Australian Unity Health Limited v Private Health Insurance Administration Council [2000] FCA 769 (8 June 2000)

Last Updated: 14 June 2000

FEDERAL COURT OF AUSTRALIA

Australian Unity Health Limited v

Private Health Insurance Administration Council [2000] FCA 769

ADMINISTRATIVE LAW - judicial review - whether irrelevant consideration taken into account - whether relevant consideration not taken into account - whether decision was within power of decision maker - use of policy in decision making - whether policy inconsistent with principles determined pursuant to statute - whether policy imposed arbitrary restriction on decision maker - whether decision maker was in a fiduciary relationship with the respondent.

National Health Act 1953 (Cth): s 73BC(5B), (5C) & (5E), s 73BC(6) & (8) s 73BC(12), s 82G(1)(r)

Sagnata Investments Ltd v Norwich Corporation [1971] 2 QB 614 cited

Surinakova v Minister for Immigration, Local Government and Ethnic Affairs (1991) 33 FCR 87 cited

Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 cited

AUSTRALIAN UNITY HEALTH LIMITED v PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

V 393 of 1999

GOLDBERG J

MELBOURNE

8 JUNE 2000

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 393 of 1999

BETWEEN: AUSTRALIAN UNITY HEALTH LIMITED

(ACN 078 722 568)

Applicant

AND: PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

Respondent

JUDGE:	GOLDBERG J
DATE OF ORDER:	8 JUNE 2000
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The application is dismissed.

2. The applicant pay the respondent's costs of the application including reserved costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA
DISTRICT REGISTRY	V 393 of 1999

BETWEEN: AUSTRALIAN UNITY HEALTH LIMITED

(ACN 078 722 568)

Applicant

AND: PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

Respondent

JUDGE:	GOLDBERG J
DATE:	8 JUNE 2000
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Introduction

1 The applicant, Australian Unity Health Limited, has applied to the Court pursuant to the provisions of the Administrative Decisions (Judicial Review) Act 1974 (Cth) to review the decision of the respondent, Private Health Insurance Administration Council ("the Council"), made on 4 November 1998 under Private Health Insurance Administration Council Rules (No 4). The decision of the Council was in the following terms:

"I refer to your submission to Council requesting that an adjustment be paid to your organisation for the 1996/97 financial year.

Council has considered the submission for an adjustment of $1,193,365.00 for the 1996/97 year, and has decided not to make a determination under the Private Health Insurance Administration Council Rule No. 4 that an adjusting amount be paid to your organisation.

Having regard to your submission, Council did not consider that exceptional circumstances as required under Council Rule No. 4 existed."

The result was that the Council decided not to exercise its power pursuant to clauses 4 and 5 of Rule No 4 to make a determination under s 73BC(12) of the National Health Act 1953 (Cth) ("the Act") that an amount be paid out of the Health Benefits Reinsurance Trust Fund ("the Trust Fund") to the applicant.

2 The application was heard at the same time as applications to review similar decisions of the Council by Government Employees Health Fund Limited (V 391 of 1999), Queensland Teachers Union Health Fund Limited (V 392 of 1999) and Manchester Unity Friendly Society in NSW Limited (V 498 of 1999). The four applicants were represented by the same solicitors and counsel. The issues which are to be resolved are common to each application as in each case the Council's decision was in the same terms save for the amount of the adjustment sought and the year to which the adjustment related.

The Health Benefits Reinsurance Scheme

3 The applicant is a registered health benefit organisation ("RHBO") under the Act and carries on a health insurance business. The applicant assumed the health insurance business of its parent, Australian Unity Limited, on 30 June 1997. As at 30 June 1999 the applicant had 96,620 active policies with members in all States covering 178,707 persons.

4 The Council is a statutory authority established by s 82B(1) of the Act and its functions and powers are set out in s 82G and s 82H of the Act. One of its principal functions is to administer the Trust Fund established under s 73BC(2) of the Act: s 82G(1)(a). The purpose of the Trust Fund and the reinsurance scheme of which it is a component is to provide support for the community rating system whereby the costs of benefits to the elderly and the chronically ill are shared among all registered RHBOs. In general terms, the policy of community rating requires that all RHBOs charge the same contribution rate for all members regardless of their age, gender or health status. RHBOs are not allowed to charge different prices for health insurance depending on the risk associated with insuring the particular person. The reinsurance scheme provides a mechanism whereby the costs of benefits for two categories of patients - the old and the chronically ill - are shared among all RHBOs.

