Health Insurance Commission v Peverill

(1994) 119 ALR 675
(1994) 68 ALJR 251
(1994) 179 CLR 226

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(Judgment by: Dawson J)

Health Insurance Commission
vPeverill

Court:

Judges: Mason CJ
Brennan J
Deane J
Dawson J
Toohey J
Gaudron J
McHugh J

Subject References:
Constitutional law
Commonwealth
Medicare benefits
Medical or pathology services
Assign-ment by patient to practitioner of right to payment
Retrospective reductions of benefit
Whether a law with respect to acquisition of property
Whether a law imposing taxation
(CTH) Common-wealth Constitution ss 51(xxiiiA), 51(xxxi), 55.
(CTH) Health Insurance Act 1973 ss 10, 20A.
(CTH) Health Insurance (Pathology Services) Amendment Act 1991.

Legislative References:
Health Insurance (Pathology Services) Amendment Act 1991 (Cth) (the Amending Act) - 6
The Health Insurance Act 1973 (Cth) (the Principal Act) - The Act
Judiciary Act 1903 (Cth) - 40
Administrative Decisions (Judicial Review) Act 1977 (Cth) - The Act
Health Insurance Act 1973 (Cth) (the Principal Act) - 20
Trading with the Enemy Act 1939 (Cth) - The Act
Commonwealth of Australia Constitution Act 1900 - The Act

Hearing date: 9, 10 March 1993
Judgment date: 9 March 1994

Canberra

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Judgment by:
Dawson J

Speaking generally, a patient who incurs expenses for medical or pathology services is entitled to receive Medicare benefits from the Commonwealth government under the Health Insurance Act 1973 (Cth) (the Principal Act). ^[26] Instead of the patient paying the medical practitioner for a service and then claiming the medical benefit from the government, the patient may enter into an agreement with the practitioner whereby the patient assigns the right to payment of the benefit to the practitioner and the practitioner accepts the assignment in full payment for the service. ^[27] The Medicare benefit is payable in accordance with the assignment or agreement. ^[28] It is this arrangement which allows a medical practitioner to engage in the practice known as bulk-billing.

Between 3 December 1984 and 31 July 1989 the respondent, Dr Peverill, performed pathology tests of a kind known as the ELISA est, which is short for enzyme-linked immunosorbent assay. The procedure is one by which specific biological substances can be detected and measured and is used, amongst other things, to test for antibodies to the rubella virus. Dr Peverill's patients assigned to him their rights to Medicare benefits for the ELISA tests. The Medicare benefits were calculated by reference to fees for pathology services set out in a schedule to the Principal Act. ^[29] Dr Peverill submitted claims for the ELISA tests under item 1345 of the schedule which specified a fee of $34.50. The claims were made to the appellant, the Health Insurance Commission, which was the appropriate body under the Principal Act. ^[30] It decided that the claims should be met under item 2294 in the schedule which specified a fee of $4.60. In proceedings under the Administrative Decisions (Judicial Review) Act 1977 (Cth) in the Federal Court, Burchett J held that the Health Insurance Commission was in error and that the benefits payable for ELISA tests were covered by item 1345. ^[31]

Dr Peverill then sued the Health Insurance Commission to recover benefits in respect of ELISA tests which he alleged were due under item 1345. In a separate action, Dr Peverill made claims under item 1345 in respect of various other pathology services which he alleged involved the quantitative estimation of substances.

