Cenrin Pty Ltd v Lamb, A
[1992] FCA 523
•12 MAY 1992
Re: CENRIN PTY LIMITED and GARY IAN SMOKER
And: A. LAMB; N. GARRITY; K. CARNELL; R. JAMES; K. PHELPS; M. FORD and I.
FLETCHER; THE HON. PETER STAPLES, MINISTER OF STATE FOR AGED, FAMILY AND
HEALTH SERVICES and THE COMMONWEALTH OF AUSTRALIA
No. N G631 of 1991
FED No. 523
Administrative Law
(1992) 27 ALD 739 (extract)
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1)
CATCHWORDS
Administrative Law - Particular persons or Tribunals - Pharmacy Restructuring Authority - determination made by delegate appointed under National Health Act - interpretation of "financial commitment" - whether error of law committed.
National Health Act 1953 (Cth)
Administrative Decisions Judicial Review Act 1977 (Cth)
HEARING
SYDNEY
#DATE 12:5:1992
Counsel for the Applicant: Mr J.A. Shaw QC with Mr A. Hughes
Instructed by: Elizabeth Johnstone
Counsel for the Respondent: Ms C.C. Simpson QC with Ms R. Henderson
Instructed by: Australian Government Solicitor
JUDGE1
By their amended application the applicants seek the review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the "ADJR Act") of a decision and determination of the first respondents, the Pharmacy Restructuring Authority (the "Authority"), and the decision of the delegate appointed under the National Health Act 1953 (Cth) (the "Health Act"). The determination of the Authority of which review is sought, as specified in the amended application, is:
"(a) That the application of the second applicant for approval to supply pharmaceutical benefits from premises at 393 Military Road, Mosman, New South Wales, be not recommended to the delegate because the application did not meet Guideline 3(g) in that a financial commitment prior to 9 August 1990 was not proven;"
The decision of the Delegate, of which review is sought, as specified in the amended application, is:
"(b) the decision by the Delegate on or about 3 July 1991 to reject the application of the second applicant for approval to supply pharmaceutical benefits from premises at 393 Military Road Mosman, premises being leased from the first applicant."
The first applicant ("Cenrin") is the intended lessor of the premises referred to in the application. The second applicant is a pharmacist who wishes to operate a pharmacy in those premises. It is the second applicant who, for practical purposes, has made the application in these proceedings.
The application originally made and which was the subject of the decision sought to be reviewed in these proceedings was made under s 90 of the Health Act 1953. That section reads:
"Subject to this section the Secretary may, in the Secretary's discretion, upon application by a pharmacist who is willing to supply pharmaceutical benefits on demand at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at or from those premises.
It is clear, of course, that the obtaining of approval under this section is an essential prerequisite for the operation of a pharmaceutical business. The Health Act has been amended recently. Certain sections which are of importance in this case came into operation as a result of such amendments, on 18 December 1990.
These provisions in question are: s 99J, which establishes the Authority, which is the first respondent in these proceedings; s 99K which provides for the functions of the Authority; and sub-s 99K(1)(a) which requires the Authority to consider applications made by pharmacists under s 90. By sub-s 99K(1)(b) the Authority is to make, in the case of an application under s 90, a recommendation whether or not the applicant should be approved under that section in respect of the particular premises.
Section 99L provides that the Minister shall determine in writing the guidelines subject to which the Authority is to make recommendations under sub-s 99K(1). These sections clearly provide, together with other sections, to which it is not necessary to make reference, a scheme for dealing with applications by pharmacists for approval. It is clear that the responsibility for considering the applications in the first instance and for making recommendations based upon material placed before it is reposed in the Authority.
It is obviously also contemplated that the Authority should receive fairly detailed guidelines as to its decision-making in relation to applications for approval. In this respect there was a clear departure from the procedure which had previously been in place in relation to such applications, where the discretion to approve or disapprove was dealt with on fairly simple lines. Apparently it was usually regarded as sufficient that the applicant seeking approval be a registered pharmacist within the State where he sought to carry on the pharmacy business and that he have appropriate State approval to carry on the business at the relevant premises.