5 As is pointed out by the Council in a paper which it has produced explaining the reinsurance scheme, reinsurance in private health insurance is not the same as reinsurance as it is understood in the general or life insurance industries. Rather it is a cross-subsidy in which all RHBOs must take part as a condition of registration. Reinsurance spreads the costs of the old and the chronically ill across all funds. In private health insurance the old are defined as persons aged 65 years or more and the chronically ill are defined as contributors who have been hospitalised for more than thirty-five days within any consecutive 365 day period.

6 The reinsurance scheme works by identifying those hospital and medical claims made on RHBOs which are subject to reinsurance, namely claims made by the old and the chronically ill. The scheme then provides for payments to be made into or out of the Fund by or to RHBOs depending upon their level of claims compared to a State average for a particular calendar quarter. The Council explained in its paper how the scheme operates as follows:

"At the end of each quarter PHIAC [the Council] collects information from each health fund for each state in which they operate. The data provided to PHIAC is:

* benefits paid for reinsurable members, and

* the number of members in single equivalent units (SEU) in each fund.

A single member counts as one SEU and all other categories as 2 SEU for the purpose of calculating the membership of each fund. The calculation is based on the average membership for the quarter.

The reinsurance scheme currently in place only redistributes 79% of the total benefits paid for members in the reinsurance categories. This is the marginal cost for those members."

7 Section 73BC(5B) of the Act requires the relevant Minister to determine in writing principles relating to the operation of the Trust Fund. Section 73BC(5C) requires those principles to include:

* principles for determining the method of, and the matters to be taken into account in, calculating the amounts to be paid into the Trust Fund by RHBOs; and

* principles for determining the method of, and the matters to be taken into account in, calculating the amounts to be paid out of the Trust Fund to RHBOs.

Section 73BC(5E) requires the Council to exercise its functions and powers in relation to the Trust Fund in accordance with the principles determined by the Minister.

8 On 21 September 1995 the Minister for Human Services and Health made a determination of the principles relating to the operation of the Trust Fund. It was entitled "Determination of Principles For The Purposes of Subsection 73BC(5B)" ("the 1995 Principles"). On 13 July 1998 the Minister for Health and Family Services made a further determination entitled the "Health Benefits Reinsurance (Trust Fund) Principles (Determination 1998)" ("the 1998 Principles"). That determination revoked the 1995 Principles which, however, applied at the time the calculations in respect of the 1996/97 year were made.

9 Section 82G(1)(r) of the Act empowers the Council:

"to make rules, not inconsistent with this Act, for the purpose of the performance of its functions and of the exercise of its powers ..."

Pursuant to that power the Commissioner of Private Health Insurance Administration (acting under s 82C(2) of the Act) made "Private Health Insurance Administration Council Rules (No 4)" on 16 June 1993 ("Rule No 4"). Clauses 4 and 5 of Rule No 4 provide:

"Determination of adjustment payments

4. If, following a determination by the Council under sub-section 73BC(6) or (12) of the Act, the Council learns from any source that the amount so determined is not appropriate, the Council may determine:

(a) under sub-section 73BC(6) - that an adjusting amount is an appropriate payment in relation to a registered organisation; or

(b) under sub-section 73BC(12) - that an adjusting amount be paid to a registered organisation.

Limitation on determination

5.(1) A determination described in rule 4 must not be made, except in exceptional circumstances, in respect of a determination under sub-section 73BC(6) or (12) of the Act that was made in respect of a period that precedes the most recent financial year for which the registered organisation was required to provide an auditor's report to the Council.

(2) If the determination is an adjusting amount under sub-section 73BC(6), `exceptional circumstances' includes evidence, to the satisfaction of the Council, that the registered organisation did not exercise proper care in giving the Council information to which the Council is entitled under section 82G of the Act."

10 A procedure has been established to enable the Council to obtain the information necessary to determine what payments are to be made by RHBOs to the Trust Fund and by the Trust Fund to RHBOs. This is presently found in the Health Benefits Reinsurance (Records of Organisations) Determination 1998 which requires an RHBO to maintain records of particulars relating to their contributors and to lodge quarterly returns with the Council setting out relevant information required to be supplied. The quarterly returns are to be provided in the form known as a "PHIAC Quarterly Return". The information and data supplied in these returns is used to calculate the reinsurance payments either to or from the Trust Fund on a quarterly basis for all RHBOs. The quarters end on 31 March, 30 June, 30 September and 31 December of each year and the returns are to be provided to the Council by the 28^th day of the month following the end of the quarter. The material lodged includes data on membership and benefits provided.