Whilst both actions were on foot, the Health Insurance (Pathology Services) Amendment Act 1991 (Cth) (the Amending Act) was passed.Some of the amendments made by that Act are expressed to operate retrospectively from 1 January 1980. The Amending Act excluded from item 1345 ''quantitative estimation of ... a microbiological or tissue antigen or antibody'', ^[32] thus excluding the ELISA test. Instead, the Amending Act inserted two new items, 2294 and 2295, which prescribed benefits for ''Enzyme-linked immunosorbent assay (ELISA)''. For the tests performed by Dr Peverill between 1 March and 14 June 1984, they provided for a fee of $15.40; for tests performed between 15 June 1984 and 30 June 1985 they provided for a fee of $16.60; and for tests performed between 1 July 1985 and 13 March 1986 they provided for a fee of $17.20. ^[33] From 14 March 1986 the schedule was further amended to prescribe fees for ''Enzyme-linked immunosorbent assay (ELISA) for a microbiological or tissue antigen or antibody where that antigen or antibody is not specified elsewhere in the Schedule''. The fee prescribed remained at $17.20. ^[34] From 1 August 1986, pathology tests were placed in a separate schedule but the item numbers remained the same as did the scheduled fees. ^[35] from 1 August 1989 the scheme for pathology Medicare benefits was significantly altered by the Community Services and Health Legislation Amendment Act 1989 (Cth) and the benefits payable under that legislation are not in issue in this litigation.

The effect of the Amending Act was to reduce, with retrospective effect, the benefits which were previously payable for the ELISA tests. The Health Insurance Commission amended its defence in each action to rely upon the retrospective amendments to the Principal Act. Dr Peverill in turn amended his reply in each case to allege that the Amending Act was beyond the power of the Commonwealth Parliament, being a law providing for the acquisition of property other than on just terms contrary to s 51(xxxi) of the Constitution. Dr Peverill also alleged, presumably in the alternative, that the Amending Act purported to insert into the Principal Act provisions imposing taxation contrary to s 55 of the Constitution.

The matters came before Burchett J to determine the issues raised by the amendments to the pleadings. He held that the Amending Act was beyond power because it was a law with respect to the acquisition of property which did not provide just terms. He did not find it necessary to deal with the issue raised under s 55 of the Constitution. ^[36] He ordered the amendments to the defence in each case to be struck out. An appeal to the Full Court of the Federal Court was launched by the Health Insurance Commission against those orders and Dr Peverill delivered a notice of contention that the Amending Act was a law imposing taxation within the meaning of s 55 of the Constitution. The appeal was removed into this court under s 40(1) of the Judiciary Act 1903 (Cth).

The Commonwealth Attorney-General intervened before us to support the validity of the Amending Act and, in doing so, relied upon decisions in the United States dealing with the prohibition contained in the Fifth Amendment against the taking of private property for public use without just compensation. That prohibition is extended to the States by the Fourteenth Amendment. There is a significant difference between that provision, which prohibits the taking of property without just compensation, and s 51(xxxi), which confers the power to acquire property compulsorily upon just terms. Moreover, the prohibition in the United States is necessarily to be seen in the context of due process which has no counterpart in the Australian Constitution. Caution must, therefore, be exercised in the use of American authorities in relation to s 51(xxxi). The Attorney-General submitted that the United States decisions establish first, that gratuitous benefits such as welfare benefits do not constitute property for the purposes of the prohibition against taking without just compensation, and secondly, that laws designed to cure previous defects in administration do not offend against the prohibition. He sought to apply those propositions in the context of s 51(xxxi).

However, I find no need to resort to American authority upon the subject. It is clearly established in this country that before s 51(xxxi) has any application there must be an acquisition of property. There is, as I have said, an obvious and important distinction between a taking and an acquisition. As Mason J observed in Commonwealth v Tasmania >/ (the Tasmanian Dam case): ^[37]

The emphasis in s 51(xxxi) is not on a ''taking'' of private property but on the acquisition of property for purposes of the Commonwealth. To bring the constitutional provision into play it is not enough that legislation adversely affects or terminates a pre-existing right that an owner enjoys in relation to his property; there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be.

In my view Dr Peverill has failed to establish that the Amending Act is a law with respect to the acquisition of property for any purpose in respect of which the parliament has power to make laws.