The guidelines were published in the Commonwealth Government Gazette on 29 May 1991. The full document is exhibit B in these proceedings. It is unnecessary, however, to make detailed reference to it. Paragraph 3 sets out, in considerable detail, the guidelines which are intended to be followed by the Authority in considering whether or not to recommend approval of applications by pharmacists under s 90 of the Health Act. Sub-paragraphs (a) to (f) deal with a variety of matters relating to the geographical location of the premises in which approval is sought for the conduct of the pharmacy business. Questions of public need for a business in those premises is also dealt with as are other matters to which it is unnecessary to make reference. The relevant sub-paragraph for the purpose of this application is paragraph 3(g) of the Guidelines, which reads as follows:
"Notwithstanding anything contained in sub-paragraphs (a) to (f), approval of a pharmacist in respect of particular premises shall be recommended where the pharmacist entered into a financial commitment prior to 9 August 1990 (being the date on which the granting by the Secretary of approvals to pharmacists under section 90 of the Act was restricted pending the passage of legislation for pharmacy restructuring) in the expectation that an approval would be granted in respect of those premises, provided that the Authority is satisfied that there was such a prior commitment and the pharmacist produces to the Authority either -
(i) a bank statement, supported if necessary by an affidavit by the pharmacist's solicitor or accountant; or
(ii) details of any contractual arrangements together with an affidavit by the pharmacist's solicitor or accountant attesting to the correctness of the date that commitment was entered into."
The question before the Authority in relation to the applicant's application was whether compliance with this sub-paragraph had been shown. The Authority held that it had not, and as a result of so holding, declined to recommend approval to the delegate. That decision of the Authority, it is submitted, was flawed in certain ways to which I shall make reference.
The decision-maker, as is, of course, customary in applications under the ADJR Act, was requested to provide a statement of facts and reasons pursuant to s 13 of the ADJR Act. The most convenient way of dealing with this application is to go to that statement. It sets out the findings made on material questions of fact and also indicates the source of material from which the findings were made. As it provides, in so doing, an easily understandable chronology of events, it is the most satisfactory course, in my view, if I simply indicate in these reasons what those findings were before coming to the main questions for decision.
Those findings indicate that, on 12 January 1991, the applicant made the application to which I have made reference. On 25 January 1991, the Health Insurance Commission, as the appropriate recipient, received a letter from the applicant which contained certain information. The letter is also before me as an annexure to an affidavit. The statement under s 13 accurately indicates its contents when it sets out that the letter stated that "he had been ready to start in the pharmacy on 1 August 1990 but the Pharmacy Board informed him that he could not own two pharmacies until 1 October".
Then, in September, the Pharmacy Board informed the applicant that he could not own two pharmacies until 1 January 1991. The statement goes on to indicate that there was a document before it which confirmed the applicant's original intention to open the business on 1 August 1990. That document is also before me. Both documents amply support the findings made in this regard by the Authority.
The statement goes on to indicate that there was received from the applicant on 25 January 1991 a statutory declaration of 24 January 1991 from a director of a company, Hemite Pty Limited, which was a company involved in the occupation of shopfitting. The statutory declaration indicated that company had received instructions on 29 June 1990 to proceed with drawings for a new pharmacy at 393 Military Road. There was a contract price of $6,850. A deposit, which other evidence indicated to be in the amount of $2,000, was received by that company from the applicant on 25 July 1990.
The job of fitting out the premises as a pharmacy was completed on 30 July 1990, and the balance, $4,850, was paid by the applicant on 7 September. Bank statements were provided, no doubt because of the provision of the Guidelines, which amply demonstrated the withdrawal of these amounts of money. It is perfectly clear, I should perhaps interpolate, that the Authority was quite satisfied that this contractual arrangement had been entered into and had been completed and paid for in the manner to which I have just referred.
The Authority considered the application at a meeting on 7 and 8 March 1991. It deferred making a recommendation. It sought further information from the applicant. This information was supplied on 9 April 1991. The applicant enclosed documents which the Authority described in this way:
"These indicate that the applicant had negotiated a lease for part of the ground floor at 393 Military Road, where he planned to open the pharmacy, from the lessors of the site, Cenrin Pty Limited."
That company is, of course, the first applicant. The applicant included in the documents forwarded a statutory declaration by his solicitor, annexing a copy of a letter sent by him to Cenrin on 20 July 1990. The letter stated that the lease as submitted to the applicant was unacceptable, and that a number of changes as set out would be required. The applicant had later advised his solicitor that Cenrin had responded to the letter of 20 July 1990 directly to him, and that he was writing to them directly to accept their offer. As evidence thereof the applicant forwarded a copy of a letter to him from Cenrin dated 6 August 1990, referring to their meeting of 25 July, and confirming the main terms to be included in the lease.
Although the lease was, at that time, being prepared by Cenrin's solicitors, the applicant was asked by Cenrin to give his written acceptance of the terms set out in the letter. The applicant made a statutory declaration in which he declared that he gave such written acceptance on 8 August 1990. It is clear from these facts that although as at the significant date of 9 August 1990 the lease transaction had not been finalised by the execution of the lease document, that the parties had reached agreement as to the major terms of the leasing arrangement for the pharmacy shop into which they intended to enter.