11 The information contained in the quarterly returns is used by the Council to calculate the quarterly payment due to each RHBO from the Trust Fund or to the Trust Fund from each RHBO for each State. When all returns have been received from the RHBOs a computer program calculates an average benefit paid for reinsurance categories of memberships of each State or Territory which is called "the calculated deficit". The Council also calculates an average reinsurance benefit paid by each RHBO for each State or Territory. The Council compares the calculated deficit for each State or Territory against the average reinsurance benefit paid by each RHBO in that State or Territory. Where an RHBO has paid less than the calculated deficit, the Council calculates a payment which the RHBO is required to pay into the Trust Fund. Where an RHBO has paid more in benefits than the calculated deficit, the Council calculates a payment from the pool and this amount is then paid out from the Trust Fund to the RHBO. There is a ceiling on the payments to be made from the Trust Fund as the payments out of the Trust Fund must not exceed the payments into the Trust Fund, with the result that it is a zero sum calculation which is made.

12 Put shortly, it is the combined experience of all RHBOs in the relevant State which determines whether an RHBO is to receive a payment from, or make a payment to, the Trust Fund. An RHBO will receive a payment from the Trust Fund if the amount of its claims that are subject to reinsurance is greater than the average for the State.

13 The Principles determined by the Minister set out the principles for determining the method of, and the matters to be taken into account in, calculating the amounts to be paid into the Trust Fund by RHBOs and to be paid out of the Trust Fund to RHBOs. The Principles entitle the Council to make corrections or adjustments to information received from RHBOs if it considers the information to be inaccurate or to contain discrepancies. Paragraphs 4 and 5 of the 1995 Principles contained in the section headed "Membership Records" provide:

"4. Organisations are required to maintain accurate membership records in a format which allows the Council to arrange for the audit of the records and reconcile the membership details on the quarterly returns. It is important that membership records contain dates of birth of contributors and dependents.

5. The Council reserves the right to make adjustments to membership figures or amounts payable into or out of the Trust Fund where it becomes aware of discrepancies in membership figures notified or amounts debited or credited by organisations to their Reinsurance Accounts."

Each of pars 2.2(3) and 3.2(2) of the 1998 Principles contained in sections headed respectively "Payments into the Fund" and "Payments out of the Fund" provides:

"For this section, the Council may make a correction to information received from a registered organisation if it considers the information to be inaccurate in a way that would produce an incorrect calculation."

14 Subsections 73BC(6) and (8) of the Act, which provide the statutory power under which the Council can require RHBOs to make payments into the Trust Fund, are in the following terms:

"(6) It is a condition of registration of a registered health benefits organization that, on and after the date of its registration, it shall participate with other registered health benefits organizations in the operation of the Fund by making such payments into the Fund as the Council determines from time to time to be appropriate payments in relation to that organization.

(8) Where the Council determines an amount to be paid into the Fund by a registered health benefits organization, it shall notify the organization accordingly and shall specify in the notification the date on or before which the payment is to be made."

Section 73BC(12) of the Act provides:

"The Council may decide that an amount is to be paid out of the Fund to a registered health benefits organization."

The applicant customarily receives money from the Trust Fund, rather than paying money into it, as it has a comparatively large number of claims subject to reinsurance.

The present application

15 The applicant followed the relevant procedures from time to time but on 7 September 1998 it notified the Council that it proposed to seek a reinsurance adjustment. It formally applied for the readjustment on 29 September 1998 when it wrote to the Council seeking reinsurance adjustments to figures supplied in returns and a recalculation of the amounts payable from the Trust Fund to it in respect of the periods 1 October 1996 to 30 June 1997 and 1 July 1997 to 30 June 1998. The adjustments sought were $1,193,365 for the former period and $1,121,173 for the latter period. The adjustments were sought to take into account extra reinsurance benefits, that is increased reinsurance claims, over and above those previously supplied. The adjustments were allowed for the latter period but were not allowed for the former period.