As I understand it, Dr Peverill first put his case upon the basis that when a patient assigned to him the patient's right to a Medicare benefit, he acquired a chose in action. So much is, I think, clear. Indeed, s 20A(3) of the Principal Act provides to that effect when it says that the Medicare benefit is payable in accordance with the assignment. And there can be no doubt that a chose in action may constitute property for the purposes of s 51(xxxi). ^[38] Moreover, it is now settled that s 51(xxxi) extends to the acquisition of property by persons other than the Commonwealth. ^[39] Further, it may be assumed for the purposes of the argument (although it is clearly not beyond argument) that a law reducing the rate of a Medicare benefit, the right to which constitutes the relevant property, is a law with respect to the acquisition of that property even though the acquisition was completed before the law took effect.

However, a medical practitioner who accepts the assignment of a Medicare benefit in full payment for his or her professional services does so entirely voluntarily. It is difficult, therefore, to see how any question of just terms arises. Indeed, the better view now appears to be that s 51(xxxi) is confined to the compulsory acquisition of property. That view was taken by Stephen J in Trade Practices Commission v Tooth & Co Ltd where he said: ^[40]

The reference to ''just terms'' throws light upon the particular meaning of ''acquisition'' in the placitum. Despite early dicta to the contrary it is now well established that pl (xxxi) contemplates acquisition by ''the method of requisition'', not by ''the method of agreement''. ^[41] Thus in British Medical Association v Commonwealth ^[42] Dixon J contrasted acquisition under pl (xxxi) with the case of a voluntary sale, speaking of the former as involving the taking of property from him ''against his will without just compensation','

Be that as it may, the chose in action in the form of a Medicare benefit was not, in my view, acquired for any purpose in respect of which the Commonwealth has power to make laws. Dr Peverill acquired Medicare benefits by assignment from his patients for his own purpose and the acquisition therefore falls outside s 51(xxxi). As Brennan J said in Re Tooth & Co Ltd (No 2 ): ^[43]

An acquisition purportedly authorised by a law with respect to a subject matter of federal power is not necessarily an acquisition for the purpose of that subject matter. If the property the subject of the acquisition is not to be used or applied ''in or towards carrying out or furthering a purpose comprised in some other legislative power'' (ie, a power other than pl (xxxi)), the acquisition is not for a purpose to which pl (xxxi) refers. The purpose of an acquisition is determined by the statute's intention as to the use or application of the property in the hands of the person acquiring the property. Where a law purports to authorise an acquisition of property by a private person, and there is no question of applying the property when acquired either for the use and service of the Crown, or for any other purpose in respect of which the parliament has power to make laws, the law finds no constitutional support in pl (xxxi). It does not fall outside pl (xxxi) for want of just terms, but for want of purpose.

That means that the Amending Act must be supported by a head of power other than s 51(xxxi). It is to be found in s 51(xxiiiA) which gives to the Commonwealth Parliament the power to make laws with respect to the ''provision of ... pharmaceutical, sickness and hospital benefits, medical and dental services''. As Brennan J pointed out in Re Tooth & Co Ltd (No 2 ), ^[44] whilst every compulsory acquisition of property by the Commonwealth (other than ''forfeitures, penalties, taxes or the like'') must find support in s 51(xxxi) and not in any other head of power, the same is not necessarily so in the case of a compulsory acquisition of property by a third party under Commonwealth legislation. Brennan J gave the examples of a law with respect to marriage and divorce providing for the compulsory transfer of property between spouses and a law under the defence power restricting a landlord's right to recover possession of premises upon the expiration of a lease. This case is, in my view, another example. The acquisition of the right to medicare benefits by Dr Peverill was not an acquisition for any purpose of the Commonwealth and, even if it were otherwise within the terms of s 51(xxxi), it would fall outside it for that reason.

Alternatively, Dr Peverill submitted that the Amending Act had the effect that the Commonwealth acquired the chose in action assigned by a patient to Dr Peverill and substituted another of a lesser value. In my view that argument cannot be sustained.

