Bardsley-Smith v Penrith City Council
[2012] NSWLEC 79
•18 April 2012
Land and Environment Court
New South Wales
Medium Neutral Citation: Bardsley-Smith & Anor v Penrith City Council & Others [2012] NSWLEC 79 Hearing dates: 1-4 November 2010 and 13-14 January 2011 Decision date: 18 April 2012 Before: Sheahan J Decision: 1.The applicants' further amended summons dated 22 October 2010 is dismissed.
2.Unless a notice of motion for any further or different orders for costs is filed, by any party, within 14 days, the only order for costs will be that the applicants pay the second and third respondents' costs, on a party-party basis, as agreed or assessed.
3.All exhibits, including those to affidavits, may be returned.
Catchwords: DEVELOPMENT CONSENT: validity, characterisation of proposal and subsequent use pursuant to the consent, correct principles to apply, interaction of national/state regulation of pharmacy and the relevant planning regime, validity of condition imposed, severability of condition Legislation Cited: Environmental Planning and Assessment Act 1979
Health Practitioner Regulation (Adoption of National Law) Act 2009 (NSW)
Health Practitioner Regulation National Law Act 2009 (Qld)
Interpretation Act 1987
Land and Environment Court Act 1979
National Health Act 1953 (Cth)
National Health Amendment (Pharmaceutical Benefits) Act 2007 (Cth)
Poisons and Therapeutic Goods Act 1966
Penrith Local Environmental Plan 1996 (Industrial Land)
Penrith Local Environmental Plan 2010Cases Cited: Attorney-General (NSW) v Quin [1990] HCA 21; (1990) 170 CLR 1
Baulkham Hills Shire Council v O'Donnell (1990) 69 LGRA 404
Berowra RSL Community and Bowling Club Ltd v Hornsby Shire Council [2002] NSWLEC 243; (2000) 114 LGERA 345
Bob Blakemore Pty Ltd v The Anson Bay Company (Australia) Pty Ltd [1990] NSWCA 25
Botany Bay City Council v Saab Corp Pty Ltd [2011] NSWCA 308; (2011) 183 LGERA 228
Botany Bay City Council v Ralansaab and 7 Ors [2010] NSWLEC 225; (2010) 178 LGERA 44
Calardu Penrith Pty Ltd v Penrith City Council [2010] NSWLEC 50
Calardu Penrith Pty Ltd v Penrith City Council [2010] NSWCA 189; (2010) 174 LGERA 446
Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; (2007) 151 LGERA 400
Chan v Dainford Ltd [1985] HCA 15; (1985) 155 CLR 533
Collector of Customs v Chemark Services Pty Ltd (1993) 42 FCR 588; (1993) 114 ALR 531
Corporation of the City of Enfield v Development Assessment [2000] HCA 5; (2000) 199 CLR 135
Dogild v Warringah Council (2008) 158 LGERA 429
Dooralong Residents Action Group Pty Ltd v Wyong Shire Council [2011] NSWLEC 251
Egan v Hawkesbury City Council (1993) 79 LGERA 321
Foodbarn Pty Limited v Solicitor-General (1975) 32 LGRA 157
Gance v Monash CC [2010] VCAT 388
High Point Commercial Property Group Pty Ltd v Maribyrnong CC [2009] VCAT 16
Holzberger v Secretary, Department of Health & Ageing [2007] FCAFC 68; (2007) 158 FCR 586
House of Peace Pty Ltd v Bankstown City Council [2000] NSWCA 44; (2000) 48 NSWLR 498
Kang v Blue Mountains City Council [2011] NSWLEC 150
Lizzio v Ryde Municipal Council [1983] HCA 22; (1983) 155 CLR 211
Macquarie International Health Clinic Pty Ltd v University of Sydney (1998) 98 LGERA 218
Maitland City Council v Anambah Homes Pty Ltd [2005] NSWCA 455; (2005) 64 NSWLR 695
Maryland Development Co Pty Ltd v Penrith City Council & Anor [2001] NSWLEC 135; (2001) 115 LGERA 75
Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24
Newbury District Council v Secretary of State for the Environment [1981] AC 578
Penrith City Council v Waste Management Authority (1990) 71 LGRA 376
Powell Holdings Pty Limited v Hornsby Shire Council [1998] NSWLEC 111
Quarry Products (Newcastle) Pty Limited and Allendale Blue Metal Pty Limited v Roads and Maritime Services (No 3) [2012] NSWLEC 57
RCM Constructions Pty Limited & Maycot Pty Limited v Ryde City Council [2004] NSWLEC 266
Royal Agricultural Society of New South Wales v Sydney City Council (1987) 61 LGRA 305
Shire of Perth v O'Keefe [1964] HCA 37; (1964) 110 CLR 529
Sutherland Shire Council v Telope Pty Ltd (1993) 85 LGERA 103
Swansea RSL Club and Rosecorp Pty Limited v Council of the City of Lake Macquarie [2006] NSWLEC 381
Tauman v Wyndham CC [2005] VCAT 2444
Terry White Chemists Australia Fair v Secretary Department of Health and Ageing [2009] FCAFC 74; (2009) 178 FCR 161
University of Sydney v South Sydney City Council (1998) 97 LGERA 186
Warringah Shire Council v Sedevcic (1987) 10 NSWLR 335
Wechsler v Auburn Council (1997) 130 LGERA 134
Western Australian Planning Commission v Temwood Holdings Pty Limited [2004] HCA 63; (2004) 221 CLR 30
Winn v Director General of National Parks and Wildlife [2001] NSWCA 17; (2001) 130 LGERA 508
Woolworths Ltd v Campbells Cash and Carry Pty Ltd (1996) 92 LGERA 244
Woolworths Ltd v Pallas Newco Pty Ltd (2004) NSWCA 422; (2004) 61 NSWLR 707Category: Principal judgment Parties: Janis Margaret Bardsley-Smith (1st Applicant)
Ian Patrick Stubbs (3rd Applicant)
Penrith City Council (1st Respondent)
Administration and Marketing Solutions Pty Limited (2nd Respondent)
Damien Michael Gance (3rd Respondent)Representation: Mr J Robson SC with Mr C Ireland (1st and 3rd Applicants)
Submitting Appearance (1st Respondent)
Mr P Tomasetti SC with Mr N Eastman (2nd and 3rd Respondents)
McPhee Kelshaw (1st and 3rd Applicants)
Gadens Lawyers (1st Respondent)
Rotstein Lockwood Reddy Lawyers (2nd and 3rd Respondents)
File Number(s): 40565 of 2009
Judgment
A: Introduction
These class 4 proceedings concern the use of premises known as Tenancy 230 in the "Penrith SupaCenta", at Jamisontown.
The applicants challenge both the validity of the relevant development consent and the lawfulness of the current use, a pharmacy business known and registered as "Chemist Warehouse Distribution Centre Penrith" ('CWDCP').
The challenged consent (08/1288) was granted on 20 February 2009, to operate from 23 February 2009. It was relevantly modified in April 2009. Operations commenced at CWDCP in September 2009.
The Parties
Three applicants commenced the proceedings on 18 August 2009, but one original applicant (the second) discontinued on 1 November 2010. The two remaining applicants (Ms J M Bardsley-Smith and Mr Ian Stubbs) are involved in the local retail pharmacy industry and are, as entitled, clearly seeking to protect their commercial interests.
The first respondent, Penrith City Council, filed a submitting appearance (save as to costs), and the two active respondents are the applicant for the relevant development consent, Administration and Marketing Solutions Pty Limited ('AMS'), and the lessee of Tenancy 230, Damien Michael Gance. References within this Judgment to the 'respondents' denote only the active respondents. References to 'Gance' will denote the respondent Damian Gance, rather than other members of his family.
The Background to the Challenge
Put shortly, pharmacy businesses must comply with licensing/approval requirements at both State and Federal levels, and must be developed and "used" in accordance with the planning regime administered at State and local levels.
The challenge before the Court concerns the applicants' primary contention that the premises are used/operated as a "shop" - a use prohibited by the relevant planning instrument(s) at all relevant times. The respondents say that any retail elements of the multi-faceted use of the premises are ancillary to their primary use as a modern, appropriately licensed, distribution centre for products generally found in and procured from one's local pharmacy, or chemist shop, including, but not restricted to, prescription medicines.
There is some tension between the respective planning and regulatory requirements in the circumstances of this case. The applicants submit that nothing in the State or Federal regulatory regimes requires, as part of a project incorporating a distribution centre, "a fully functional retail chemist shop", selling pharmaceuticals and other products/goods, but rather they require merely that the public have access to the distribution centre to obtain drugs which are "pharmaceutical benefits" (see [78] below).
The applicants submit that the local Council as consent authority may have been misled in this respect, by the proponent of the development, when assessing the relevant development application, and the respondents contend that it is "unethical to prescribe (sic?) medication without the capacity to fulfil the obligation of a pharmacist to provide the full gamut of health care services that are expected or required".
The Relief Sought
The applicants' summons, as finally amended on 22 October 2010, seeks the following relief:
The Applicants seek declarations that:
1.Consent DA08/1288 ('the Consent') granted by the first respondent to the second respondent on 20 February 2009 was granted contrary to s76B of the Environmental Planning and Assessment Act 1979 ('the Act').
2.The Consent is void, invalid and of no force or effect.
3.The present use of the premises being Shop 230 at 13-23 Pattys Place, Jamisontown (Premises), is prohibited in the IN2 Light Industrial zone of the Penrith Local Environmental Plan 2010 (2010 LEP), being the use of the premises for the retail sale of pharmaceutical and related products.
4.The present use of the Premises is contrary to s76B of the Act, being a use of land for a purpose which is prohibited in the IN2 Light Industrial zone, being the retail sale of pharmaceutical and related products.
The Applicants seek injunctive relief that:
5.The first respondent be restrained from taking any step pursuant to the Act which relies upon the validity and efficacy of the Consent.
6.The second and third respondents, their servants and agents be restrained from taking any further step pursuant to the Act which relies upon the validity and efficacy of the Consent.
7.The third respondent, his servants and agents be restrained from continuing the present use of the Premises for the retail sale of pharmaceutical and related products, being a purpose prohibited in the IN2 Light Industrial zone.
And
8.Such further or other relief or order the nature of the case requires.
9.An order that the respondents pay the applicants' costs of the proceedings.
Final versions of Points of Claim and Points of Defence were also filed, by leave, in late October 2010.
B: The Parties' arguments, and the structure of this judgment
The applicants say that their challenge, as framed, raised four substantive arguments, and they also made submissions on discretion and relief. Put shortly, as outlined by Mr Robson, senior counsel for the applicants, the four substantive questions they raised were:
1) Was the consent for Tenancy 230, even as amended, beyond Council's jurisdiction, because the subject use, being as a "shop", was prohibited by the then applicable Penrith Local Environmental Plan 1996 (Industrial Land) ('the 1996 LEP')?
2) Is the actual present use, as a "shop", regardless of how the consent is construed, prohibited by s 76B of the Environmental Planning and Assessment Act 1979 ('the EPA Act'), by virtue of the current LEP ('the 2010 LEP')?
3) Is that present use in breach of the terms of the consent, particularly condition 4, which, as amended, requires any retail sales to be no more than ancillary to the primary use of the premises as a distribution centre?
4) Is condition 4 valid, and, if it is not, is it severable from the consent, or does it render the whole consent invalid?
The respondents addressed the four arguments and the questions of discretion and relief, but there is inevitably some overlap in the consideration of the questions. The respondents defended the consent, and the use, on the basis that the consent covered one multi-faceted, fully integrated use, comprising six activities, and cannot be segmented.