16 The adjustments sought, if allowed, do not result in payment of the amount of the adjustment sought to the applicant. If a decision is taken to make a further payment out of the Trust Fund to an RHBO as a result of an adjustment to earlier claims made, all RHBOs in Australia would be required to contribute to the Trust Fund in proportions determined by the Council to permit the payment to the applicant of 79% of the amount underclaimed (fixed under the 1998 Principles) or 80% of the amount claimed (fixed under the 1995 Principles). The applicant's net loss suffered is less than 79% or 80% of the amount underclaimed as it is necessary to deduct from that amount the proportion which the applicant itself would be required by the Council to contribute in order to fund the payment out of the Trust Fund.

17 That application came to be made in the following circumstances. The applicant uses computer software to calculate the amount of reinsurance it is entitled to claim against the Trust Fund. On 1 October 1996 the applicant implemented a new computer system called "WHICS/Open" supplied by Wacher Pty Ltd (now called Sanderson Wacher Pty Ltd) ("Wacher"). As part of the process of conversion to the new computer system, a project committee with representatives from Wacher and the applicant was established to identify any areas where the new system required modification so that it would satisfy all requirements of the applicant. Prior to implementing the new system, the applicant tested it for six months. It is not necessary to go into the details of the testing but the result was that no error in identification of claims subject to reinsurance was discovered during the testing period.

18 After the new computer system was implemented on 1 October 1996 the applicant's internal auditors continued to review the quarterly returns and the returns for the four quarters ending 30 June 1997 were audited by external auditors. The auditors did not detect any relevant error.

19 On 17 July 1998 the applicant was notified by Wacher of relevant errors which had been discovered in the reinsurance allocations performed by the new computer system. Further tests disclosed that reinsurance calculations performed by the system for the period 1 October 1996 to 30 June 1998 were incorrect.

20 The Council decided to accept the adjustment for the period 1 July 1997 to 30 June 1998 as it was within the time frame allowed by clause 5 of Rule No 4, that is to say it was not in respect of a period which preceded the most recent financial year for which the applicant was required to provide an auditor's report to the Council. The Council declined to make any adjustment for the period 1 October 1996 to 30 June 1997 as that period was outside the time frame allowed by clause 5 of Rule No 4 and the Council decided that exceptional circumstances had not been made out. The Council, in its statement of reasons for the decision, said that it had adopted as its approach to the ascertainment of "exceptional circumstances" that:

"a fund must demonstrate that its circumstances were different to those that apply to other organisations and that they were beyond the control of the organisation."

The Council concluded that the applicant had not proved that its circumstances were different from those of other organisations, nor that those circumstances were beyond its control. The Council in its reasons for the decision said that the purpose of Rule No 4:

"... is to ensure that, except in exceptional circumstances, health funds can plan their affairs with certainty and that they will not be required to contribute to the reinsurance pool as a result of mistakes made by other funds some years before. In accordance with the terms and policy of the legislation, it is not appropriate for PHIAC to make the adjustment sought."

21 As noted earlier, by letter dated 4 November 1998 the Council informed the applicant that it had decided that an adjusting amount could not be paid out of the Trust Fund in respect of the 1996/97 financial year.

Submissions of the parties

22 The applicant submitted that for the purposes of s 5(1) and (2) of the Administrative Decisions (Judicial Review) Act 1977 the making of the decision was an improper exercise of power as the Council had taken irrelevant considerations into account, it had not taken relevant considerations into account, it had exercised its discretionary power in accordance with a rule of policy without regard to the merits of the case and the decision was not authorised by the Act. The applicant made four principal submissions in order to bring itself within this framework:

* Rule No 4 is inconsistent with the Act and the Principles determined by the Minister and is therefore invalid;

* Alternatively Rule No 4 was improperly applied so as to defeat the operation of the Principles;

* The Council failed to take into account the fiduciary nature of the Trust Fund;

* By adopting and applying Rule No 4 the Council applied an arbitrary policy. It was said that the policy was arbitrary because it allowed an adjustment in respect of a twelve month period immediately preceding the date of the application for the adjustment but did not take into account how the problem giving rise to the adjustment arose.

23 The parties agreed that the relevant Principles for this and the associated proceedings were the 1995 Principles as it was those Principles which applied at the time the erroneous information was supplied to the Council. I have some reservations about the applicability of the 1995 Principles to the issues before me as a critical issue is what were the obligations and duties of the Council at the time the requests for the adjustments were made by the various applicants. At that time the 1998 Principles were applicable. As the parties made their submissions on the basis that the 1995 Principles were to be applied in determining the issues in dispute I proceed on the same basis. If I had concluded that the issues were to be determined by reference to the 1998 Principles I would have still reached the same conclusions. The analysis I have undertaken in relation to the 1995 Principles applies equally to the 1998 Principles.