There was a further meeting on 10 May 1991, in which the Authority considered the applicant's application. This is referred to in paragraph 6 of the statement under s 13 of the ADJR Act. As reference has been made to it in argument, I will set it out verbatim as follows:
"At its meeting on 10 May 1991, the PRA (ie, the Authority again considered the application and deferred making a recommendation. It determined that a financial commitment had been made to a pharmacy which the Applicant was not allowed to own under State law as he was not approved. The PRA sought further material to establish that Cenrin agreed to the changes in the lease sought by the Applicant in his agreement of the lease dated 8 August 1990. The PRA also sought from the applicant the date of Cenrin's agreement."
The statement of facts goes on to record that the applicant had forwarded as information to the Authority a letter from Cenrin dated 8 August 1990 in which Cenrin agreed to the change sought by the applicant. The Authority also noted that the applicant had paid all the costs of Cenrin's solicitors, relating to the preparation of the lease.
There were further deferrals of consideration of the applicant's application by the Authority which are referred to in the statement of facts and which it is unnecessary to set out in full here. They related to requests from the Authority to provide yet further material relating to the intended leasing arrangements of the shop. On 25 June 1991, as appears from the statement, the Authority considered the material which had been provided by the applicant including the further documentation it had sought and came to a decision that Guideline 3(g) of the Ministerial Guidelines had not been met. It consequently recommended to the relevant delegate that the application not be approved. The delegate accepted this recommendation.
The Statement of Facts goes on in paragraphs 34 to 37 to indicate the bases for the recommendations made that there be no approval of the applicant's application. Paragraph 35 is as follows:
"Guideline 3(g) permits the PRA to recommend approval of a pharmacist where it is satisfied that a pharmacist entered into a financial commitment in respect of particular premises prior to 9 August 1990 in the expectation that an approval would be granted in respect of those premises. That guideline also requires the pharmacist to produce to the PRA either a bank statement supported by an affidavit where necessary, or details of any contractual arrangements together with supporting affidavit."
Clearly, the reference to "approval" in this paragraph and in guideline 3(g) is to approval by the Authority and ultimately by the Secretary under s 90 of the Health Act. Paragraph 36 states:
"In applying the guidelines the PRA considered a financial commitment to be one which is shown to be ongoing and binding, the revocation of which would involve the applicant pharmacist incurring a substantial financial penalty."
Paragraph 37 stated as follows:
"The PRA duly considered the material provided by the Applicant and was not satisfied that there was sufficient evidence to prove the necessary prior financial commitment nor was it satisfied that the requirements of guideline 3(g) had been fulfilled. The PRA was of the opinion that the applicant could not prove the necessary commitment at 9 August 1990 because, whilst negotiations in respect of the lease were clearly underway at that date, he was unable to show that a lease in respect of the pharmacy had been executed by that date. A recommendation was therefore made that the application not be approved."
The major submission made on behalf of the applicant is that paragraph 36 indicates that the Authority, when considering the application of guideline 3(g), adopted a construction of the words "financial commitment" which was far too stringent. It was put that the words were ordinary English words and that they did not require, in their application to the deliberations of the Authority, a construction of the kind set out in that paragraph. There was no need that the financial commitment required to be shown by an applicant under 3(g) be one which was of necessity to be ongoing and binding, nor was it necessary that it be one, the revocation of which would involve the substantial financial penalty suggested. To add those requirements to the simple words of the guideline was to substantially alter the requirements of the guideline and to do so involved an error in construction of the words. It was accordingly an error of law in the application of the guidelines in the fulfilment of their function under s 99 of the Health Act.
It is unnecessary and undesirable that a Court in considering a matter of this kind enter upon the definition of words of simple import such as "financial commitment". Obviously, each case should depend upon its own facts. However, it is sufficient for the purpose of deciding this case for me to indicate simply that, in my view, the adoption of this stringent and restrictive definition by the Authority resulted in appellable error.
The facts are, of course, quite clear and they are uncontested. Although, as at 9 August 1990, the lease had not been finally entered into, there had nevertheless been considerable discussion, negotiation and fundamental agreement about the terms. The document obviously was in a state of completion but it had not, at that precise time, been executed. The costs for the preparation of the lease payable in accordance with ordinary conveyancing practice by the lessee had been the subject of consideration by the lessor's solicitor. It is perfectly clear on the facts that the commitment existed on the part of the applicant to pay these costs. They were in fact paid in September when they were rendered in detail in the amount to $1375.
It was additionally, and quite clearly, established by uncontested evidence that there was an obligation undertaken by the applicant to Hemite Pty Limited in respect of the fitting out of the shop. It is clear it was the intention that the fitting out be undertaken and completed by 9 August 1990. The fitting out, again quite clearly, was for the purpose of constituting the premises a pharmacy. There was a firm contract for $6,850 and there was payment of $2,000 by way of part-payment. Although the balance was not paid until after 9 August 1990, there was in every respect on the evidence before me, and clearly before the Authority, a binding obligation to pay.