I will now proceed to introduce, in turn, the "players" (section C, commencing at [15]); the premises (D, [33]); the planning regime (E, [54]); the regulation of the pharmacy industry (F, [67]); the subject development application ('DA') (G, [103]); and the consent in contention (H, [131]). I will then deal, in turn, with the evidence tendered about the pharmacy industry, and the retail sector (I, [151]), and with the evidence given by the key operator, Damian Gance (J, [206]), before turning to my reasoning (K, [228]).
C: The Sources of Evidence, and the other non-party "players"
Both sides relied on extensive affidavit, oral, and documentary evidence, much, but not all, of the latter being exhibits/annexures to major affidavits. There was also before the Court an extensive two-volume bundle of agreed documents (Exhibit A1), volume 1 of which contains documents relevant to planning considerations and approval, and volume 2 of which contains, largely, documents produced on subpoena.
The applicant Ian Stubbs and the respondent Damien Gance both gave oral evidence, along with (a) two employees of either the active respondents or of interests associated with them, Minh Vu and Filomena Pannia, (b) pharmacists Peter Valastro (for the respondents) and Paul Mahoney (for the applicants), and (c) retail industry expert planner/analyst, Peter Leyshon (for the applicants).
Stubbs is not himself a pharmacist, but the managing director of Lion Retail Management Group Pty Limited, a company he established in 1999 to provide specialist management and consultancy services to various businesses, including seven "community pharmacies" (i.e. traditional suburban "chemist's shops"), and some managed by receiver/managers. The pharmacies for which he acts are conducted by registered pharmacists holding approvals under the Commonwealth National Health Act 1953 ('National Health Act'). His company does not handle any stock, but negotiates deals with wholesalers, manufacturers or brokers.
Gance is a registered pharmacist, and described himself as the "commercial manager" of the "group", "chain" or "network" of pharmacies which trade under the names "My Chemist" or "Chemist Warehouse". He had held that post for four years at the time of the hearing. He was residing in Kew, Victoria at that time. He is the lessee of Tenancy 230 and trades there as CWDCP under a licence with AMS, but is not engaged in the day-to-day operations.
Despite his self-description as commercial manager of the Chemist Warehouse and/or My Chemist group(s), Gance sought, for no apparent reason, in his oral evidence, to reject any notion that there is such an entity as the "Chemist Warehouse Group", or that the various Chemist Warehouses are operated as a franchise. Whilst the Court accepts that those who operate "Chemist Warehouse" stores are often individuals who license the right to such naming, much of the documentary and affidavit evidence uses the terms "Chemist Warehouse Group" or "My Chemist Group". Various individuals at various stages purport to be working on behalf of different entities such as AMS or the "Chemist Warehouse Group", and sometimes interchangeably.
In this judgment I will use the word "group" loosely, to refer to the "chain" or "network" of "My Chemist" or "Chemist Warehouse" businesses relevant to the particular business involved in these proceedings. Gance distinguishes between the two different brandings of the businesses in that group, as follows (pars 7 and 8 of his affidavit 4 June 2010):
The 'My Chemist' format is a traditional retail chemist open to the public. It contains a dispensary for the distribution of restricted pharmaceutical products and also offers for sale ordinary non-restricted goods which are typically offered for sale in pharmacy premises.
The 'Chemist Warehouse' format is a discount format which also includes a dispensary for the distribution of restricted pharmaceutical products, and which includes the sale of bulk, big boxed, grouped and discount items and 'specials' which fit within the types of goods found in pharmacies generally.
The "group" of "My Chemist" and "Chemist Warehouse" businesses appears to at least operate somewhat in "affiliation" with, East Yarra Friendly Society Pty Ltd ('EYFS'). The group buys both prescription stock and "over the counter" ('OTC') stock from EYFS and/or its principal, Mario or Marcello Verrocchi. (See limited ASIC search at fol 049, registration dating from 20 October 1970). Verrocchi appears to have an interest in the operation of other entities as well as EYFS (such as "ePharmacy" operations), as well as some individual "Chemist Warehouse" stores. Various licences were issued in the names of EYFS trading under one of its former names, "East Yarra Friendly Society Ltd", and Verrocchi, and the business address for the licence holder was to be 274 Edwards Street, Reservoir, Victoria 3073. In various other documents that address is given for Damien Gance himself, "Chemist Warehouse", "My Chemist", "My Chemist Health and Beauty Distribution", and AMS. (Another key address now for the group and associated entities appears to be 40-44 Raglan Street, Preston, Victoria).
AMS provides administrative, purchasing, and marketing services to the various enterprises in the "group", which comprised, at the time of hearing, a total of 174 "Chemist Warehouse" and "My Chemist" pharmacies, 33 of which operated in NSW/ACT. Among the services AMS provides is assistance with development applications. Individual pharmacy operators enter into service agreements with AMS and pay fixed monthly service fees. AMS's Senior Property Manager, Mr Tas (or Tass) Hatzis, is referred to in some documents as "Property Manager My Chemist", but Gance insists that Hatzis is employed by AMS, and is generally involved at the "start up" stage of group stores. Gance conceded that at certain times Hatzis could well be properly identified as his representative, as AMS might be seen by the general public as part of the group (Tpp238-9, and 260).
Among the documentary evidence are (1) trademark searches (Exhibit A9), and (2) a copy of the non-exclusive licence agreement between Jack Gance (uncle of the respondent, Damian Gance) and Verrocchi on the one hand, as owners of the intellectual property in the brand names "Chemist Warehouse" and "My Chemist", and Damian Gance, trading as "CWDCP", on the other (at tab 1, vol 1 of Damian Gance's materials). That agreement (see fols 36 and 37) was executed by all three men and its schedule (fol 37) refers to the subject premises "or such other locations as the enterprise may relocate to". The commencement date is 21 September 2009 and the term is indefinite.
The trademark for "Chemist Warehouse" is dated May 2002 (No. 913632), and was lodged by Jack Gance and Mario Verrocchi. The list of "goods and services" includes "online retailing" and "mail ordering" relating to pharmacies. A chimney was added to the trademark (No. 1197039) on 4 September 2007, but the two services were not carried forward into the list. In 2008 the words "discount chemist" were added to the chimneyed house image.
Pannia is not a registered pharmacist, but has worked for the group since 1991. She described herself as the "NSW State Manager" responsible for 33 My Chemist/Chemist Warehouse stores operating in NSW and the ACT. Damian Gance, in his oral evidence (but not his affidavits), disputed that job specification, and it became a matter of some contention. He described her (Tp249) as "an area manager who works on behalf of AMS", managing the retail compliance of the stores. In later oral evidence she confirmed that she was the "State Manager" providing retail and management support to stores in the group, but employed by AMS.
She testified that she set up the Penrith operation, and was very familiar with it, but was based at related Smithfield premises, which are said to be the distribution centre for EYFS/Verrocchi OTC products. She described the CWDCP operation thus: "the business is engaged in the storing, warehousing, picking, packing, distribution and sale of pharmaceutical products".
She gave some evidence of the financial and dispatch records of CWDCP, including the relative value of the pharmaceuticals and OTC products which are distributed from Tenancy 230. She estimated the total value of OTC products distributed from the front of the premises to group stores in NSW/ACT between 2 October 2009 and 30 November 2010 at $103,583.05. Some exhibits are also relevant to the financial performance of CWDCP - Exhibits R1, A10, and A7/A11.
Vu is a registered pharmacist employed by Gance and responsible for the day-to-day running of CWDCP, including checking scheduled medication dispatched from the centre to ensure no adverse interactions among the patient's various medications.
He described picking and packing from shelves in the dispensary and in the front area, and he also described, in general terms, the layout of the rear section of the premises. He also noted (par 8 - emphasis mine):
The pharmaceutical products delivered to the Centre are not delivered separately as stock for ePharmacy distribution and stock for the front of the Centre. They are delivered to the Centre in bulk. The staff at the centre separate them as the need arises.
Valastro, called by the respondents as an expert on the pharmacy industry, has been a registered pharmacist practising in Victoria since 1975. He has conducted a registered training organisation business specialising in training pharmacy retail managers, but told the Court (Tp159, L23) that he had disposed of the organisation. He has been involved in Quality Management Systems. He has also run businesses of other types, e.g. security, photographic and marketing.
Mahoney, called by the applicants as an expert on the pharmacy industry, has been a registered pharmacist since 1965, and has held many offices in the industry.
Leyshon is a Town Planner, research analyst, and an acknowledged expert on the retail sector, and was called by the applicants.
D: The Premises
The SupaCenta
The Penrith SupaCenta - sometimes referred to in the evidence as the "Penrith Super Centre" or similar variations - is located off Mulgoa Road at 13-23 Pattys Place, Jamisontown, and is owned by Pipven Pty Limited ('Pipven').
Consent was granted for its construction on 2 July 2001 (01/0231). It houses large "bulky goods" type retail operations, such as Spotlight, Bing Lee, Snooze, and various furniture outlets, and occupies more than 6.4ha of land, including extensive parking. Other "bulky goods" establishments, such as Bunnings, Harvey Norman, and Domayne, are located nearby, to constitute a precinct of bulky goods retailing.
The land on which the SupaCenta stands was zoned 4(b) Special Industrial Zone under the 1996 LEP, and is now zoned IN2 Light Industrial under the 2010 LEP, which came into force on 22 September 2010.
The SupaCenta building itself comprises 27,561m2 of floor space, in a single storey, but expansion (almost doubling the floor space) is proposed (in the modification assessment report, this expanded floor area is said to be 64,000m2). Council granted a further development consent on 9 November 2009 (09/0746) for "alterations and additions to existing Bulky Goods Retail Centre" (see Calardu Penrith Pty Ltd v Penrith City Council [2010] NSWLEC 50, in which judicial review proceedings were dismissed by Biscoe J, and Calardu Penrith Pty Ltd v Penrith City Council [2010] NSWCA 189; (2010) 174 LGERA 446, where an appeal was dismissed by the Court of Appeal).
The Lease of Tenancy 230
Those responsible for leasing out Tenancy 230 on Pipven's behalf ('Ticor') issued a Tenancy Instruction document on 26 February 2009 (Exhibit A1, Vol 2, fols 181-2).
The permitted use of the premises by the lessee was specified as:
Retail sale of all generally accepted pharmacy products and services, including the sale of cosmetics, photographic services and products and opthalmological services. Warehouse and distribution services to be carried out from the premises in addition to the above. Trading as 'Chemist Warehouse'. (emphasis added).
Pipven confirmed, on 4 June 2009 (Exhibit A1, Vol 2, fols 95-6), its entry into an agreement to lease the premises to Damien Gance from 14 August 2009. (The lease actually commenced on 21 September 2009 for 3 years, with provision for two 5 year extensions - see Exhibit A1, Vol 2, fols 183ff). Fit-out of the tenancy took place May-September 2009. The rent in year one was to be $150,000, year 2 $170,000, and year 3 $185,000, and trading commenced on 16 or 21 September 2009.
The physical features of Tenancy 230, and their uses
The pedestrian public gains access to Tenancy 230 from within the SupaCenta building, entering it through a doorway signed "Chemist Warehouse - Discount Chemist - Distribution Centre - Direct to the Public". Tenancy 230 occupies approximately 600m2 (variously 593-613m2), and presents - and the applicants argue, operates - as a large, discount "chemist shop", with a large storage area at the rear. The respondents complain that that "shop" presentation does not reflect the true nature of the business as a whole (Tp31, LL15-23).
The physical premises of Tenancy 230, seen as a whole, can be divided into four separate areas, one of which relevantly sub-divides into two sections:
(1) Entry from the public domain brings one into an open, densely stocked, shelved area, which, although presenting as a retail pharmacy, is seen by the third respondent as his "warehouse", and is so described on the floor plans. In that area, so-called OTC items are not only displayed for sale, but stored for distribution.