24 The applicant submitted that the Principles prescribe a precise formula to ascertain the amount to be received by an RHBO from the Trust Fund (or if applicable, the amount to be paid into the Trust Fund by the RHBO). It submitted that the Principles do not confer any discretion on the Council in respect of the matters to be taken into account in performing the specified calculations. It was said that the effect of the Principles is to confer on an RHBO an entitlement to be paid money from the Trust Fund in circumstances which answer the provisions of par 9 of the 1995 Principles. Paragraph 9 sets out the manner in which the amounts of payments to and from the Trust Fund are to be determined.

25 The applicant submitted that the Principles have a mandatory effect by virtue of the provisions of s 73BC(5B), (5C) and (5E) which provide:

"(5B) The Minister shall determine in writing principles relating to the operation of the Fund.

(5C) The principles must include:

(a) principles for determining the method of, and the matters to be taken into account in, calculating the amounts to be paid into the Fund by registered health benefits organizations; and

(b) principles for determining the method of, and the matters to be taken into account in, calculating the amounts to be paid out of the Fund to registered health benefits organizations.

...

(5E) The Council shall exercise its functions and powers in relation to the Fund in accordance with the principles."

It was submitted that the Principles have statutory force and leave no room for an exercise of discretion by the Council once the true facts are identified.

26 The applicant submitted that Rule No 4 is inconsistent with these statutory provisions and the Principles and that, in particular, par 5(1) of Rule No 4 provided an arbitrary fetter on the circumstances in which an adjustment would be made. It paid no regard to the mandatory requirement of the Principles which require payment on the basis of the true facts. In short, Rule No 4 operated to defeat the Principles rather than facilitate their implementation and was ultra vires.

27 The Council submitted that clause 4 and clause 5 of Rule No 4 were validly made under s 82G of the Act and that they related to the exercise of the Council's powers under s 73BC(6) and (12) of the Act. It was submitted that the rules provide for the circumstances where the Council may determine an adjusting amount as an appropriate payment to be made to an RHBO or is to be paid to an RHBO.

28 The Council submitted that in the circumstances before the Court it had carried out what it was required to do under and by reference to the Principles. It was also submitted by the Council that once it had made its calculations on the basis of the information supplied by the applicant it was functus officio and one could not find in the legislation, or by implication, a power to reopen a decision. It referred to Jayasinghe v Minister for Immigration (1998) 76 FCR 301 at 311-315. It was submitted that unless one could find in the legislation expressly or by implication a power to reopen the determination made by the Council then once the Council has made a decision, absent Rule No 4, there was no scope to revisit the decision.

Reasoning

29 The fact that the relevant provisions of the 1995 Principles require the Council to apply a precise formula to determine the amount to be paid into or out of the Trust Fund and that the Council has no discretion in determining the amount so to be paid does not answer the question whether Rule No 4 is inconsistent with the Principles or invalid. It is first necessary to understand how the procedure under the Principles is to apply. An RHBO may have an entitlement to be paid money from the Trust Fund but that right will depend upon the information it and other RHBOs have supplied to the Council. That information is used by the Council to determine the amounts payable by or to RHBOs in accordance with pars 8 and 9 of the 1995 Principles, which provide:

"8. As soon as possible after the end of each settlement period, the Council will determine the net amounts payable by or to each organisation in respect of that period and notify them accordingly.

9. Subject to paragraph 10 below, the amounts will be determined on the following basis:

(a) ascertain the Reinsurance Account Deficit for each organisation's health benefits fund;

(b) subject to paragraph (c) below, calculate 80% of the Reinsurance Account Deficit for each organisation's health benefits fund(s) and attribute it to the reinsurance pool;

(c) in respect of benefits for professional services rendered in hospital, payments eligible for reinsurance are limited to 80% of the difference between the Medicare rebate and the fee charged up to the maximum Medicare Benefits Schedule (MBS) fee;

(d) calculate the average number of contributors enrolled in an ABA for each organisation's health benefits fund(s). For this purpose, contributors at the family rate will count as two and those at the single rate as one;

(e) calculate a total number of average contributors pool by aggregating (d) in respect of each State;

(f) determine totals of the amounts calculated under (b), for all health benefits funds in respect of each State;

(g) determine the average amounts paid per contributor in respect of each State [i.e. the amounts calculated in (f) divided by the total number of average contributors calculated in (e)];

(h) determine the amount that would have applied to each health benefits fund if it had average experience in respect of each State [i.e. the average number of contributors calculated in (d) multiplied by the amounts calculated in (g)];

(i) calculate the difference between the amounts calculated in (b) and (h) for each health benefits fund. Where the total amount calculated in (h) exceeds the total amount calculated in (b) the organisation is to be notified that an amount equal to the difference is payable to the Trust Fund. Where the total amount calculated in (b) exceeds the total amount calculated in (h) the organisation is to be notified that an amount equal to the difference is payable from the Trust Fund."