I am quite satisfied that these amounts of money could not be regarded as trivial in any sense. They were substantial and they clearly involved a financial commitment within the meaning of the guideline. I think that proposition is unarguable. Indeed, I think I can state fairly, that it was not contested in argument on behalf of the respondent in these proceedings.
As far as the Authority founded its recommendation upon the failure of the applicant to satisfy it that a relevant financial commitment on the part of the applicant was demonstrated before 9 August 1990, that finding was, in my view, flawed by an error of law and it is also my view that the fact that there was a financial commitment is an inescapable finding. However, reliance is placed by the respondent upon paragraph 6 of the statement of facts which is set out in full above. It was said that having regard to certain statements in that paragraph, it was clear that the Authority had decided that the second aspect of guideline 3(g) had not been made out by the applicant in his application before the Authority. That second aspect is the requirement that the financial commitment be entered into "in the expectation that an approval would be granted in respect of those premises".
It was put on behalf of the respondent that there was an unchallenged finding of fact to be ascertained from paragraph 6, namely that the Authority had held that the applicant did not relevantly have any such expectation at the time of his entering into the financial commitment. The passage relied upon reads as follows:
"It determined that a financial commitment had been made to a pharmacy which the Applicant was not allowed to own under State law as he was not approved."
I have given anxious consideration to this passage. I find it very difficult to follow especially in light of the subsequent finding to which I have made reference, that there was in fact no relevant financial commitment demonstrated on the part of the applicant. It is very difficult to see indeed how paragraph 6 can stand with the very clearly stated findings in paragraphs 36 and 37 to which I have made reference.
I am quite unable to regard it as a finding that at the time of making the financial commitment, the applicant had no expectation that approval would be granted to him under s 91 of the Health Act. If the Authority had made a finding to that effect on 10 May 1991, then that surely would have disposed of the applicant's application insofar as he would have failed to have established an essential part of it. However, the Authority so far from indicating that the application there and then had to be rejected entered upon a series of requests for further information, the nature of which I have already referred to. Those requests all for the most part went to the seeking of further corroborative material in relation to the state of advancement of the lease transaction as at 8 August 1990.
As material was supplied in relation to this, the Authority considered it, deferred the matter of the recommendation and sought further material in relation to it. This material was also supplied by the applicant. It is, in my view, inconceivable that the Authority would responsibly have put the applicant to so much trouble if he had already at 10 May 1991 decided that the commitments entered into by the applicant had been made by him in circumstances where he had no expectation that he would receive approval.
I think that the statement in paragraph 6 is no more than a recording of the fact that the applicant, at the time he entered into the financial commitment, was aware that he was not then permitted, as was the case under the relevant New South Wales legislation, to operate more than one pharmacy. It is not a finding that he did not expect to obtain approval under sub-s 90(1) of the Health Act, because he was not eligible for it through the operations of the provisions of sub-s 90(4).
I am satisfied that the reference in paragraph 37 to non-fulfilment of the "requirements of guideline 3(g)" is, in the light of what appears in paragraph 35, a reference to the fact that the leasing arrangements had not been completely finalised by 9 August 1990. Indeed, I am unable to accept, in light of reading the s 13 statement in totality, that expectation of approval was an issue in the mind of the Authority in its considerations as to whether or not approval should be recommended.
The letter received from the applicant dated 21 January 1990 quite clearly established that his expectation was that there would be no problem with the State legislation. I am of the view that a reasonable reading of the Authority's reasons as set out, is that this aspect of the case did not trouble them. The real issue, so far as the Authority was concerned, in its deliberations, was whether a relevant financial commitment had been established on the part of the applicant. As I have said, in finding this issue against the applicant, they, in my view, committed an error of law in the construction of the relevant words of the guideline.
I have come to the conclusion that viewed in the way that I do, this is a simple case. The Authority misconstrued the section. Had they construed it correctly, the material before it clearly indicated compliance on the part of the applicant. I am of the opinion that the applicant was clearly entitled to a decision in his favour on the material before the Authority, and that this is not an appropriate case for sending the matter back to the decision maker to be reviewed. In my view it is a case where I should make orders under ss 16(c) and (d) of the ADJR Act (Minister for Immigration and Ethnic Affairs v Cunningham (1986) 11 FCR 528).
I therefore make a declaration that the second applicant is entitled to the grant of his application, under sub-s 90(1) of the Health Act, and give an appropriate direction to the Authority that it make a recommendation in those terms. I think that it is an appropriate case, however, for those orders to be settled, after short minutes have been brought in. I also order that the respondent pay the applicant's costs.
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