(2) To the rear of that shelved, so-called "warehouse" area, in public view from the shelved area, but not publicly accessible, is what looks like a traditional pharmaceutical counter/dispensary area, where "pharmacists only" products are stored, largely owned by Gance.
(3)Directly behind the rear wall of that dispensary area, in the rear portion of Tenancy 230, there is a table of computer screens for ePharmacy purposes, and for recording distribution of restricted products to other Chemist Warehouse/My Chemist stores in NSW/ACT, and a parcel packing area. A "Blue Cross" service was clearly planned for inclusion in the operation - it is mentioned in the Statement of Environmental Effects to which I will return (see [116]ff below) - and the service was to be supplied by a dispensing machine in that area. However, no such machine was in evidence when the Court carried out its view on 1 November 2010 (see Tp67, LL35-43, p69, LL24-25, and p70, LL11-13) and Gance said (Tp207, LL43-46) that, while he had had discussions with ePharmacy about a Blue Cross contract, he had reached no agreement on one (see also Exhibit A6).
(4) Behind that computer/packing area is a large warehouse area, closed to the public. It is the respondents' case that this rear area of the premises is used for:
(i)the warehousing, storage, packing and distribution of items ordered via "ePharmacy",
(ii)the storage and distribution of pharmaceutical products to associated pharmacies, and to nursing homes, and
(iii)to nursing homes, and for the storage and distribution of pharmaceutical samples provided to medical practitioners and other health care professionals.
(4A) Some of area (4) is enclosed with a substantial steel fence, or "cage". Access to the "caged" area is restricted by a coded lock. Goods restricted under the NSW Poisonsand Therapeutic Goods Act 1966 ('the PTG Act'), largely owned by Verrocchi/EYFS, are stored in the caged area. Outside the cage, drug samples, and non-restricted items (e.g. fragrances, baby care items, etc) are stored, the latter for eventual display and sale in the retail area out the front, and to fill "ePharmacy" orders. Pannia described the use of the caged area as follows (par 16):
(a)Restricted pharmaceutical products are stocked;
(b)Other non-restricted pharmaceutical products are stocked;
(c)ePharmacy orders are processed;
(d)ePharmacy orders are fulfilled by staff (the goods the subject of the orders are not boxed or packaged by the staff in the caged area. They are only loaded onto trolleys);
(e)When live contracts for Samples Plus / Market Reach or nursing homes distribution exist, these orders are also processed and fulfilled from the caged area;
(f)Restricted pharmaceutical products are stocked for, and picked and packed for distribution to, the Group's stores in NSW and in the ACT.
(4B) The rest of the rear warehouse area (4) comprises a storage area for pallets etc, a staff amenity area, a parking spot for a forklift, an area for the keeping of larger items, including items such as wheelchairs, and a large roller door. All goods delivered to the premises come to that rear door.
Outside the SupaCenta building, beyond that rear loading dock/receiving area, and to its north, is a large open-air carpark. Although the external rear wall of Tenancy 230 presents from the outside as a blank façade with a large roller door, external signage visible from the carpark advertises prescriptions available at a discount up to 50%, "distribution centre direct to the public", and the like.
Distribution Agreements
On or about the date trading commenced (circa 21 September 2009), Gance (trading as CWDCP) entered formal agreements with Verrocchi/EYFS (Supply and Distribution Agreement - tab 5 of Gance's materials), and with "ePharmacy", a business owned by ePharmacy Group Pty Limited (Fulfilment and Distribution Agreement - tab 6).
Under the agreement reached with Verrocchi and EYFS (jointly trading as "My Chemist Health and Beauty Distribution"), CWDCP began warehousing and storing their goods, for distribution to other stores from Tenancy 230, on 10 December 2009. The distribution fee paid to CWDCP is two cents per item. Gance deposed that approximately 25% of goods offered for sale throughout the group are distributed through Verrocchi/EFYS, 65% are supplied directly by Sigma Pharmaceuticals Ltd (with whom the group has a wholesaling agreement under which individual stores obtain favourable buying terms), and 10% come directly from suppliers such as Revlon, L'Oreal, and the like.
ePharmacy
The ePharmacy company is owned by Mario Verrocchi, Brett Clark, Jeffrey Wasley, Gary Nipperess, Jack Gance, and Sam Gance (father of the respondent) (Exhibit A5). Damian Gance stressed that it was an independent entity in which he had no pecuniary interest, and he claimed at one stage not to know who the directors were. It works with the respondent AMS on projects, and about 95% of the products advertised on its website are kept in stores within the group.
Under the relevant agreement, stores (such as CWDCP) wholesale any ordered goods to ePharmacy, and then distribute them to customers who have placed orders on-line, for 10% of the value of the order, plus any costs incurred. The agreement with CWDCP, as a distributor, clearly stipulates that the ePharmacy company owns the website. The customer has no relationship with the distributor, and pays only ePharmacy. CWDCP began fulfilling internet orders on 6 October 2009.
ePharmacy markets and offers for sale OTC products that require no special licence to sell. It also markets and offers for sale products that are scheduled items and ethical products subsidised by the Federal Government under the PBS. These products may only be dispensed to customers by registered pharmacists from approved premises that have a PBS licence. Customers send the prescription to ePharmacy at Virginia, and it is express-posted to Penrith. Customers fill out the internet questionnaire. Any repeat prescription is sent back to the customer unless he/she has requested that it be held by ePharmacy, but it is not held by Chemist Warehouse (see Tp197, LL12-27).
Gance believes that the ePharmacy transaction has two parts - a wholesale transaction between CWDCP and ePharmacy, and a distribution function discharged by CWDCP, involving the 10% commission, or "distribution fee", on the "retail value of the goods" (see Gance's direct quotation at Tp199, LL32-40). It is not an email transaction. The customer goes direct to the website, creates a user account, provides payment details, selects products and then proceeds to the electronic checkout from which ePharmacy coordinates distribution and dispatch from any one of its distribution centres around the country and the product is sent to the end customer (see Tp200, LL1-12).
Gance deposed (29 October 2010) that it is his objective that, "with time", the business conducted in Tenancy 230 will "primarily distribute pharmaceuticals and related health care products transacted on the internet". He said (Tp203, LL26-29):
I see the business being predominantly a distribution business and the prominence of that distribution is going to continue to increase as ePharmacy and Chemist Warehouse continue to throw more distribution towards the Penrith Distribution Centre.
He hopes to achieve ePharmacy sales of approximately $100M per annum within five to ten years - it will represent 95% of the business, but continue to involve direct transactions between ePharmacy and the customer's bank account. The CWDCP business will need to maintain PBS approval, and, thus, direct access for the public.
I will deal further with Gance's evidence later in this judgment (commencing at [206]).
Staffing of CWDCP
While there are some contradictions in the evidence about staff numbers and staffing levels, it would appear likely that there are 12 out of 16 present at any one time, with two staff members working exclusively on ePharmacy, and two on group distribution. All four work in the caged area, but the two working exclusively on ePharmacy also work outside the cage, as they are often required to "pick and pack" pharmaceutical products, particularly non-restricted pharmaceutical products stocked on shelves in the front area of the premises, in order to fulfil ePharmacy orders, as well as orders/requests from within the group. These staff frequently cross over between the front and back areas of the premises.
There is one staff member working in the storage area of the premises which is not open or accessible to members of the public. This staff member performs tasks for the front area and for the ePharmacy component. There may be up to seven staff in the front public area, including three pharmacists (query "rotating"?) in the dispensary area (the supervising pharmacist, Vu, and two assistant/trainee pharmacists).
E: The Planning Regime
The 1996 LEP
Clause 9 of the 1996 LEP (Exhibit A1, tab 1) provides the land use zoning and development control table. As already noted, at the time of the granting of the challenged consent, the subject land was zoned 4(b) Special Industry Zone under the 1996 LEP.
No use was permissible without development consent (item (b)(i)).
Uses permitted "only with development consent" (in item (b)(ii)) were:
Shops trading principally in bulky goods which shops
(a) have a gross floor area of not more than 1,000m2 and
(b) do not have frontage to a road referred to in clause 20
And any land use other than those included in item (b)(iii).
(Clause 20 has no direct relevance to the current proceedings)
Several uses were specifically designated as prohibited in item (b)(iii), including "general stores", "office premises (other than those ancillary to, and used in conjunction with, another land use that is not prohibited in this zone)", and "shops (other than convenience stores, corner shops, fast food take-away restaurants, take-away food shops, shops trading principally in bulky goods included in paragraph (b)(ii) and shops trading principally in motor vehicle parts and accessories, including marine vessel parts and accessories)".
The term "shop" was defined in Schedule 1 (at fol 34) to mean:
... a building or place used for the purpose of selling, exposing or offering for sale by retail goods, merchandise or materials but, in the development control table, does not include a building or place elsewhere specifically defined in this Schedule, or a building or place used for a land use elsewhere specifically defined in this Schedule.
The words "sale" and "retail" are not defined, but have been held to have, as their ordinary meaning, that of a sale, as in transfer of property for money, to customers not themselves engaged in the retail trade, not wholesale. The volume or quantity must be not larger than is necessary to satisfy the requirements of "the ordinary man in the street". Defining a retail sale in terms of small quantities and ultimate consumers finds support in the recognised dictionaries. See Chan v Dainford Ltd [1985] HCA 15; (1985) 155 CLR 533, Collector of Customs v Chemark Services Pty Ltd (1993) 42 FCR 588; (1993) 114 ALR 531, and also Woolworths Ltd v Campbells Cash and Carry Pty Ltd (1996) 92 LGERA 244, in which (at 258-9) Cole JA discussed in some detail the differences between "wholesale" and "retail", and the concept of "warehouse".
Other possibly relevant definitions in Schedule 1 of the 1996 LEP (at fols 25-36) included:
bulky goods means large goods which are, in the opinion of the council, of such a size and shape as to necessitate:
(a) a large area for handling, storage or display; and
(b) easy and direct vehicular access so as to allow for their collection by customers,
but does not include agricultural products, beverages, clothing, food, footwear, leisure goods, paper or stationery products, small electrical appliances, electronic goods or toys;
business premises means a building or place in which there is carried on a light industry or trade (but does not include a brothel) which provides a service directly and regularly to the public but (in the development control table) does not include a building or place specifically defined elsewhere in this Schedule.
convenience store means a building or place:
(a) used for the purpose of selling, exposing or offering for sale by retail principally groceries, small goods and associated small items, and
(b) used in conjunction with the sale by retail of petrol, oil and other petroleum products, and
(c) that does not exceed 200m2 in gross floor area,
but (in the development control table) does not include a building or place specifically defined elsewhere in this Schedule.
corner shop means a building or place used for the purpose of selling foodstuffs, personal care products, and other small daily convenience goods (whether or not the facilities of a post office, bank, newsagency or dry cleaning agency are included) and which has a gross floor area not exceeding 100 square metres.
general store means a shop:
(a) used for the sale by retail of general merchandise and that may include the facilities of a post office, and
(b) that does not exceed 200m2 in gross floor area,
but (in the development control table) does not include a building or place specifically defined elsewhere in this Schedule.
office premises means a building or place used for the purpose of carrying out professional, administrative, clerical or public duties but, for the purposes of the development control table, does not include an office used in conjunction with or ancillary to a landuse elsewhere specifically defined in this Schedule.
warehouse or distribution centre means a building or place used mainly for storing or distribution of good or materials pending their distribution to the retail trade but does not include the retail sale of any of the goods or materials from that building or place.
Just as the definition of "shop" requires interpretation of the words "sale" and "retail", the definition of "business premises" requires interpretation of the word "trade". Although House of Peace Pty Ltd v Bankstown City Council [2000] NSWCA 44; (2000) 48 NSWLR 498 urges caution in the use of dictionaries, clearly "trade" connotes "buying and selling", and/or conducting business (c.f. a profession) for a profit. The respondents pose the question of whether that interpretation could embrace the "picking, packing, and distributing" elements of the use of Tenancy 230.