30 Although the Principles are predicated upon the fact that correct information is to be supplied it does not follow that the consequence of the supply of incorrect information can be corrected under the Principles or that a determination of the Council can be reviewed if an RHBO has supplied incorrect information. That depends upon the proper construction and effect of the Principles.

31 I do not consider that there should be implied into the 1995 Principles the proposition that a determination is only valid if it is based on correct information supplied by the RHBO and that if correct information has not been supplied by an RHBO it has an entitlement, as of right, to a re-determination of the amount due from it to the Trust Fund or the amount due to it from the Trust Fund. The Principles set out an administrative procedure to be followed but they are not a code. They leave a number of matters of administration to be determined by the Council, such as the nature of the records to be kept and the manner in which the quarterly returns are to be completed and provided. The power of the Council to make rules for the performance of its functions and the exercise of its powers not inconsistent with the Act suggests that any matters not expressly covered by the Principles may be the subject of determination by the Council by the use of its rule-making power.

32 The Act confers an entitlement on an RHBO to be paid an amount pursuant to s 73BC(12) of the Act calculated in accordance with the relevant Principles but that entitlement is based upon the information supplied by the RHBO. That information may be adjusted by the Council pursuant to par 5 of the 1995 Principles prior to a determination of the amounts payable to or from the Trust Fund pursuant to par 8. But that entitlement does not, by virtue of the Principles, carry with it a right to adjustment or alteration of the amounts payable to or from the Trust Fund or to the underlying information if the information is later shown to be incorrect. The Principles are silent on this issue and that lacuna is picked up and covered by Rule No 4.

33 There is in both the 1995 Principles and the 1998 Principles a specific window of opportunity for the Council to make adjustments or corrections to the information supplied by an RHBO. But that opportunity to make adjustments exists for no longer than the point of time at which the Council determines whether an RHBO is to make a payment to the Trust Fund or is to receive a payment from it. Paragraph 5 of the 1995 Principles is limited in its operation to the point of time at which a quarterly return is processed and the Council acts under par 8 of the 1995 Principles and determines the net amounts payable by or to each RHBO in respect of a relevant period.

34 Paragraph 5 refers to adjustments to amounts "payable into or out of the Trust Fund" where the Council becomes aware of discrepancies in "amounts debited or credited by organisations to their Reinsurance Accounts". Paragraph 5 does not refer to adjustments to amounts "paid" into or out of the Trust Fund. The language of par 5 suggests that any adjustment is to occur before such payments are made. This view is supported by the fact that the adjustment results from discrepancies in "amounts debited or credited by organisations to their Reinsurance Accounts". This process occurs at the time a quarterly return is submitted to the Council in accordance with par 6 of the 1995 Principles. That return contains the amounts so debited or credited.

35 The significance of this analysis of par 5 of the 1995 Principles (and I make a similar analysis of pars 2.2(3) and 3.2(2) of the 1998 Principles) is that it does not result in Rule No 4 being inconsistent with the Principles. If the operation of par 5 is not unlimited in point of time, Rule No 4 does not operate inconsistently with it, nor does it act as a restraint or fetter on an otherwise unlimited discretion to make adjustments at any time to the amounts so debited or credited by RHBOs to their reinsurance accounts. Such an unlimited discretion is not contained in the 1995 or the 1998 Principles.

36 The 1995 Principles do not deal with the situation where it is said that errors or discrepancies in information provided by an RHBO have been discovered after the Council has determined the net amounts payable by or to each RHBO in respect of the period for which that information was provided and such amounts have been paid. Rule No 4 therefore does not impinge upon any area of action or discretion committed to the Council under either the 1995 or the 1998 Principles. Rather it covers a situation not provided for in the Principles.

