edelsten of the allegations and to afford Dr. Edelsten an opportunity to put before Dr. Dash his reply. The failure to take that course establishes the ground that a breach of the rules of natural justice occurred in connection with the making of the decision, in my opinion. In exercise of the discretion conferred by s.16 of the Administrative Decisions (Judicial Review) Act 1977 I consider that the decision should be set aside. It might be inferred from the evidence of Dr. Nearhos that, because the allegations were elicited in the course of an investigation carried on in exercise of another function of the Commission, it was thought by Dr. Nearhos - and perhaps by Dr. Dash - that the exercise of the functions being performed by Dr. Nearhos and Dr. Dash ought to be kept, in a formal sense at least, separate from that other function. The existence, and the influence on him, of the allegations were frankly and voluntarily revealed by Dr. Nearhos in evidence, and I have no suspicion at all that he or Dr. Dash might have intended to conceal what they thought should be revealed. But the breach of the principles of natural justice was in my opinion serious, and ought to entail the consequence that the decision be set aside.

31. Although I have held that no obligation falls on the Commission to accord a medical practitioner an opportunity to be heard before making a referral of the kind contemplated by Regulation 3(2)(b), I am not to be taken to suggest that the opportunity which I have held that the Minister or his delegate is obliged to accord a medical practitioner before making a reference concerning excessive services under s.82 could not be provided by offering that opportunity, before referral under Regulation 3(2)(b), by way of one or more communications by the practitioner to the Commission, and through the Commission to the Minister or his delegate.

32. The application in the proceeding No. VG203 of 1989 will be dismissed. In the proceeding No. VG210 of 1989 there will be orders that the decision of the delegate of the respondent Neil Blewett made 9 June 1989 to refer the matter specified in the reference to the Medical Services Committee for the State of Victoria and the reference to the said Committee be set aside and that the matter to which the said decision relates be remitted to the respondent Neil Blewett for further consideration by him or by his delegate according to law.