Accordingly, at the time of the relevant assessment and consent, the position was that, unless a use was expressly prohibited under 4(b)(iii), it was permissible with consent (being an innominate use).
Clause 23A of the 1996 LEP (fol 22) dealt specifically with development of the subject land (namely Nos.13-23 Paddy's Place, Jamisontown). Clause 23A(2) provided that:
despite any other provision of this plan, the Council may grant consent to the carrying out of development on the land to which this clause applies for the purposes of shops principally trading in bulky goods without any restriction as to the gross floor area of any such shops.
The 2010 LEP
The 2010 LEP (Exhibit A1, tab 3) was gazetted on 22 September 2010, and expressly repealed the 1996 LEP. The subject site was redesignated as IN2 Light Industrial, and the structure of the zoning table is effectively the reverse of that in the 1996 LEP (see fols 73-74), with innominate uses now prohibited. The only use permitted without consent is "roads". Relevant uses permitted with consent include "industrial retail outlets". Specifically prohibited are "schools".
Relevant definitions in the 2010 dictionary (fols 149-182) were and are relevantly similar to (some exactly the same as) those in the 1996 LEP. While the 2010 LEP contains no definitions of "convenience store", "corner shop" or "general store", the following definitions are noted:
bulky goods premises means a building or place used primarily for the sale by retail, wholesale or auction of (or of the hire or display of) bulky goods, being goods that are of such size or weight as to require:
(a) a large area for handling, display or storage, or
(b) direct vehicular access to the site of the building or place by members of the public for the purpose of loading or unloading such goods into or from their vehicles after purchase or hire,
but does not include a building or place used for the sale of foodstuffs or clothing unless their sales is ancillary to the sale or hire or display of bulky goods.
business premises means a building or place at or on which:
(a) an occupation, profession or trade (other than an industry) is carried on for the provision of services directly to members of the public on a regular basis, or
(b) a service is provided directly to members of the public on a regular basis,
and may include, without limitation, premises such as banks, post offices, hairdressers, dry cleaners, travel agencies, internet access facilities, medical centres, betting agencies and the like, but does not include sex services premises.
industrial retail outlet means a building or place that:
(a) is used in conjunction with an industry (including a light industry) but not in conjunction with a warehouse or distribution centre, and
(b) is situated on the land on which the industry is carried out, and
(c) is used for the display or sale (whether by retail or wholesale) of only those goods that have been manufactured on the land on which the industry is carried out.
neighbourhood shop means retail premises used for the purposes of selling small daily convenience goods such as foodstuffs, personal care products, newspapers and the like to provide for the day-to-day needs of people who live or work in the local area, and may include ancillary services such as a post office, bank or dry cleaning, but does not include restricted premises.
office premises means a building or place used for the purpose of administrative, clerical, technical, professional or similar activities that do not include dealing with members of the public at the building or place on a direct and regular basis, except where such dealing is a minor activity (by appointment) that is ancillary to the main purpose for which the building or place is used.
shop means retail premises that sell groceries, personal care products, clothing, music, homewares, stationery, electrical goods or other items of general merchandise, and may include a neighbourhood shop, but does not include food and drink premises or restricted premises.
warehouse or distribution centre means a building or place used mainly or exclusively for storing or handling items (whether goods or materials) pending their sale, but from which no retail sales are made.
These definitions, especially that of "warehouse or distribution centre", would appear to suggest that retail sales of any sort are now prohibited, regardless of whether they are in aid of the warehouse or distribution purpose.
F: Regulatory Regimes for Pharmaceutical Businesses
Generic v branded pharmaceuticals
It is important to understand, at the outset of the following discussion, the distinction between "generic" and "branded" pharmaceuticals when considering a case such as the present. Valastro deposes as follows (pars 34-36 - emphasis mine):
When a drug company develops a new drug and successfully brings it to the market, it normally applies for a patent on the drug, which gives it the exclusive right to market the drug for a specific number of years. The drug is named after its ingredient chemical or drug and the drug company would also develop a simpler trade name for marketing the drug. These types of drugs are known as branded pharmaceuticals and they are required to have both the trade name and the name of the ingredient drug (or drugs) on their container label.
Once the patent on the drug expires, the drug is left without patent protection. The drug may then be produced and distributed by any drug company. A drug produced and distributed by any drug company after the patent on it has expired, is known as a generic drug. Generic drugs are required to be manufactured so as to have the same bioequivalence as, or so as to be therapeutically equivalent to, the original formulation. Different brands of such generic drugs can be interchanged without differences in clinical effect.
When a prescriber writes a prescription for a branded pharmaceutical whose patent has expired and a generic equivalent is available the Pharmaceutical Benefits Scheme allows for (and encourages) a pharmacist to substitute a generic drug for the branded drug provided that the prescriber has not specifically stated 'no substitution' on the prescription form. Competition between drug companies producing generics results in more affordable pharmaceutical prices to the public.
The Pharmacy Board of Australia publication "Guidelines for dispensing of medicines" (Exhibit A8) carries no date, but it does refer to a key statute - the Health Practitioner Regulation National Law Act 2009 (Qld). The document notes that as part of the COAG agreement for a national regulation system, the ownership of pharmacies, regulation of premises, inspections and related matters remain within the jurisdiction of the States and Territories. The focus of the Guidelines is on safe dispensing and labelling, and on the training and roles of dispensary assistance.
Item 3 of the Guidelines enables the dispensing of a prescription transmitted by facsimile or scanned copy provided the pharmacist has taken reasonable steps to ensure the bona fides of the prescription, and arrangements are made to receive the original.
Item 4 says "the Board views the indirect supply of medicines, such as internet and mail-order dispensing, as less than the optimal way of delivering a pharmacy service because communication may be compromised".
There are detailed guidelines regarding labelling of dispensed medicines. Section 7.2 says that label content should "include the following:
The brand and generic names of the medicine, the strength, the dose form and the quantity supplied; for extemporaneously prepared medicines and medicines not dispensed by count, the name and strength of each active ingredient, and the name and strength of any added preservatives or the name of the formula as described in a standard reference book
Specific directions for use, including frequency and dose
The patient's name or, in the case of an animal, the owner's name and the kind of animal
The date of dispensing or supply
The dispenser's (and if different, the checking pharmacist's) initials
A unique identifying code
The name, address and telephone number of the pharmacy or pharmacy department at which the prescription was dispensed
Storage directions (where important) and expiry date (where applicable)
The words 'Keep out of reach of children'.
Section 8 of the guidelines deals with counselling patients about prescribed medicines.
Licensing of premises and operations
To conduct any broad-based operation in the pharmaceutical industry, various licences or approvals are needed, even if no manufacture is involved. Both State and Federal authorities are involved in regulating the industry.
Maloney repeatedly referred to the Health Insurance Commission ('HIC'), and Valastro at no point in his documentary evidence, nor in their joint conference and the report thereof, took issue with that. (See Tpp184-188. According to the Medicare website the HIC was established in 1974 to run "Medibank" and later Medibank Private until the "universal care system" called Medicare was introduced in 1983. Medibank Private separated from the HIC by 1998, and the HIC was renamed Medicare Australia on 1 October 2005).
Pharmacists need approval to open a new pharmacy, relocate an existing one, change the size of an existing one, change the address of an existing one, and change the ownership of an existing one.
The Pharmacy Location Rules - Applicant's Handbook, dated March 2009 (annexure B to Valastro's affidavit, with various application forms in annexure C) provides information and guidance to pharmacists regarding applications for the establishment of a new pharmacy approval or the relocation of an existing pharmacy approval.
Section 90 of the National Health Act provides for the Secretary of the Federal Health Department to approve a pharmacist if the Australian Community Pharmacy Authority ('ACPA') so recommends, and State law registers pharmacists and enables them to carry on business in a pharmacy. A change of pharmacy ownership or a change in the size of pharmacy premises does not require a recommendation from the ACPA. There are location-based criteria to be applied.
Section 84 defines "approved pharmacist" as "a person for the time being approved under section 90 ...". It also clarifies that, contrary to a popular misconception, the term "pharmaceutical benefit" refers not to the subsidisation of the price of a drug by the Commonwealth, but to the actual drug or, in other circumstances, to a form of the drug and, on some occasions, to a brand of a "pharmaceutical item" that is the drug in that form with that manner of administration. These matters are dealt with in more detail in s 85, and s 84AB defines "pharmaceutical item".
The approval of pharmacists is dealt with in s 90. Section 90(3D) provides that (emphasis added):
The Secretary must not grant approval under this section to a pharmacist in respect of particular premises if the Secretary is satisfied that on or after the day the approval would otherwise be granted:
(a) the pharmacist would be unable to supply pharmaceutical benefits at the premises; or
(b)the premise would not be accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the Secretary, are reasonable.
It was suggested in argument that this requirement was inserted in the Act to restrict pharmacists who wished to supply PBS medicines only by mail order.
Section 90(4) provides that nothing in the "section authorises the Secretary to grant approval to a pharmacist in respect of premises at which that pharmacist is not permitted, under the law of the State or Territory in which the premises are situated, to carry on business".
Across the States and Territories there is now a uniform national law, which New South Wales has adopted by enacting the Health Practitioner Regulation (Adoption of National Law) Act 2009 (NSW), and making regulations under it to lay down detailed standards for pharmaceutical premises. (See, e.g. cl 13 of the regulation)
Section 94 of the National Health Act provides for the Minister exercising his discretion to approve a hospital authority for the purpose of its supplying pharmaceutical benefits to patients receiving treatment in or at the hospital. There was controversy during this case as to whether a "hole in the wall" would provide sufficient public access for a warehouse to comply with s 90(3D) of that Act, and cl 13 of the NSW regulation, but it may indeed satisfy any criteria for a hospital dispensary.
Section 98(3) provides that:
If the Secretary is satisfied that:
(a)an approved pharmacist is not carrying on business as a pharmacist at premises in respect of which the pharmacist is approved; or
(b)the premise are not accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the Secretary, are reasonable;
then the Secretary may (at his or her discretion), by notice in writing to the pharmacist, cancel the approval of the pharmacist under section 90.
Valastro also attaches to his affidavit a detailed explanatory memorandum (annexure F) from which I glean the following:
Section 90 involves approval to supply "at" or "from" particular premises.
There must be both ACPA approval and State authority approval.
The Pharmacy Location Rules include such things as the minimum distance between pharmacies and whether there is a community need for pharmaceutical services in a particular location. There are restrictions on connection to supermarkets.
The purpose of the location rules is twofold - first to provide widespread community access to pharmaceutical services, and second to ensure the continued viability of existing pharmacies. The rules were introduced in 1991 and they have been somewhat controversial in terms of competition policies. Woolworths has pressed for approval of establishment of pharmacies in-store.
At a minimum, members of the public must have access to pharmaceutical benefits "at" the approved premises at reasonable times. Pharmacists may also choose to supply, e.g. to aged care facilities or mail order customers, pharmaceutical benefits "from" their premises.
Holzberger v Secretary, Department of Health & Ageing [2007] FCAFC 68; (2007) 158 FCR 586 concerned the cancellation of an approval on the basis that Holzberger was not dispensing pharmaceutical benefit medicines to the public at the specified location (A 3 x 3 space formerly used as a storeroom). He was dispensing "from" this location to another pharmacy not approved to supply pharmaceutical benefits 375m away. The full Federal Court held that the supply of pharmaceutical benefits need not necessarily occur "at" the approved premises. The Act was amended to close the loophole (see pp 5-8 of the Australian Parliamentary Library paper 11 September 2007).