37 Rule No 4 recognises that after a determination has been made as to the amounts payable by or to RHBOs in respect of a particular period, the Council may learn that those amounts were not appropriate. It then provides for a procedure to enable rectification of that situation, albeit restricted in respect of periods more than one complete financial year earlier. Such a rule is not inconsistent with the Act or the Principles (whether 1995 or 1998) as there is no provision of the Act or the Principles with which it conflicts. It is also enables the Council to perform its function of administering the Trust Fund. It cannot be said therefore that Rule No 4 was an irrelevant consideration for the Council to take into account in reaching its decision.

38 It also follows that I reject the submission that the Council failed to take into account as a relevant consideration the fact that pursuant to the Principles (either 1995 or 1998) the applicant was entitled to the adjustment and payment for which it had applied. No such entitlement existed otherwise than as provided by Rule No 4. In particular there is no specific provision in the Act or the Principles that the applicant was entitled to an adjustment or payment after receiving payment in respect of a particular period upon submitting corrected information.

39 The ground of review under s 5(2)(b) of the Administrative Decisions (Judicial Review) Act 1977 - failing to take a relevant consideration into account in the exercise of a power - is only available where a decision-maker is bound to take that consideration into account in making the decision: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 39. That ground does not assist the applicant in the circumstances of this case having regard to the construction I have placed on the Principles.

40 The applicant submitted that Rule No 4 and, in particular, the requirements in clause 5 that an RHBO establish "exceptional circumstances", was an instance of an adoption of a policy which imposed arbitrary restrictions on the exercise of the power conferred by the Act. The applicant submitted, in the alternative, that if the Council was entitled to apply clause 5 of Rule No 4 the exercise of its power in this case paid no regard to the applicant's submissions particularly because of the way it approached "exceptional circumstances". It was said that the Council shut its ears and eyes to the application made to it.

41 The power conferred by the Act is a power to administer the Trust Fund: s 82G(1)(a). That broad general power of administration is given a focus by the Principles as to the method of determining payments into and out of the Trust Fund but the Principles do not otherwise direct the Council how to administer the Trust Fund. Obviously administration of the Trust Fund requires the Council to establish procedures, policies and guidelines in carrying out its administrative functions.

42 A distinction should be drawn between a guideline, policy or procedure which limits the discretion conferred by a statute and a policy which allows for the discretion to be exercised whilst providing guidance as to how that discretion will be exercised. In Re Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 Brennan J (as he then was) at 641 quoted with approval the following passage from the judgment of Lord Denning in Sagnata Investments Ltd v Norwich Corporation [1971] 2 QB 614 at 626:

"I take it to be perfectly clear now that an administrative body, including a licensing body, which may have to consider numerous applications of a similar kind, is entitled to lay down a general policy which it proposes to follow in coming to its individual decisions, provided always that it is a reasonable policy which it is fair and just to apply. Once laid down, the administrative body is entitled to apply the policy in the individual cases which come before it. The only qualification is that the administrative body must not apply the policy so rigidly as to reject an applicant without hearing what he has to say. It must not `shut its ears to an application': see [1970] UKHL 4; [1971] AC 610, 625 per Lord Reid. The applicant is entitled to put forward reasons urging that the policy should be changed, or saying that in any case it should not be applied to him. But, so long as the administrative body is ready to hear him and consider what he has to say, it is entitled to apply its general policy to him as to others."

These observations are apposite to the circumstances presently before the Court. The statutory power committed to the Council by the Act is to administer the Trust Fund: s 82G(1)(a), to exercise its functions and powers in relation to the Trust Fund in accordance with the Principles determined by the Minister: s 73BC(5E), and to make rules, not inconsistent with the Act, for the purpose of the performance of its functions and the exercise of its powers: s 82G(1)(r). It can be seen that within the scope of that legislative power, supplemented by the provisions of the 1995 Principles, the Council has a broad discretion but nevertheless one which requires the laying down of guidelines and policy considerations.

43 I do not consider that Rule No 4 is an arbitrary restriction on the Council's statutory power. It is appropriate for the Council to lay down guidelines, policies and rules as to how it will administer various aspects of the Trust Fund. What is important is that any particular application by an RHBO be considered by reference to the particular circumstances of its case. As was pointed out by Hill J in Surinakova v Minister for Immigration, Local Government and Ethnic Affairs (1991) 33 FCR 87 at 98:

"There can be no challenge to a decision merely because a decision was made in accordance with a policy. To ensure consistency of administrative decision-making, it will often be appropriate for a policy to be issued containing guidelines. The policy of the Minister, to which I have referred, is one such example. However, a decision-maker must take care to ensure that he does not slavishly follow a policy and disregard the particular circumstances of a case. As Gummow J said in Khan's case ((supra) pp 11-12)):

`... what was required of the decision-maker, in respect of each of the applications, was that in considering all relevant material placed before him, he give proper, genuine and realistic consideration to the merits of the case and be ready in a proper case to depart from any applicable policy ..."