For the reasons Toohey J and I gave in Mutual Pools Pty Ltd v Commonwealth , ^[45] the reduction or extinction of a liability, even though it may confer a financial or monetary advantage upon the person whose liability is reduced or extinguished, does not result in the acquisition of property by that person. That is not because no money passes hands. It is because nothing which answers the description of property is acquired. True it is that in that ituation no coins or notes are involved, but the character of money s not dependent upon its physical qualities. They may not be present at all in a transaction involving the transfer of money and are of no intrinsic worth. Money is merely a medium of exchange; it is not an object of exchange. It represents value or purchasing power, but does not constitute property within the meaning of s 51(xxxi) of the Constitution. The enactment of the Amending Act did not result in the acquisition by the Commonwealth of the chose in action assigned to Dr Peverill by his patient. The value of the right which he acquired in the form of the chose in action was reduced, but the Commonwealth did not acquire any property.

Nor, in my view, can it be said that the Amending Act is a law imposing taxation. That argument appears to assume that any tax is imposed upon Dr Peverill rather than the patient. That assumption is not, I think, crucial to the argument.

The familiar definition of a tax is that it is ''a compulsory exaction of money by a public authority for public purposes, enforceable by law, and ... not a payment for services rendered''. ^[46] That definition is, of course, not exhaustive even when there are added to it the more recent requirements that a tax not be by way of penalty and not be arbitrary. ^[47] Whilst it may be possible in some circumstances for a tax to take a form other than the exaction of money, ^[48] in the context of s 51 of the Constitution, which requires a line to be drawn between the taxation power (para (ii)) and the acquisition power (para (xxxi)), those circumstances, if they exist at all, must be limited. Nevertheless, a tax must, I think, be by way of exaction and where the exaction is of money, as it invariably is, it takes the form of the imposition of an obligation upon the taxpayer which is met by the payment of money. Money raised by taxation constitutes part of the revenue of the Commonwealth and, under s 81 of the Constitution, forms part of the Consolidated Revenue Fund to be appropriated for the purposes of the Commonwealth in the manner imposed by the Constitution. Under s 83, no money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law. ^[49]

In Australian Tape Manufacturers Association Ltd v Commonwealth Toohey J and I remarked: ^[50]

Those characteristics of a tax which require it to be levied by a public authority for public purposes are important in that they reflect the general conception of a tax as a means of raising revenue for government (even if the aim of the tax is also to encourage or discourage behaviour of a particular kind). In consequence, the fact that an exaction is to be paid into a consolidated revenue fund is sufficient indication that the exaction is for a public purpose, hence a tax. ^[51] By inference, the strongest indication that an exaction does not constitute a tax is that the moneys raised do not form part of such a fund.

In the present case there is no exaction: Dr Peverill is not obliged to pay any amount for the purpose of raising revenue. The Amending Act reduces the liability of the Commonwealth to pay Medicare benefits, but it does not, in my view, impose a tax. A tax may variously be described as an exaction, levy, contribution, duty, charge or even an extortion, ^[52] but whatever the description, taxation for the purposes of s 51(ii) involves an obligation imposed by law to pay money which, when paid, will comprise government revenue and form part of the Consolidated Revenue Fund. ^[53] Of course, what amounts to an exaction etc is a matter of substance rather than form. As Latham CJ observed in Attorney-General (NSW) v Homebush Flour Mills Ltd : ^[54]

''Voluntary loans'' and ''gracious offerings'' and ''forced benevolences'' are not unknown in our history. When such transactions amount to the exaction of money in obedience to what is really a compulsive demand, the money paid is paid as a tax.

However, in my view, a person does not without more become a taxpayer merely by reason of the reduction or extinction of a liability which the government owes to him or her.

For these reasons, I would hold the Health Insurance (Pathology Services) Amendment Act 1991 to be a valid exercise of legislative power, and allow the appeal.