The applicants drew the Court's attention to a case in the Federal Court regarding s 90 of the National Health Act - Terry White Chemists Australia Fair v Secretary Department of Health and Ageing ("Terry White") [2009] FCAFC 74; (2009) 178 FCR 161 - which involved a challenge by a rival chemist to a Chemist Warehouse store in a shopping centre on the Gold Coast, adjacent to the building where the challenger had an outlet. The issue was whether the decision of the Secretary of the Department of Health to grant approval under s 90(1) of the National Health Act to supply pharmaceutical benefits exceeded the Secretary's power because of the provisions of s 90(4).
The Court described s 90(4) as "a curiously worded provision". The Court commented that it would seem to amount to no more than an expression of intention that the Act not displace or override any State or Territory law in accordance with s 109 of the Constitution. The Secretary, however, apparently took the view that the sub-section operated as a limitation on power, and that an applicant must show that it is permitted under a law regulating pharmacies to carry on business at the premises in respect of which the relevant PBS approval is to be granted. The Secretary was considered by the Court to be "plainly correct" in this respect.
The Full Federal Court said (at [17] and [20] - emphasis added):
... it is clearly open to the Minister to require the Authority to take into account the land use requirements of State, Territory and Local laws if the Minister should consider that to be appropriate. This is an altogether different proposition from the proposition that, when the Secretary comes to consider the recommendation of the Authority pursuant to s 90(3)B of the National Health Act she is obliged to consider the impact of those laws again....
...
The preferable construction is to regard s 90(4) of the National Health Act as not so much a limitation on the power of the Secretary to grant an approval pursuant to s 90(1), as a limitation on the extent of the approval that the Secretary grants. Viewed in this way, s 90(4) makes it clear that an approval granted by the Secretary pursuant to s 90(1) is not to be regarded as extending beyond the purposes of the scheme set up by Pt VII of the National Health Act, the Pharmaceutical Benefits Scheme. The approval is not to be regarded as overriding any provision of State or Territory laws under which the carrying on of the business of a pharmacy at the relevant premises by the particular pharmacist would not be permitted. On this construction, the Secretary would not be concerned with the operation of any laws of any State or Territory, but only with the granting or refusal of approval to a particular pharmacist to supply pharmaceutical benefits at particular premises, for the purposes of the Pharmaceutical Benefits Scheme. A pharmacist to whom such approval is granted would still need to be permitted by the laws of the relevant State or Territory to carry on the business of a pharmacist at the premises in respect of which the approval has been granted. The Secretary cannot grant the pharmacist an approval that would oust the effect of those State and Territory laws, but only an approval for the purposes of the Pharmaceutical Benefits Scheme. It would be for the authorities of the relevant State or Territory to apply and enforce the laws of that State or Territory. Accordingly, s 90(4) of the National Health Act is a declaratory provision that seeks to put beyond doubt that, although a pharmacist might be approved under s 90(1) for the purpose of supplying pharmaceutical benefits at or from particular premises, he or she being willing to do so on demand at particular premises, such an approval does not cover the field of all permits, licences or approvals a pharmacist may be required to obtain in order to comply with a law of a State or Territory in which the premises are situated, in order to carry on the business of a pharmacist. In that sense, s 90(4) of the National Health Act is not a limitation on the power of the Secretary, but explanatory of the content of the power.
The Court concluded (at [22]):
The adoption of a purposive construction of s 90(4) of the National Health Act leads to the conclusion that, when considering an application for approval under s 90(1), the Secretary is not concerned with provisions of State or Territory laws, but only with the functioning of the Pharmaceutical Benefits Scheme...
Based on the clear dichotomy drawn in the above-quoted passage from Terry White, as between approval of operator and approval of use of relevant premises, the applicants submit (par 25 of final submissions) that a s 90 approval does not imply anything either way about the need to operate a "shop".
Applications relevant to CWDCP
Gance applied on 12 or 15 June 2009 to Medicare Australia for approval to relocate a pharmacy from Priceline at Fitzroy in Victoria to Tenancy 230, with opening scheduled, if approved, for 30 August 2009. Despite objections from the present applicants and 20-odd other pharmacists, Medicare informed Damien Gance in September 2009 (it would appear, twice) that his application to supply pharmaceutical benefits at the premises had been approved. Medicare approved the application to supply pharmaceutical benefits at the Tenancy 230 premises, with effect from 21 September 2009 (see fols 105-106). Formal approval for Damian Gance to trade as "CWDCP" is dated 18 September 2009 (fol 198).
In September 2009, the NSW Pharmacy Board also approved Gance's application for a new pharmacy at the Tenancy 230 premises (fols 61-89). The subject pharmacy is registered as "CWDCP", and Gance is nominated as the sole registered owner. The lessor (Pipven) and the lessee Gance are named, and the expiry date of the lease is nominated as 13 August 2012. One Lance Vadala appears to have prepared the application, as a "junior" to Hatzis, and described himself on correspondence as Property Manager of AMS. It was dated and signed by Gance on 27 August 2009. In a statutory declaration dated 7 September (at fol 086) Gance indicated he expected to incur start up expenses of $800,000 which he would fund out of his own resources, including funds given by his father, Samuel Gance, without strings. There is an inspection report dated 14 September 2009 (at fols 87-88).
Wholesaling of pharmaceutical products is also regulated by State legislation, the PTG Act. Supply by wholesale is defined as supply of a substance or goods for the purpose of resupply. Appendix C the 2008 regulation made under the Act authorises each person who is specified to possess and be supplied with wholesale quantities of specified substances - medical superintendents, optometrists, podiatrists, dental therapists or oral health therapists, dental hygienists, vaccination nurses, emergency ambulance officers, etc. "Restricted substance" is defined in s 4(1) of the PTG Act as any substance specified in schedule 4 of the poisons list, established by s 8. The holder of only a wholesaler's licence must not supply a restricted substance to a person who is not an authorised person, even if that person were to hold a valid written prescription. Regulations 160 and 161 regulate the licensing - the applicant must be a fit and proper person and the premises must be appropriate. Under regulation 134 a pharmacist can supply another pharmacist in certain specified circumstances.
On or about either 24 or 29 September 2009, PTG Act applications were made to the NSW Department of Health, in respect of both a Smithfield site and the subject premises, for licences to "supply by wholesale poisons and/or restricted substances for therapeutic use". The name John Fulton Prendergast was deleted from the heading "Name of Licence Holder" in both cases. (He was apparently National Logistics Manager of My Chemist Health and Beauty Distribution, until made redundant about August 2010).
The Smithfield application (see fol 006) was lodged in the names Mario Verrocchi, Jack Gance and EYFS "on behalf of Smithfield Distribution Centre", and the Penrith one in the name of Mario Verrocchi and Brett Clarke (on behalf of ePharmacy, and East Yarra Friendly Society Ltd & M Verrocchi) in respect of Shop 23 SuperCenta (sic) Penrith.
Any applicant for such a licence is required to provide an overview of the activities in which the company is involved. In this case, both licence applications provided the following information (see fols 009 and 023):
My Chemist / Chemist Warehouse Group own and operate 160 retail pharmacies throughout Australia including licensed Distribution Warehouses situated in Victoria and Queensland. In NSW there are currently 65 Chemist Warehouse Stores in metropolitan and regional areas, it is planned to increase this number over the next five years.
These NSW stores are currently supplied through our Victorian Warehouse and it is our intention to open a NSW Distribution Warehouse to service these stores.
The company sources product from local suppliers which are directly supplied to our own warehouses then distributed to our own stores these products are limited to schedule 2, 3 and 4 products. Chemist Warehouse stores also obtain scheduled products directly through state based pharmaceutical wholesalers.
The type of products to be wholesaled is schedule 2, 3 and 4.... The My Chemist / Chemist Warehouse Group only operate within Australia therefore we do not export any schedule products.
It is intended to supply and distribute only to Chemist Warehouse Retail Pharmacies throughout New South Wales.
The departmental documents in evidence include an "Inspection Report/Checklist". Prendergast was interviewed on 10 November 2009 in respect of both Penrith and Smithfield.
The inspecting officer, Phillip Bannon, noted, in his report of 19 November 2009 (fol 048), that the Chemist Warehouse group of pharmacies had applied for wholesale licences at the two sites in NSW, to supply scheduled substances to pharmacies within their group, and that they already had a wholesale business in Victoria and needed to set up two wholesale premises in NSW. He described the dichotomy of the Penrith premises, noting a separate distribution centre at the rear of the pharmacy to be used as a NSW supply centre for ethical stock for Chemist Warehouse pharmacies, "independent from the pharmacy both physically and operationally". He described the Smithfield premises as "a traditional wholesaling warehouse". (As Smithfield is not engaged in supplying pharmaceutical benefits to end users, it does not require National Health Act approval, merely a PTG Act licence to supply scheduled items).
The principal pharmaceutical advisor, Martin Power, signed off on the applications on 30 November 2009 (fols 040 and 045).
Bannon informed the Chief Financial Officer of AMS and/or the group, Vince Cardinale, that the accounting and invoicing must be in the name and address depicted on the licence. It was decided that the legal entity for both licences would be "East Yarra Friendly Society Ltd and M Verrocchi", and Bannon recommended licensing both sites with a condition that they "only supply to registered pharmacies in New South Wales".
The licences were issued in the name EYFS, trading as East Yarra Friendly Society Ltd, and M Verrocchi, and the business address for the licence holder in respect of both premises was to be 274 Edwards Street Reservoir, Victoria 3073. This was finalised by agreement on 3 December 2009. The licences were granted/issued, and forwarded to Prendergast, on 8 December 2009 - Smithfield is licence No.4035, and Jamisontown No.4036 (see fols 057-058). Verrocchi applied to renew one of the licences (instead of two) on or about 15 September 2010 (see fols 59-60).
Accordingly, the wholesale/distribution use of the rear of Tenancy 230 is licensed (4036), and the retail supply of pharmacists from the front is also licensed, at both State and Federal levels. (All three documents appear at tab 34 of the Gance materials).
G: The Development Application Made
Background to the proposal
Despite having established, with limited (but all necessary) approvals, a warehouse and distribution centre at Smithfield, the group did not use it for restricted pharmaceutical products, and did not have a licence for it under the National Health Act. So-called "ethical products" were distributed to group stores in NSW/ACT either directly from supplier Sigma Pharmaceuticals Ltd, or from the group's distribution centres in Queensland and Victoria.
In a study he conducted, Gance identified the group's need for an additional distribution centre in NSW, and deposed (affidavit sworn 4 June, and filed 11 June 2010, par 20 - emphasis added) as follows:
The purpose of establishing the Penrith distribution centre was generally:
a.To have a multi-faceted centre in New South Wales similar to the centres that exist in Victoria and in Queensland;
b.To provide a distribution centre for ethical products (being generally Schedule 4, Schedule 5 and Schedule 8 products) which have come off patent (commonly referred to as 'generics') and consequently are able to be sold to the public at significantly lower prices than those brand products still under patent;
c.To provide a distribution centre for brand ethical products as we do in other States and Territories in Australia;
d.To have an operative centre, warehousing and distribution point in New South Wales for the ePharmacy on-line business which is affiliated with the Group;
e.To have an operative centre, warehousing and distribution point in New South Wales for the Samples Plus group and for the Market Reach group;
f.To provide a base for the operation of distribution of goods to nursing homes;
g.To provide a base for the operation of the Home Medicines Review scheme; and
h.To provide a base for the operation of distribution of goods under the My Home Health scheme.
Before the Penrith centre was established (as he noted in par 23) "no other My Chemist or Chemist Warehouse store in New South Wales operated the ePharmacy, nursing homes distribution, Samples Plus/Market Reach and My Home Health components of the business". Gance was not, and says he is not now, involved in the Smithfield operation.
