FEDERAL COURT OF AUSTRALIA HBF Health Funds Inc v Minister for Health and Ageing [2006] FCAFC 34 ADMINISTRATIVE LAW – appeals on a question of law – nature of an appeal pursuant to s 44(1) of Administrative Appeals Tribunal Act 1975 (Cth) – formulation of question of law. ADMINISTRATIVE LAW – statutory interpretation – meaning of improper discrimination – whether unequal treatment of equals only involves discrimination when it is not the product of a distinction which is appropriate and adapted to the attainment of a proper objective – whether improper discrimination involves only discrimination against a person and not discrimination between persons – discrimination related to the age of a person – discrimination related to the amount or extent of benefits to which a person becomes or has become entitled during a period – whether loyalty benefit scheme requiring a contributor to attain the age of 65 years before he or she can utilise the scheme's benefits constitutes improper discrimination – whether loyalty benefit scheme providing for benefits to be calculated by reference to the level of claims made for ancillary benefits by the contributor constitutes improper discrimination. Administrative Appeals Tribunal Act 1975 (Cth)s 44(1) National Health Act 1953 (Cth) ss 66, 73AAF, 73AAH, 73AAJ, par (mb) of Sch 1 Federal Court Rules O 53 r 2(1) Austin v Commonwealth (2003) 215 CLR 185 distinguished Bayside City Council v Telstra Corporation Limited (2004) 216 CLR 595 distinguished Birdseye v Australian Securities and Investment Commission (2003) 76 ALD 321 followed Cameron v The Queen (2002) 209 CLR 339distinguished Comcare v Etheridge [2006] FCAFC 27 followed Permanent Trustee Australia Ltd v Commissioner of State Revenue (2004) 211 ALR 18 distinguished Siganto v The Queen (1998) 194 CLR 656cited Street v Queensland Bar Association (1989) 168 CLR 461 distinguished Waters v Public Transport Corporation (1991) 173 CLR 349 considered HBF HEALTH FUNDS INC v MINISTER FOR HEALTH AND AGEING WAD 178 of 2005 SPENDER, BRANSON AND SIOPIS JJ 21 MARCH 2006 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 178 of 2005 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: HBF HEALTH FUNDS INC APPLICANT AND: MINISTER FOR HEALTH AND AGEING RESPONDENT JUDGES: SPENDER, BRANSON AND SIOPIS JJ DATE OF ORDER: 21 MARCH 2006 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondent's costs. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 178 of 2005 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: HBF HEALTH FUNDS INC APPLICANT AND: MINISTER FOR HEALTH AND AGEING RESPONDENT JUDGES: SPENDER, BRANSON AND SIOPIS JJ DATE: 21 MARCH 2006 PLACE: PERTH REASONS FOR JUDGMENT THE COURT introduction 1 This statutory appeal from the Administrative Appeals Tribunal ('the Tribunal') calls for consideration of the concept of 'improper discrimination' as defined by s 66(1) of the National Health Act 1953 (Cth) ('the Act'). On 23 June 2005 the Hon R J Groom, a Deputy President of the Tribunal, affirmed a decision of a delegate of the Minister for Health and Ageing which had effectively prevented the applicant ('HBF') from implementing a proposed 'loyalty bonus scheme' ('the HBF Scheme'). The delegate of the Minister had taken the view that the implementation of the HBF Scheme would involve HBF in 'improper discrimination' within the meaning of the Act. 2 For the reasons given below we are not satisfied that the decision of the Deputy President is based, as HBF contended, on a misunderstanding of the true meaning of 'improper discrimination' as defined by s 66(1) of the Act. The appeal must therefore be dismissed. nature of appeal 3 This appeal is brought pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ('the AAT Act'). Section 44(1) authorises an appeal 'on a question of law'. The limited nature of an appeal on a question of law was discussed in Birdseye v Australian Securities and Investment Commission [2003] FCAFC 232; 76 ALD 321 ('Birdseye') and more recently in Comcare v Etheridge [2006] FCAFC 27 ('Etheridge'). 4 An appeal to the Court from a decision of the Tribunal is required to be instituted by filing a notice of appeal in, or substantially in, the form numbered 55A in Schedule 1 to the Federal Court Rules (see O 53 r 2(1) of the Federal Court Rules). A notice of appeal in, or substantially in, form 55A must specify, amongst other things, the question or questions of law raised by the appeal, the orders sought by way of relief and the grounds relied upon in support of those orders. 5 As pointed out in Birdseye at [10]‑[18] and Etheridge at [13], the subject matter of an appeal pursuant to s 44(1) of the AAT Act is the question or questions of law specified in the notice of appeal. It is not necessary to repeat here what was said in those cases about the appropriate form of a question of law specified for the purposes of an appeal pursuant to s 44(1) of the AAT Act. The question of law specified in the applicant's amended notice of appeal is reformulated below to clarify the critical questions raised on this appeal. 