The Full Federal Court has handed down two important administrative law decisions relating to the Professional Services Review scheme.

The Full Federal Court has handed down two important administrative law decisions relating to the Professional Services Review (or PSR) scheme.

The invalid appointment: Kutlu v Director of PSR

In Kutlu v Director of PSR [2011] FCAFC 94, the Full Federal Court considered whether a failure to follow a legislated consultation step prior to making a statutory appointment invalidated the appointment. The Court found that it did, and that the actions of the purported appointee were also invalid.

Section 84 of the Health Insurance Act 1973 required the Minister for Health and Ageing to consult with the Australian Medical Association (or AMA) before making appointments to the PSR Panel. The members of the PSR Panel are drawn upon to constitute to PSR committees to investigate inappropriate practice by medical practitioners. Kutlu concerned five separate PSR committees, each of which was constituted by members of the PSR Panel who were appointed by two successive Ministers without consulting the AMA.

The Court considered whether the requirement in the Health Insurance Act to consult was a mandatory requirement, or merely direction which would not result in invalidity if not followed. The Court found that it was a mandatory requirement – the requirements to consult

"are essential preliminaries to the Minister's exercise of the power of appointment. They have a rule-like quality that is easily identified and applied. The sections do not direct the Minister to carry out his or her powers of appointment in accordance with matters of policy. Instead, the confer a discretion to appoint after the preconditions of consultation with, and advice by, the AMA have been fulfilled and the Minister has had regard to that advice."

It followed that all the investigative steps carried out by the five PSR committees were also invalid. The Commonwealth argued that such a finding of invalidity would create significant public inconvenience. The Court gave short shrift to that argument, saying that

"the scale of the Ministers' failure to obey simple legislative commands to consult the AMA before making the appointments is not likely to have been a matter that the Parliament anticipated. If the appointments were treated as valid, the unlawfulness of the Ministers' conduct in making them would attract no remedy. And, if that were so, the appointees would hold offices to which the Minister had unlawfully appointed them and they could not be prevented by injunction or other orders of a court from exercising the powers of those offices."

The Commonwealth also argued that the de facto officers doctrine operated to prevent a challenge to the PSR committees decisions and investigations. The Court also rejected that argument, saying that the de facto officers doctrine has no application where the Parliament has authorised only properly appointed officers to have particular powers. The de facto officers doctrine had no operation in this case because the Parliament did not authorise officers other than PSR Panel to be constituted as a committee and exercise the statutory powers of a PSR committee under the Health Insurance Act.

Kutlu is an important reminder for agencies to check that delegations and appointments comply with statutory procedures, and a warning that the de facto officers doctrine may not cure defects.

Facts, evidence and inference: Tisdall v Webber

The other case, Tisdall v Webber [2011] FCAFC 76, concerned an investigation by a PSR committee into a Dr Tisdall who had rendered 80 or more services on 20 or more days (the so-called "80/20 rule").

Section 106KA of the Health Insurance Act and the Health Insurance (Professional Services Review) Regulations 1999 has the effect that a doctor who breaches the 80/20 rule is taken to have engaged in "inappropriate practice". However, the Regulations provided that if a doctor satisfied a PSR committee that "exceptional circumstances" existed, then the doctor would not have engaged in inappropriate practice. A number of matters were prescribed in the Regulations as constituting exceptional circumstances, including a lack of medical services for patients of the doctor.

Dr Tisdall argued before the PSR committee that exceptional circumstances existed because there was a chronic shortage of doctors in the area in which he practised, and other doctors refused to see his patients. Dr Tisdall supplied material to the Committee which supported his contentions. The Committee decided that it was not satisfied that exceptional circumstances existed, and made a number of findings which it used to support that conclusion, including:

  • The number of services rendered by other practitioners in Dr Tisdall's area indicated that other practices "likely had capacity to see additional patients".
  • The Committee "did not accept that other practitioners would have refused to see Dr Tisdall's patients".
  • The Committee found "that there were services available for these patients."  

The Full Federal Court (Justices Greenwood, Tracey and Buchanan) was highly critical of the way in which the PSR committee went about making its findings. Justice Buchanan said that the evidence Dr Tisdall provided to the committee went "unanswered", and went on to say:

"The Committee appears to have dealt with Dr Tisdall's case in large measure by making a speculative assumption… that other practitioners had the capacity to see additional patients and would have been prepared to do so. How those findings were reconciled with the argument advanced for Dr Tisdall… was not explained. The Committee simply declared… that it did not accept that other practitioners would have refused to see Dr Tisdall's patients."

Justice Greenwood was similarly critical of the PSR committee's findings, saying:

"[T]he Committee members are not entitled to make findings of fact… based upon assumptions of likely capacity and likely disposition to see patients, unsupported by actual evidence, or simply based on inferences drawn from statistics which do not reveal facts about the reasons for statistical rates of attendance."

The Tisdall case highlights the importance of considering submissions made to a decision-maker, and being careful about making findings of fact which are based on evidence. It also sounds a cautionary note about using statistical information to draw inferences: decision-makers should be careful that the statistics actually support the inferences being drawn.