Mr Robson asked Gance directly, who actually wanted to have two separate wholesaling premises in NSW, and the answer Gance gave (at Tp258, LL6-7) was: "Mario Verrocchi and East Yarra Friendly Society trading as My Chemist Health and Beauty Distribution". In terms of Penrith, specifically, he asserted (at Tp258, LL13-18):
We established the business as a distribution centre with many facets. One of the facets was always intended to be a wholesaling distribution centre. It was always intentioned to be a market reach samples plus distribution centre. It was always our thought that we would run an ancillary retail out the front. So, no, it was not my intention to have a separate and independent business.
The components of the use intended by the proponent(s)
The items of intended business listed for the proposed project, in [104] above, require some elaboration. Gance testified that many of them operate by the taking and/or filling of orders, but not in the "traditional retail format" of a customer coming to a place, selecting a product on display, and purchasing it OTC. Many require "remote or on-line ordering", followed by dispatch from a warehousing/distribution centre. "Ethical products" require a PBS licence and, therefore, premises with a dispensary, and public access.
"Samples Plus" and "Market Reach" are on-line ordering systems in which sample goods are offered free-of-charge to appropriate health professionals. The manufacturer/supplier contracts with the businesses (which operate websites, like ePharmacy, which I have described above). The nursing home business would operate in a similar way.
Chemist Warehouse and ePharmacy are equity partners in Market Reach, which was formed in 2007. Market Reach Pty Ltd has an agreement with Alphapharm Pty Ltd, a large supplier of PBS medicines and Australia's leader in generic medicines, and has engaged Gance to assemble, collate and package samples of health care products at the Penrith premises and cause them to be delivered by Australia Post to health care professionals in NSW and the ACT. Market Reach owns the intellectual property and operates the business. On 22 October 2010, Gance entered a "Fulfilment and Distribution Agreement" with Market Reach (tab 2 of Gance's affidavit 29 October 2011). Remuneration for distribution is 7.50 cents per first unit of sample delivered to the delivery address the subject of the order and 10 cents for each additional unit.
"Samples Plus" appears to be the only registered trademark owned by Market Reach (see fol 40). Mr Gance states that (par 46 First Affidavit) to service Market Reach, CWDCP is required to have both a licence under s 90 of the National Health Act and a "poisons" licence (under the PTG Act) to supply scheduled medications.
In the "Samples Plus" business the property in the goods lies with the manufacturer of the pharmaceutical, and passes to the medical practitioner (Tp204-p205). Market Reach is responsible for promoting the manufacturer's goods to the doctor and CWDCP merely distributes for which it is remunerated. At Tp206, LL34-44 Gance said:
There is no agreement between Chemist Warehouse Distribution Centre Penrith and the manufacturer or supplier of the pharmaceuticals. Market Reach, which is an independent entity, enters into an agreement with a pharmaceutical manufacturer or supplier as it's a function of marketing and the way that pharmaceutical manufacturers used to work whereby representatives would call a medical clinic and give them stock from the boot of their car is no longer allowed, permissible, so what happens is the medical representative will call upon the medical practice, the medical practitioner will order samples, those samples are then fulfilled by one of the Samples Plus distribution centres of which Chemist Warehouse Penrith distribution centre is one. They fulfil the orders which are specifically for Alphapharm products.
By comparison, a "Samples Plus" transaction is "a cold call, so to speak, where the marketing company Samples Plus who is part of Market Reach will send a pro forma sampling sheet out to the doctor" (Tp207, LL6-16).
The "My Home Health" component of the business involves the storage, display, testing and sale of large bulky medically related items such as wheelchairs, walkers, commodes, crutches, etc. These are not generally available in an ordinary My Chemist or Chemist Warehouse store due to the practicalities of accommodating their size. A larger integrated multi-faceted business location allows for these larger items to be stored and displayed as necessary (see Tp211, LL21-32).
The "Home Medicines Review" is a customer service that can be undertaken by any pharmacist in cooperation with a person's general practitioner. It involves a home visit and a face-to-face interview in an appropriate space. Medication regime is reviewed and a report provided to the general practitioner who then agrees with the consumer on a medication management plan. A larger facility obviously can provide for office or other space to facilitate the face-to-face requirement. The Federal Government's information sheet on this review scheme appears at tab 16, commencing at fol 233. Medicare pays a prescribed fee for each review referred by a general practitioner.
These details were reflected in materials provided to the Council in the DA process.
The DA is submitted, with a Statement of Environmental Effects
On 12 December 2008, on behalf of AMS, Restifa and Partners Pty Limited ('Restifa') lodged with the Council DA 08/1288, which sought consent for the fit out and use of Tenancy 230 to fulfil the identified need for an additional distribution centre for the group in NSW.
The supporting Statement of Environmental Effects ('SEE') was prepared by David Ryan, Executive Director of City Plan Services Pty Ltd (later renamed City Plan Strategy and Development, but herein 'City Plan'). In his fee proposal (Exhibit A1, Vol 2, fols 153-158) dated 19 November 2008, he noted (at fol 153) that "an ordinary retail pharmacy would be prohibited on the site by reason of being defined as a shop" as distinct from bulky goods retailing or another permitted use.
The City Plan SEE described the proposal thus (at fol 193):
The proposed development involves the fit out and use of the subject tenancy for a Chemist Warehouse and Bulky Goods Distribution outlet.
At the time of the submission of the DA and SEE, what became LEP 2010 was on display as a 2008 draft. Compliance of the proposal with the relevant provisions of that draft was asserted by the SEE (at p18, fol 206).
The SEE
The introduction of the SEE stated that the DA is for a "Chemist Warehouse", yet stated that it was prepared on behalf of "My Chemist" (fol 190).
As depicted on the proposed floor plan (drawing SK2A - fol 266), the "despatch/packing" area at the rear comprised 331m2 (which appears to include the dispensary area), and the "warehouse" area at the front, 261.7m2.
The SEE stated (fols 193-194):
The use of the tenancy comprises several interrelated elements which are briefly described as follows:
Elements of use
Description
Epharmacy
One of Australia's largest internet pharmacy operators. Currently distribution is carried out from Townsville and Virginia but increased demands mean an additional distribution centre is required in NSW. The Penrith Distribution Centre shall become a key distribution point and responsible for fulfilment of internet orders for a large proportion of NSW.
The internet service offers a full range of products ordinarily sold through pharmacies and requires larger floor areas and large uninterrupted clear spanning areas to be feasible and efficient.
All products that can be purchased via the internet/mail order, must be available for picking, packing and distribution from the Centre (approximately 50,000 lines)
Blue Cross
Blue Cross Healthcare services is a subsidiary of Catholic Health Care Services. It is a not for profit organisation for aged care and community services.
Using advanced robot picking and packing technology, patients' medications are dispensed and packed into a highly organised and easy to administer system.
The distribution centre in Penrith will be responsible for the fulfilment of medications and other supplies for Blue Cross in the southern states.
Samples Plus
Samples Plus is an ordering system for 'samples' offered to qualified medical practitioners and other health care professionals.
Home Medication Review
H.M.R. is the process of reviewing the medication
where patients are required to take high levels or numbers of prescription or pharmacy medication. The service is available to all patients/customers both in the general public or in nursing homes i.e. Blue Cross.
The services will be conducted within an office environment at the Penrith Distribution Centre.
My Home Health
Storage, display, testing & sale of wheel chairs, walkers and other large items and ancillary smaller items such as bed pans. It offers other specialist equipment not ordinarily available from traditional pharmacies due to size constraints of a normal pharmacy.
Retail pharmacy
Pharmacy selling usual over-the-counter drugs and dispensing prescriptions.
In order for premises to be a Licensed Pharmacy Premises by the National Health Act and enable all of the above uses to be licensed and operational, members of the public must also have access to the pharmacy, giving rise to an ancillary retail component within the site. Failure to have this ancillary component would result in a breach of the regulations.
Hours of operation were proposed as 9am-5.30pm Monday to Saturday and 10am-2pm Sunday. Staff numbers were quoted as 13-17. There would be in-bound deliveries approximately 4-5 times daily, via vans or trucks up to 2 tonnes, and there would be daily distribution out-bound via Australia Post (fol 198). External signage was not part of the proposal.
The proposed fit out was to be undertaken generally in accordance with drawing SK2A (fol 266). Mr Tomasetti's written opening submissions for the respondents (filed 29 October 2010) said (par 10) that "the business is engaged in storing, warehousing, picking, packing, distribution and sale of pharmaceutical products" from the premises depicted in that drawing, to which many references were made during the hearing. The shelved front "warehouse" or public area is "shaded" on the drawings, but the associated dispensary area, and the "despatch/packing" area in the rear, are not.
Permissibility argued
The SEE argued the permissibility of the proposal (at pp12-18 - fols 200-207 of Exhibit A1, vol 1, tab 6). It noted (at pp12f, fols 201f - emphasis in original):
The proposed use is permissible with consent within Zone 4(b) in LEP 1996, as stated in section 4(b)(ii):-
'Shops trading principally in bulky goods which shops:
have a gross floor area of not more than 1,000sqm, and
do not have a frontage to a road referred to in clause 20.'
With regard to land at 13-23 Pattys Place, Jamisontown, Clause 23A also states that:-
'...(2) Despite any other provision of this plan, the Council may grant consent to the carrying out of development on the land to which this clause applies for the purpose of shops principally trading in bulky goods without any restriction as to the gross floor area of any such shops.'
In the definitions to the LEP, 'bulky goods' means:
'large goods which are, in the opinion of the council, of such a size and shape as to necessitate:
(a)a large area for handling, storage or display, and
(b)easy and direct vehicular access so as to allow for their collection by customers,
but does not include agricultural products, beverages, clothing, food, footwear, leisure goods, paper or stationery products, small electrical appliances, electronic goods or toys.
The proposal satisfies the separate elements of this definition as follows:
The floor area of the tenancy at almost 600m2 is significantly larger than most ordinary retail pharmacies operating in town centre locations. This size is necessary to accommodate the operational requirements of the Chemist Warehouse business.
The goods available from the tenancy cover a range of different sizes from individually bulky items such as wheelchairs and large pallets of smaller items to small individual pill bottles and the like. In most cases, the nature of the business dictates the bulk handling of items for processing, packaging and distribution, which entails large areas for manoeuvring of pallets and other items by fork lift trucks which are themselves stored within the tenancy.
Approximately 480 square metres of the premises were to be open to the public (40% of 1200m2 gross area). Non-medicinal and non-prescription pharmacy items, including disability aids, were to be offered for sale, as well as "health and beauty products ... and other merchandise". The Home Medication Review Service would also be available to the public. There was compliance with the requirements and guidelines of the Pharmacy Board of Victoria. A considerable increase in ePharmacy sales was expected over the next three to five years, while walk-in sales would only marginally increase.
The Tribunal said:
16. It is therefore expected that whether the premises are located in an industrial area or some other zone that an approved pharmacy would be set out in a similar fashion given the requirements of the Pharmacy Board...
17. In terms of size this pharmacy will be large, but if as we were advised, it is to be used to store pharmaceutical goods for distribution to internet customers, as well as samples to the medical profession and medication for the aged, no doubt a large area is required to allow for the storage of sufficient stock to meet the needs of the customers with respect to these services.
The Tribunal concluded (at [20]) that the primary purpose of the site was its use for the storage and distribution of pharmaceutical goods. This conclusion was based on the actual size of the premises, and the goods to be stored and distributed with the ability to easily retrieve stored items to fulfil customers' orders.
The Tribunal concluded (at [30]) that the proposed use was:
... not a shop and is therefore not prohibited within the Industrial zone. Any retail sales to the public are likely to be minor and are considered ancillary to the proposed use. The use as a warehouse and distribution centre is appropriately located given the other surrounding activities and the site's proximity to major freeways.