44 In Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 Bowen CJ and Deane J said at 590:

"Indeed, the consistent exercise of discretionary administrative power in the absence of legislative guidelines will, in itself, almost inevitably lead to the formulation of some general policy or rules relating to the exercise of the relevant power."

What is important is that the applicant be given an opportunity to put its case: British Oxygen Co Ltd v Minister of Technology [1970] UKHL 4; [1971] AC 610 at 625; R v Queensland Fish Management Authority; ex parte Hewitt Holdings Pty Ltd (1992) 27 ALD 335 at 338-339.

45 I do not consider that Rule No 4 is couched in terms which impose an arbitrary restriction on the Council's general powers. The Rule did not preclude the Council from considering the particular circumstances which applied to the application which the applicant made to it. It did not shut its eyes to the circumstances of that application but rather considered those circumstances within the framework which it had established. It was not inappropriate for the Council to formulate the requirement that special circumstances be shown before an application in respect of a period more than one financial year prior to the last completed financial year could be considered or to formulate the approach it would take to the determination of such exceptional circumstances. This was a matter for the Council to determine and within the scope of the administrative matters committed to it for its determination. It formulated this requirement by reference to the desirability of ensuring that, except in exceptional circumstances, RHBOs could plan their affairs and would not be required to repay money to the Trust Fund if other RHBOs had made mistakes in earlier years. This situation would arise where there was a recalculation made, such as is presently sought, because the amount of the calculated deficit would be adjusted, as would the amounts paid to RHBOs whose average reinsurance benefit paid was more than the calculated deficit. Such adjustments would result in those RHBOs being required to repay money to the Trust Fund.

46 The learning in relation to the doctrine of functus officio adds little to the analysis: see generally Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 211-216; Comptroller-General of Customs v Kawasaki Motors Pty Ltd (No 1) (1991) 32 FCR 219 at 225-226; Jayasinghe v Minister for Immigration and Ethnic Affairs (1997) 76 FCR 301 at 311-315. The Act allows for the establishment of an administrative scheme and leaves it to the Minister to determine by Principles how the scheme is to be administered. Those Principles can be supplemented by rules made by the Council. The present issue is resolved by considering the overall administrative scheme and the inter-relationship between the Principles and the rules made by the Council rather than by particular reference to the doctrine of functus officio.

47 The applicant also submitted that the Council failed to take into account the fact that it had an entitlement under the Trust Fund as a beneficiary with the result that the Council owed a fiduciary duty to the applicant which it had not observed. Characterising the relationship between the Council and the applicant as a fiduciary relationship adds little to the issue. Even if the Council owed fiduciary obligations to the applicant it has not breached those obligations by acting as it has done, that is to say, in accordance with the Principles and Rule No 4. However I do not consider that the Council owed fiduciary obligations to the applicant by virtue of the fact that s 82G(1)(a) of the Act committed the administration of the Trust Fund to the Council. The Fund's appellation "the Health Benefits Reinsurance Trust Fund" does not of itself impose a fiduciary obligation on the Council. The Council has not undertaken to act in the interests of RHBOs; rather it has undertaken to discharge a statutory function. The RHBOs have not entrusted money or property to the Council nor has the Council agreed to become the agent of the RHBOs or assume a responsibility in relation to them: see generally Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 96-97; Breen v Williams [1995] HCA 63; (1996) 186 CLR 71 at 82. Rather the RHBOs have participated in the Trust Fund as a condition of their registration as an RHBO: s 73BC(6) of the Act.

48 The Council was entitled to apply Rule No 4 in considering the application which had been made to it. The application to review the Council's decision not to make a determination in respect of the 1996/97 year will be dismissed with costs.

I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Associate:

Dated: 8 June 2000

Counsel for the Applicant:	Mr J W K Burnside QC and Mr S Senathirajah
Solicitor for the Applicant:	Corrs Chambers Westgarth
Counsel for the Respondent:	Mr R R S Tracey QC and Mr T J Ginnane
Solicitor for the Respondent:	Phillips Fox
Date of Hearing:	20 March 2000
Date of Judgment:	8 June 2000