6 As Birdseye and Etheridge also make plain, the grounds required to be specified in the notice of appeal are not grounds of appeal; they are the grounds upon which the appellant will argue that the answers for which it contends to the questions of law entitle it to the relief which it seeks. It is not possible, as the applicant sought to do in this case, to extend the subject matter of the appeal beyond the specified questions of law by itemising, under the heading 'Grounds', a series of alleged errors (some being errors of law, some being errors of fact and some being errors of mixed law and fact) in the reasons for decision of the Tribunal. legislative framework 7 HBF is a health benefits organisation registered under Part VI of the Act. Its registration is subject to the conditions set out in Division 3 of Part VI of the Act and Schedule 1 of the Act (s 73AAF of the Act). 8 Section 73AAH of the Act relevantly provides: '(1) It is a condition of registration of a registered organization that the organization will ensure that its constitution and rules, and its actions, are at all times consistent with the principles of community rating. (2) The constitution or rules of a registered organization will not be consistent with the principles of community rating if the constitution or rules permit the organization to undertake any activity that constitutes improper discrimination against a person who seeks to become, or who is, a contributor to the health benefits fund conducted by the organization or against a dependant of such a person'. (emphasis added) 9 Section 66(1) of the Act relevantly provides that, in Part VI of the Act, unless the contrary intention appears: 'improper discrimination means a discrimination that is related to all or any of the following matters: (a) …; (b) …; (ba) the age of a person, except to the extent that the person's age may be taken into account under section 73BAAA and Schedule 2 [in relation to Lifetime Health Cover]; (baa) …; (bb) …; (c) the frequency of the rendering of professional services to a person; (d) the amount, or extent, of the benefits to which a person becomes, or has become, entitled during a period; (e) …' 10 The terms of the above definition are reflected in paragraph (mb) of Schedule 1 of the Act which relevantly provides (presumably out of an abundance of caution having regard to the terms of s 73AAH) as follows: 'The organization will not, in determining whether a contributor or a dependant of a contributor may participate in a loyalty bonus scheme, have regard to any of the following matters: (i) …; (ii) the age of the contributor or of a dependant of a contributor; (iii) …; (iv) the amount, or extent, of the benefits to which the contributor becomes, or has become, entitled during a period; (v) …' the proposed loyalty benefit scheme 11 HBF did not challenge the Tribunal's description of the essential elements of the HBF Scheme. Those essential elements, as identified by the Tribunal in its reasons for decision, include the following: · to qualify for a loyalty benefit members must have either hospital or ancillary cover and have at least 3 years continuous membership; · loyalty benefits increase as the length of membership increases; · the loyalty benefit includes an ancillary component rewarding members (for their loyalty to the membership as a whole) for either reducing or deferring claims for professional services viewed as discretionary; and · benefits accrue until the member reaches the age of 65 at which time they will ordinarily be available to be used. questions of law 12 The questions of law that HBF seeks to have answered on this appeal can be simply stated. They are: 1. Do rules of a registered organisation in respect of a loyalty benefit scheme which require a contributor to attain the age of 65 years before he or she can utilise the financial benefits offered by the scheme give rise to discrimination that is related to 'the age of a person' within the meaning of s 66(1) of the Act? 2. Do rules of a registered organisation in respect of a loyalty benefit scheme which provide for the amount of the benefit to be calculated on a basis that takes into account the level of claims made for ancillary benefits by the contributor over a rolling three year period give rise to discrimination that is related to 'the amount, or extent, of the benefits to which a person becomes, or has become, entitled during a period' within the meaning of s 66(1) of the Act? consideration 13 It is convenient to consider together the two questions of law identified above. 14 HBF contended that the HBF Scheme does not involve discrimination at all and therefore does not involve 'improper discrimination' within the meaning of the Act. This contention was based on the proposition that discrimination generally involves the inappropriate and unequal treatment of equals which is not adapted to the attainment of proper objectives. Further, HBF contended that 'discrimination' in the definition of 'improper discrimination' involves only discrimination against a person and not discrimination between persons. 