In High Point Commercial Property Group Pty Ltd v Maribyrnong CC ("High Point") [2009] VCAT 16, the shop component of the land use would be prohibited on the subject land if it were a separate and distinct use from the warehouse distribution centre use. The front area was to be 302m2 including a dispensary, and the warehouse/distribution area 451m2. Only the front area would be accessible to the public, again 40% of the gross area. 60% of the prescription dispensary operation was ePharmacy. The applicant anticipated that the distribution centre component would generate 80% of the business turnover.
The Tribunal made the point that the requirement of public access did not require planning approval of something that might otherwise be prohibited in a particular zone. It referred to the High Court's decision in Lizzio, characterised the use by its dominant purpose, and found that the use of part of the operation as a shop was inseparable from the other activity. That part of the front of the premises which was to operate as a shop was also to be a storage area for the distribution activity, which would operate seamlessly across both areas of the premises. The Tribunal said (at [20]-[25]):
20. Considered alone, the front area of the premises has the potential to be regarded as the use of the land for a shop. However, I do not regard this as the relevant test. Ultimately, the interrelationship between the retail part of the premises and the use of the remainder of the premises is central to my determination.
21. I take the same view of this application as did Member Rickards for an almost identical facility in Tauman's case. I am influenced most by the fact that the operation of the shop is inseparable from the operation of the warehousing/ distribution activity which relies on all of its stock, including dispensed pharmaceuticals sourced from the front part of the premises. In this way, despite its appearance, it is deceptive to regard the front part of the premises as just a shop, since it is fundamentally also a storage area for the distribution activity which operates seamlessly across both areas of the premises. This is the essence of what I regard as the subservience of the shop use to the warehousing/distribution activity.
22. In this way, I do not make much of the fact that the front area is similar in size to the back area, since the front area is used equally to serve the operations of the back area by filling customer orders, with the exception of the small counter sales area. This is also evidenced by the almost identical hours of the retail use and the warehousing/ distribution activities.
23. Other factors influencing my decision include:
the fact that some 80% of the business turnover would be derived from the warehousing and distribution operations at the rear of the premises. It is reasonable to expect that the online business would, if anything, strengthen over time;
the generally far higher proportion of transactions anticipated from the warehousing/distribution business compared with off-the-street retail sales; and
the relative staffing requirements of each part of the business on the land, with a bent towards the warehousing and distribution operation.
24. While the front area of the premises may be capable of operating as a separate economic unit (although no evidence was presented either way), I consider that applying the real and substantial purpose test to the subject land requires me to have regard to the operation of the premises as a whole. In this context, even if substantiated, I do not regard this factor as determinative.
25. Therefore, I find that the real and substantial use of the premises is for the storage and distribution of pharmaceutical goods. To the extent that retail sales occur at the front of the premises and this area is laid out and appears to function as a shop, it is ancillary to the dominant use of the land as described.
Both Tauman and High Point were followed in Gance v Monash CC [2010] VCAT 388.
Submissions on Issue 1 - Possible invalidity of the consent
The applicants contend that, on a proper construction of the development consent, it includes approval of a retail/shop use, which is an independent and prohibited use, and not correctly seen as ancillary to the warehouse/distribution operation proposed.
Both sides rely on the Foodbarn principles (see [237] above).
The applicants submitted (par 5) that, if the Council "...purported to give consent to [a] prohibited development, this was a jurisdictional error". The applicants relied principally on Pallas Newco, in which Spigelman CJ stated (at [88]) that, where characterisation involved a jurisdictional fact, as it did in that case, the Court had to determine the case on the evidence before it, rather than being confined to the evidence which was before the Council when it granted the consent.
The question of whether there has been a jurisdictional error, that is, whether the Council had jurisdiction to grant the consent, requires an examination of how the Council characterised the use of the premises when granting that consent. Often the difficulty in construing what a consent means is the threshold issue of what, if any, documents, apart from the instrument of consent itself, are "incorporated" into the consent. See Quarry Products (Newcastle) Pty Ltd and Allendale Blue Metal Pty Limited v Roads and Maritime Services (No 3) [2012] NSWLEC 57. In this case, condition 1 is quite clear on the question of incorporation, and the SEE and plans are, by that condition, incorporated in the consent, to the extent they are not clearly excluded by either markings on the plans, or any of the conditions.
The applicants submit (par 8) that Council was "misled" by the second respondent in relation to the necessity for a retail outlet to be established in premises, where a pharmacist has been approved to distribute pharmaceutical benefits. They say that there was a misunderstanding, or a misconstruction, of what was proposed, and, indeed, of what was required under the National Health Act . Mr Robson says that "there is nothing in the legislation that says you need a fully functional retail chemist shop with thousands of items at all to run any other business" (Tp6, LL9-11). The pharmaceutical benefits licence is granted to a person, but it relates to particular premises. It does not require a full-scale retail pharmacy, selling not only PBS drugs, but also non-PBS products. "All it requires is a publicly accessible dispensing window" (Tp13, LL46-47 - in a clear transcription error, the transcript mistakenly records the word as "assessable").
Valastro agreed that the only reason that public access is needed in premises such as these is for the sale of pharmaceutical benefits (Tp173, LL38-41), as well as non-pharmaceutical benefits drugs dispensed otherwise than over the internet (Tp174, LL6-7). Hence, the applicants submit (par 32) that a full retail pharmacy ancillary to the main purpose of a distribution centre is an independent use which contravenes the 4(b) zone, and, therefore, also s 76B of the EPA Act. Terry White makes clear that pharmacies must comply with State planning laws. The information provided to Council indicated that the core activity of the business was as a distribution centre, and that retail OTC was ancillary to it. The applicants contend that the Council erroneously accepted the representations made by the respondents, as to the alleged dominance of the distribution centre use, and that the Council noted in its report (at p299) that the incorporation of a retail pharmacy was required, to enable the premises to operate and be licensed.
The respondents agree that a "permissible" characterisation was an "essential pre-condition" to the grant of consent by the Council, and, if incorrect, the consent would be invalid (pars 4-5). They submit that the jurisdictional question can be answered in terms of the Council's characterisation of the use of the premises (par 4). Council was empowered to grant consent by determining that the premises would have an "innominate use" (par 7), that is, the land could have any use, other than that prohibited under cl 9, such as a "shop". Rather than the proposal that the premises be used for the purpose of trading in bulky goods, "the use being made of the subject premises is not prohibited, is not specifically defined and is thus a land use which is permitted with development consent as an innominate use" (T01.11.10, p 17, LL 22-24). The onus, therefore, falls on the applicants to prove that the premises are a "shop".
The respondents contend that the use of Tenancy 230 is not as a "chemist shop", but for a range of inter-related uses - "the use of the premises contains co-mingling of activities comprising a single business" (Tp17, LL45-46) - which seek to take advantage of the changes occurring in the pharmacy industry, largely brought about by the advances of the internet (Tp18, LL6-7). In so far as there is a use of the tenancy for what is now known as "ePharmacy", the respondents contend that it is not retail selling (Tp21, L42-p23, L7), and they also contend that any truly retail components of the co-mingled use are "ancillary" (Tp34, LL8-10) - as they had always put, frankly, to Council. They rely on Chamwell, and submit that there is a single use of the premises, i.e. the distribution of pharmaceutical goods and health care products, and that this purpose requires ancillary public access, under the National Health Act.
The applicants argue that, in particular, the ePharmacy use of the premises is a "sale" where stock is taken directly from the front of the store, where it is "exposed" and "offered", and may be used for ePharmacy when it is "picked from the shelves" for that purpose (par 62). As noted above, Leyshon suggested that ePharmacy goods are "sold under the banner of ePharmacy but are products belonging to Mr Gance and the Penrith distribution facility" (Tp130, LL16-17) - he says it is a retail transaction, so the applicants argue that the Council acted beyond its power, and, in granting the consent, breached the zoning requirements of the land.
Consideration of Issue 1
The Court must undertake an objective analysis of the purposes of the application, and its components, at a level of generality. As I noted in Macquarie Hospital, the exercise is not susceptible to purely mathematical analysis.
Although Gance asserts that all of the stock available for public view is his, distribution of non-ethicals being primarily done from Smithfield, and that it is being stored at the front for group distribution, and ePharmacy purposes, it is obvious, from the presentation of that public area, that the stock is also being offered for sale by a retail transaction, to members of the public visiting the SupaCenta.
Such co-mingling of both goods and purposes was clearly foreshadowed to Council in the DA documents as the proponent's intention for the operation. While the SEE asserted that the proposed use was a "shop trading principally in bulky goods", it referred to the "usual range of pharmaceuticals and cosmetics", putting the Council on notice of commerce beyond PBS products. The City Plan letter of 20 January 2009 ([131]-[132] above) expanded on this aspect of the application.
Accordingly, when considering the application and deciding to grant conditional consent, Council was aware that an ancillary retail facility was included in the proposal. The National Health Act requirement for "public access" is mandatory, and obviously means there must inevitably be some elements of "shop" incorporated in the proposed warehouse/distribution project, for the ePharmacy component, and for any on-site sales of such products. If there is to be a pharmaceutical warehouse/distribution facility, an ancillary retail function must be accepted.
There is some inaccuracy in the assertion in the SEE table of "elements of use" (in [122] above), where it says, in respect of the "retail pharmacy" element, that such a pharmacy must be "an ancillary retail component within the site", inferring that, to satisfy the licensing requirements of the National Health Act, it must be a traditional full-service "chemist shop".
On the other hand, the community has come to expect that providers of pharmaceutical benefits to customers invariably offer for sale, as well, a wide variety of the other goods, of the range and type seen in CWDCP during the Court's inspection.
The LEPs envisage that "shops" are more broadly based enterprises than some "hole in the wall" access point for PBS products, and they proscribe them as independent uses in the relevant zone(s). The necessary public access is achieved by providing public access not only to PBS products, but to a full range of goods usually available to the public, including PBS stocks, in a traditional chemist shop conducting retail sales. The DA documents clearly proposed some such element of retail sales, beyond PBS products, in the proposed use for which consent was sought.
In its assessment of the DA, Council accepted the propositions put by City Plan on behalf of AMS, to the effect that a full "retail component" was required for a licensed pharmacy operation, and that such a "shop" use would be incidental or ancillary to the primary use as a distribution centre, and Council then approved the DA on that basis - emphasising the limitation by imposing the relevant condition.
While a full-service traditional retail pharmacy is clearly not required by the National Health Act, such a pharmacy certainly ensures compliance with the "public access" requirement, and s 90 (4) states that any approval under s 90(1), requiring such public access, does not obviate the need for the project to comply simultaneously with state planning laws. The mere presence of some retail elements does not make the proposal, as a whole, one for a "shop".
As I conclude my determination of these proceedings, I remain more than a little troubled by two aspects of the matter:
(1)that the proponent did not substantiate why, and that the Council did not properly check that, such a fully stocked "shop" was required for the proposed integrated pharmaceutical warehouse to be properly licensed, and
(2) that goods are freely available in a range going far beyond what might be seen to be "incidental" to the provision of PBS products (e.g. measuring glasses, "droppers", pill dispensers, tablet cutters) into what Mr Robson described (Tp6, LL36 - 38) as "other paraphernalia".
Mr Tomasetti submitted (Tp369, LL16-17) that from "droppers", cutters etc:
... it is only a short extension to sale of nappies and other general health care related products.
The challenge for the Court is to settle on whether one can really "draw a line" on what is acceptable as incidental or ancillary to the provision of public access to pharmaceutical benefits, and, if so, where such a line should be drawn.
Once you accept that compliance with the National Health Act requires some sort of "shop" use, where is the line to be drawn between, at one extreme, a "hole in the wall" set-up, where the public can purchase, on prescription, PBS items only, and, at the other extreme, a full pharmaceutical "supermarket", which might stock, display, and sell a wider range of ethical products, along with cosmetics, fragrances, nappies, and other products such as toys, sun hats, tissues, confectionery, and so on?
A patient/customer needing a prescription medication included in the PBS, and the necessary equipment to administer it, might also equally need a freely available painkiller, a vitamin supplement, or the like, to deal with the medical problem being treated. Is that person required by any law to go also to another shop (pharmacy or otherwise) to obtain all that he/she needs?
There is nothing before the Court to show that such a limitation is required, or was intended, by any pharmacy legislation. Hence, the Court must examine the implications of the planning regime for the limitation of the "access" component of the project. That task involves characterisation, according to the principles outlined above.
In the SupaCenta context, I venture to suggest that, for example, a retailer of "bulky" electrical goods, such as major household appliances, would be expected to carry and sell, not only facultative non-bulky products like batteries, power boards, extension cords, and the like, but also, probably at the check-out or cash register, general magazines, confectionery items, bottled water etc.
I tried unsuccessfully to engage Mr Robson on this question of accurately "drawing the line" (see, especially, Tpp382-3), so the Court has had to come to a decision without any assistance from the applicants.
The Court's discretion in class 4 challenges such as this extends only to declining to grant relief when a breach of the law is established, and does not extend to declining, for some reason asserted to be in the interests of justice, to make any findings of such a breach, when dictated by the evidence. Warringah Shire Council v Sedevcic (1987) 10 NSWLR 335.
I am satisfied that the "troubling" aspects I mentioned above do not invalidate the characterisation exercise carried out by the Council, with which the Court agrees. In the end analysis it does not matter where a line is drawn regarding products, the retail use will be ancillary, and inextricably bound, to the warehouse/distribution use.
I believe that I should follow the reasoning of the VCAT in the three cases quoted above ([250]-[257]), and I, therefore, find no jurisdictional error in the grant of the subject consent.
Issue 2 - Is the present use prohibited?
The submissions made, and the characterisation and other analysis required, for the resolution of this second question - involving current use, as distinct from proposed use - are very much the same as applied for Issue 1. Intentions, hopes or expectations regarding the project are rarely relevant, and never the determinative test of the use - the Court must look at the actual operation: O'Keefe, Pallas Newco, and Chamwell.
Again, however, the Court must not focus too heavily on straight mathematical analysis, but some such analysis can illuminate the question of characterisation, once satisfied that definitional questions are clearly answered. Some of those questions - e.g. is a certain activity "retail" or not? - are complex.
The applicants contend that the present use of the premises is overwhelmingly "retail" in character, in terms of use of shelf space, revenue, and staffing, making the primary present use, rather than an ancillary use, a "shop", clearly prohibited in the IN2 zone. "Shop" was defined in the two LEPs as follows:
1996
... a building or place used for the purpose of selling, exposing or offering for sale by retail goods, merchandise or materials but, in the development control table, does not include a building or place elsewhere specifically defined in this Schedule, or a building or place used for a land use elsewhere specifically defined in this Schedule.
2010
... retail premises that sell groceries, personal care products, clothing, music, homewares, stationery, electrical goods or other items of general merchandise, and may include a neighbourhood shop, but does not include food and drink premises or restricted premises.
The applicants contend that the evidence establishes the following elements of present use at CWDCP:
1. Distribution of the EYFS/Verrocchi goods.
2. Samples Plus/Market Reach.
3. Home medication review.
4. My Home Health.
5. Retail pharmacy comprising the following components:
(a)Dispensing of medicines listed on PBS;
(b) Dispensing of medicines not listed on PBS;
(c) Sale of items scheduled under the PTG Act and not listed on PBS;
(d) Sale of OTC goods, including fragrances, toiletries and general "grocery type" supplies;
(e) Sale of generic health products such as vitamin supplements, etc.
6. ePharmacy involving the sale of goods from the front of the store, in addition to PBS listed medicines which must be dispensed by a qualified pharmacist.
7. Sale of items to nursing home patients (proposed, but not presently undertaken through Penrith).
Only the dispensing/distribution of PBS-listed items requires a s 90 approval, and such an approval would be needed for some goods or transactions embraced by elements 5 to 7 in the above list, and not needed at all for elements 1 to 4 and other components of elements 5 to 7.
The parties are in dispute about which of these elements, and to what extent, involve "retail". The primary group distribution element (No 1 above) accounts for 60% or more of the value of the business, and involves no retail.
For my part, while ePharmacy involves a sale, and is the element of the present use which is expected to grow exponentially in the years ahead, the actual sale of the item does not involve CWDCP, whose role is its distribution. In this respect I do not accept Leyshon's evidence.
Off-the-shelf, OTC, and disability aid sales, in or through the front of the premises, are clearly "retail" in character, but the "Samples Plus" and Market Reach operations are clearly not, and not all services provided to nursing homes will necessarily involve retail. There is a service "sold" in Home Medication Reviews, but the consideration comes from Medicare to CWDCP, it is really a minor element, and it may not meet the relevant tests or definitions of sale/retail (in [59] above) anyway.
At the end of the analysis of the CWDCP business, I find myself accepting the respondents' description of the present use as six "co-mingled" activities (par 46):
(a) Distribution for ePharmacy.
(b) Distribution for nursing homes.
(c) Distribution for 'Samples Plus'.
(d) Distribution of both ethical and OTC products for and within the group.
(e) Sales of ethical products.
(f) Sales of OTC products.
The respondents are correct to invoke the Macquarie Hospital example, rather than O'Donnell. The evidence suggests that much (if not most) of the stock shelved in the front section of the premises currently supplies the ePharmacy element, among others, and, on the other hand, stock for the distribution tasks is stored throughout the whole premises. The extent of the overlaps in use of space for the elements of present use is clearly shown in the marked-up floor plans at pp58-62 of the respondents' submissions of 14 January 2011.
Having upheld the consent for Tenancy 230 as valid, because it is a multi-faceted single use, of which such "shop" aspects are both minor and genuinely ancillary, on the one hand, and required by the National Health Act, on the other, as well as being "inextricably bound" to the overall use of the premises, I am satisfied by the evidence before the Court that the use is being carried out in accordance with that consent, and I can find no breach of the law.
Issue 3 - Is there a breach of Condition 4
Condition 4, as amended, and put in simple terms, requires that any retail sales from Tenancy 230 are to be ancillary to the primary use of the premises as a distribution centre.
As the elements of use about which the applicants complain have been found, on the totality of the evidence before me, to be ancillary to the primary warehouse and distribution centre use, I find that the premises operate in accordance with the limitation imposed by condition 4.
Issue 4 - Validity and/or severability of Condition 4
For completeness, I will address this last issue, although it may seem superfluous in light of my conclusions on Issues 1 to 3.
Council's power to impose conditions on a consent flows from s 80A(1) of the EPA Act, read with s 79C(1).
Section 80A(1)(a) relevantly provides:
A condition of development consent may be imposed if:
(a) it relates to any matter referred to in section 79C (1) of relevance to the development the subject of the consent...
Section 79C(1) provides:
(1) Matters for consideration-generalIn determining a development application, a consent authority is to take into consideration such of the following matters as are of relevance to the development the subject of the development application:
(a) the provisions of:
(i) any environmental planning instrument, and
(ii) any proposed instrument that is or has been the subject of public consultation under this Act and that has been notified to the consent authority (unless the Director-General has notified the consent authority that the making of the proposed instrument has been deferred indefinitely or has not been approved), and
(iii) any development control plan, and
(iiia) any planning agreement that has been entered into under section 93F, or any draft planning agreement that a developer has offered to enter into under section 93F, and
(iv) the regulations (to the extent that they prescribe matters for the purposes of this paragraph), and
(v) any coastal zone management plan (within the meaning of the Coastal Protection Act 1979),
that apply to the land to which the development application relates,
(b) the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic impacts in the locality,
(c) the suitability of the site for the development,
(d) any submissions made in accordance with this Act or the regulations,
(e) the public interest.
The power of Council to impose conditions is broad. The test of the validity of a condition attached to a consent originates from Newbury District Council v Secretary of State for the Environment [1981] AC 578, and was set out by McHugh J in Western Australian Planning Commission v Temwood Holdings Pty Limited [2004] HCA 63; (2004) 221 CLR 30, at [57], as follows:
(1) The condition is for a planning purpose and not for any ulterior purpose. A planning purpose is one that implements a planning policy whose scope is ascertained by reference to the legislation that confers planning functions on the authority, not by reference to some preconceived general notion of what constitutes planning.
(2) The condition reasonably and fairly relates to the development permitted.
(3) The condition is not so unreasonable that no reasonable planning authority could have imposed it.
I discussed the Newbury/Temwood principles in my first instance judgment in Botany Bay City Council v Ralansaab and 7 Ors [2010] NSWLEC 225, at [171]-[186]. When my decision in that case was reviewed by the Court of Appeal - in Botany Bay City Council v Saab Corp Pty Ltd [2011] NSWCA 308; (2011) 183 LGERA 228 - Basten JA said:
In Australia the question is not so much whether the "Newbury test" has been adopted by the High Court, or courts of intermediate appeal, but rather what it requires. Labels are frequently adopted without sufficient reference to the specific statutory and factual context in which they are to be applied.
There is a valuable discussion of these issues also in Biscoe J's judgment in Dogild v Warringah Council (2008) 158 LGERA 429, at [37]-[68]. His Honour there referred to pre-Newbury Australian authority and other relevant decisions.
The applicants in the present case submit that the presence of a retail pharmacy on the premises was based on a "misconception" by Council of the extent of the requirements of the National Health Act (par 89). As a result of this misconception, condition 4 was then amended, "radically" changing and confining the effect of condition 1 that permits the use of the premises as a "bulky goods retail outlet" (par 90).
The applicants, therefore, submit that condition 4 is "impermissibly uncertain", because there is a possibility that the premises will be used for a purpose significantly different from the purpose for which the consent was granted (par 91). They further submit that, because condition 4 is invalid, the whole development consent is invalid, as condition 4 is not severable from the rest of the consent (par 94). See Wechsler v Auburn Council (1997) 130 LGERA 134, and its application of s 32 of the Interpretation Act 1987 (NSW).
The respondents submit that the Council imposed condition 4 on the sole basis that the retail use of the premises was only ancillary to, rather than possibly independent of, the use of the premises for distribution purposes (par 84). They further submit that condition 4 was not so uncertain as to alter the effect of the consent.
I see condition 4 as fundamental to the consent and the development, as it goes to the root of the planning permission granted by Council. I accept the applicants' submission that the Council would appear unlikely to have granted consent without the agreement on condition 4, and its qualification on the use of the premises. However, I reject their submission that it is relevantly uncertain.
In my view condition 4 meets the Newbury/Temwood test - it is for a planning purpose; it reasonably and fairly relates to the development; and it is a reasonable condition to impose in the circumstances of the consent.
I am also satisfied that it is not severable in any event. See Maitland City Council v Anambah Homes Pty Ltd [2005] NSWCA 455; (2005) 64 NSWLR 695. See also Winn v Director General of National Parks and Wildlife (2001) 130 LGERA 508.
L: Conclusion and Orders
The applicants' challenges have all failed, so no questions of relief and/or discretion arise. The summons should be dismissed with costs. All exhibits, including both those formally tendered, and those to affidavits, may be returned.
The formal orders of the Court will be:
1.The applicants' further amended summons dated 22 October 2010 is dismissed.
2.Unless a notice of motion for any further or different orders for costs is filed, by any party, within 14 days, the only order for costs will be that the applicants pay the second and third respondents' costs, on a party-party basis, as agreed or assessed.
3.All exhibits, including those to affidavits, may be returned.
Decision last updated: 19 April 2012
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