15 The above contentions are untenable and inconsistent with the authorities concerning the proper interpretation of anti-discrimination legislation. 16 The Act does not contain a definition of the word 'discriminate' in any of its grammatical forms. In its usual or ordinary meaning 'discriminate' does not necessarily carry a pejorative connotation; it simply means to make a distinction between persons or things. For example, it is generally regarded as appropriate for a school principal to discriminate in the level of after‑school care and supervision provided for infants and adolescents respectively. A description of a person as 'discriminating' is generally understood as a positive statement about that person. There is, in our view, no reason to think that the word 'discrimination' is not used in s 66(1) of the Act in its ordinary sense to mean the making of distinctions – relevantly between persons. 17 There is now considerable anti‑discrimination legislation in Australia. For example, the Racial Discrimination Act 1975 (Cth) ('the RDA') by s 15 renders it unlawful for employers to make distinctions based on race, colour or national or ethnic origin in determining who should be offered employment. Although s 15 of the RDA does not use the words 'discriminate' or 'discrimination' it is, as the title of the Act recognises, a provision which proscribes discrimination on the grounds identified in the section. Similarly, the Sex Discrimination Act 1984 (Cth) ('the SDA') by s 14(1) renders it unlawful for employers to make distinctions based on, among other things, sex or marital status in determining who should be offered employment. Section 14(1) of the SDA expressly proscribes 'discrimination against'a person on the grounds of sex or marital status. 18 The authorities, including Waters v Public Transport Corporation (1991) 173 CLR 349 ('Waters'), make it clear that the effect of s 15 of the RDA and s 14(1) of the SDA is to deem race, colour, national or ethnic origin, sex and marital status to be irrelevant to an employer's decision as to who should be offered employment. The employer is, of course, still entitled to choose one candidate over another and in this sense to discriminate between candidates. However, the employer's choice between candidates must be based on grounds that have not been deemed by statute to be irrelevant to that choice. That is, the choice must be made by reference to grounds other than race, colour, national or ethnic origin, sex or marital status. The legislature has, to the extent of its constitutional power, rendered it unlawful for an employer to discriminate againsta person on any of these grounds when choosing an employee. 19 In Waters at 363 Mason CJ and Gaudron J suggested that anti‑discrimination legislation was concerned with discrimination against, rather than discrimination between, persons with different characteristics. Their Honours said that the notion of 'discrimination against' involves differentiation by reason of irrelevant or impermissible considerations. This view was not expressed by any other member of the High Court in Waters. If their Honours intended to convey that discrimination 'between' persons involves the drawing of distinctions on legitimate grounds while discrimination 'against' persons implies the drawing of distinctions on irrelevant or illegitimate grounds, the suggested linguistic convention is not, we suggest, uniformly followed (see, for example, the language adopted by Dawson and Toohey JJ in Waters at 392). 20 More importantly, nothing in Waters, or any other relevant authority, suggests that it is permissible to discriminate between persons on a ground proscribed by legislation as a ground of discrimination because a legitimate reason for drawing a distinction between persons on that ground can be identified. The proposition advanced by HBF (see [14] above) that discrimination generally involves the inappropriate and unequal treatment of equals that is not adapted to the attainment of proper objectives appears to derive from authorities in which the notion of 'discrimination' as manifest in the text and interpretation of the Constitution has been considered (see, for example, Street v Queensland Bar Association (1989) 168 CLR 461 at 570-571; Austin v Commonwealth (2003) 215 CLR 185 and Permanent Trustee Australia Ltd v Commissioner of State Revenue (2004) 211 ALR 18 at [88]-[94]). These authorities are of limited assistance in determining the proper construction of the definition of 'improper discrimination' in s 66(1) of the Act. This is because that definition explicitly refers to discrimination that is related to particular matters; that is, in the more traditional language of anti-discrimination legislation, to discrimination on the grounds identified in the subparagraphs of the definition. The terms of the definition of 'improper discrimination' leave no room for any evaluation of whether a distinction on any of the identified grounds is adapted to the attainment of a proper objective. 21 The submissions of HBF identified in [14] above were in part founded on a misunderstanding of certain observations contained in the joint judgment of Gaudron, Gummow and Callinan JJ in Cameron v The Queen (2002) 209 CLR 339 at [15]. The High Court in Cameron v The Queen was concerned with principles of sentencing. One such principle is that a convicted person may not be penalised by way of increased sentence for having insisted on his or her right to trial (Siganto v The Queen (1998) 194 CLR 656 at [22]). 22 The observations from the joint judgment in Cameron v The Queen upon which HBF placed reliance can only be understood if they are read in the context provided by the preceding paragraph (ie [14]). The relevant passage is thus: 'Reconciliation of the requirement that a person not be penalised for pleading not guilty with the rule that a plea of guilty may be taken into account in mitigation requires that the rationale for that rule, so far as it depends on factors other than remorse and acceptance of responsibility, be expressed in terms of willingness to facilitate the course of justice and not on the basis that the plea has saved the community the expense of a contested hearing. … One aspect of the legal notion of discrimination "lies in the unequal treatment of equals". The "equals" here are those required to plead guilty or not guilty; they stand as equals before the criminal law and processes of Western Australia. But is the differential treatment of such persons and the unequal outcome with respect to sentence the product of a distinction which is appropriate and adapted to the attainment of a proper objective, here the facilitation of the course of justice by the willingness of the accused to plead in a particular fashion? The answer … is in the affirmative.' (citation omitted) 23 As their Honours concluded in the above passage, no principle of sentencing proscribes the drawing of a distinction for sentencing purposes between accused persons who facilitate the course of justice by pleading guilty and those who do not so facilitate the course of justice. As the facilitation of the course of justice is a proper sentencing objective, and as mitigation of sentence for those who plead guilty is appropriate and adapted to achieve that objective, the differential treatment involved in mitigating the sentences of those who plead guilty, while not mitigating the sentences of those who plead not guilty, is permissible – albeit that it would be impermissible to increase the sentences of those who plead not guilty because they have insisted on their right to trial. 24 Nothing said by Gaudron, Gummow and Callinan JJ in Cameron v The Queen provides support for the contention that the unequal treatment of equals can only involve discrimination when it is not the product of a distinction which is appropriate and adapted to the attainment of a proper objective. Where the law proscribes discrimination on a particular ground, consideration of whether discrimination on that ground might be in the public interest is, as their Honours recognised, foreclosed. 25 Another authority on which HBF placed reliance was Bayside City Council v Telstra Corporation Limited (2004) 216 CLR 595 ('Bayside'). That case concerned the application of clause 44(1)(a) of Schedule 3 of the Telecommunications Act 1997 (Cth) which provides that a law of a State or Territory has no effect to the extent that it discriminates against a particular carrier. That is, the legislation in question was not concerned to proscribe discrimination on particular grounds but rather to render ineffective laws which discriminated generally against a particular carrier. In this sense the legislation under consideration was comparable to provisions such as s 117 of the Constitution. It was in that context that Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ at [40] said: 'Discrimination is a concept that arises for consideration in a variety of constitutional and legislative contexts. It involves a comparison, and, where a certain kind of differential treatment is put forward as the basis of a claim of discrimination, it may require an examination of the relevance, appropriateness, or permissibility of some distinction by reference to which such treatment occurs, or by reference to which it is sought to be explained or justified. In the selection of comparable cases, and in forming a view as to the relevance, appropriateness, or permissibility of a distinction, a judgment may be influenced strongly by the particular context in which the issue arises. Questions of degree may be involved.' (citation omitted) 26 Section 66(1) of the Act (see [9] above), in contrast to the legislation considered in Bayside, is concerned with discrimination on particular grounds. It characterises as 'improper discrimination' any discrimination that is related to the age of a person and any discrimination that is related to the amount, or extent, of the benefits to which a person becomes, or has become, entitled during a period. Consequently, any rules of a registered organisation which permit the organisation to discriminate against a person on the basis of his or her age (whether it be a young or an old age) or on the basis of the amount, or extent, of the benefits to which the person becomes, or has become, entitled during a period will not be consistent with the principles of community rating (see s 73AAH(2)). Section 73AAH(1) (see [8] above) requires the rules of a registered organisation to be consistent with the principles of community rating. 27 The Tribunal, in our view, rightly rejected the submission that s 73AAJ of the Act discloses an intention to modify the operation of s 73AAH(1) in respect of ancillary health benefits. Section 73AAJ is concerned to proscribe 'improper discrimination' in certain classes of decisions made by registered organisations. Decisions concerning ancillary benefits do not fall within the terms of s 73AAJ. However, this does not, in our view, give rise to an implication that decisions of registered organisations concerning ancillary benefits are not required to be consistent with the principles of community rating. Indeed s 73AAH(4) makes clear that, generally speaking, decisions concerning ancillary health benefits must be consistent with the principles of community rating. Section 73AAH(4) effectively deems limitations on entitlements to ancillary health benefits in respect of a period by reference solely to the quantum of ancillary health benefits already claimed in respect of that period to be consistent with the principles of community rating. If decisions concerning ancillary health benefits were not otherwise required to be consistent with the principles of community rating s 73AAH(4) would be unnecessary. 28 The effect of the provisions of the Act concerning principles of community rating is to require the rules of registered organisations to attach no significance to the age of a person – except to the extent authorised by s 66(1)(ba). Similarly, the principles of community rating require that, subject to s 73AAH(4), no significance is to be attached to the amount, or extent, of the benefits to which a person becomes, or has become, entitled during a period. 29 Paragraph (mb) of Schedule 1 of the Act renders it impermissible for a registered organisation, in determining whether a contributor or a dependent of a contributor may participate in a loyalty bonus scheme, to have regard to the age of the contributor or the dependent or the amount, or extent, of the benefits to which the contributor becomes, or has become entitled during a period. Age and benefit entitlements are deemed by paragraph (mb) of Schedule 1 to be irrelevant to participation in a loyalty benefit scheme. 30 Provisions of a loyalty benefits scheme which require a contributor to attain the age of 65 years before he or she can utilise the financial benefits offered by the scheme attach significance to the person's age. Any rules of a registered organisation which seek to implement such provisions will therefore contravene s 73AAH of the Act. A registered organisation which determines whether a contributor or a dependent of a contributor may participate in a loyalty benefit scheme by reference to the age of the contributor or dependent will contravene paragraph (mb) of Schedule 1 of the Act. 31 The same analysis applies to provisions of a loyalty benefits scheme which attach significance to the level of claims made for ancillary benefits by a contributor over a three year rolling period. Such provisions will give rise to discrimination that is related to 'the amount, or extent, of the benefits to which a person becomes, or has become, entitled during a period' within the meaning of s 66(1) of the Act. They will not fall within the protection of s 73AAH(4). 32 It is not necessary for the purpose of answering the questions of law which may be understood to constitute the subject matter of this appeal to give consideration to the numerous arguments advanced by HBF in support of the contention that the HBF Scheme is consistent with the policy objectives of the Act. The Act by, amongst other provisions, s 66(1), s 73AAH and paragraph (mb) of Schedule 1, discloses a clear intention that a registered organisation may not operate a loyalty benefit scheme that discriminates against a contributor by reason of his or her age or the amount, or extent, of the benefits to which he or she becomes, or has become, entitled during a period. It is not open to a registered organisation to argue that its particular loyalty benefit scheme, whilst discriminating in the above ways, is not proscribed by the Act because it will advance certain other policy objectives of the Act. The Act has foreclosed any such argument. conclusion 33 Each of the questions of law which constitute the subject matter of this appeal is answered, Yes. These answers do not indicate that error attends the decision of the Tribunal. The application will be dismissed with costs. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Spender, Branson and Siopis. Associate: Dated: 21 March 2006 Counsel for the Applicant: N McKerracher QC and D H Solomon Solicitor for the Applicant: Solomon Brothers Counsel for the Respondent: S Owen-Conway QC and G Rumble Solicitor for the Respondent: Phillips Fox Date of Hearing: 14 February 2006 Date of Judgment: 21 March 2006