Grewal and the Secretary, Department of Health and Ageing
[2006] AATA 85
•3 February 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 85
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/875
GENERAL ADMINISTRATIVE DIVISION ) Re SABINA KAUR GREWAL Applicant
And
THE SECRETARY, DEPARTMENT OF HEALTH AND AGEING
Respondent
DECISION
Tribunal Senior Member M D Allen Date3 February 2006
PlaceSydney
Decision The decision under review is set aside.
(Sgd) M.D. ALLEN
.............................
Senior Member
CATCHWORDS
HEALTH LAW - cancellation of Applicant’s approval to supply pharmaceutical benefits - Applicant sought deactivation of her approval - financial non-viability of the pharmacy - Applicant’s psychiatric illness - held that the Respondent paid insufficient regard to Applicant’s special circumstances in cancelling her approval - decision under review set aside.
National Health Act 1953 ss 90, 98
Shaffer v Secretary, Department of Health and Aged Care (2002) 124 FCR 234
Re Rogers and Secretary, Department of Health and Ageing (2003) 38 AAR 255
Comptroller-General of Customs v Members of Administrative Appeals Tribunal (1994) 123 ALR 140
Freeman v Department of Social Security (1988) 87 ALR 506
Re Wong and Minister for Immigration and Multicultural Affairs [2002] AATA 54
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Skoljarev v Australian Fisheries Management Authority (1995) 39 ALD 517
Re Martin and Secretary, Department of Health and Ageing (2004) 84 ALD 528
Shaffer and Secretary, Department of Health and Aged Care [2001] AATA 426
Australian Securities and Investments Commission v Donald (2003) 203 ALR 566
REASONS FOR DECISION
Senior Member MD Allen 1. By application made 8 July 2005, the Applicant sought review of a decision by the Respondent made 5 July 2005 to cancel with effect from 22 July 2005, the approval granted to her to supply pharmaceutical benefits under the National Health Act 1953 (“the Act”) from premises located at 210 Oxford Street, Paddington in the State of New South Wales.
2. That decision was made pursuant to ss 98(3) of the Act which reads:
“Where the Secretary is satisfied that an approved pharmacist is not carrying on business as a pharmacist at premises in respect of which the pharmacist is approved, the Secretary may (at his or her discretion), by notice in writing to the pharmacist, cancel the approval of the pharmacist under section 90.”
3. As was pointed out in Shaffer v Secretary, Department of Health and Aged Care (2002) 124 FCR 234, the Secretary is not obliged to cancel the approval and the discretion granted by the Act is broad.
4. Subsection 90(1) of the Act provides that the Respondent may approve a pharmacist who is willing to supply pharmaceutical benefits on demand at particular premises to supply pharmaceutical benefits at or from those premises.
5. An application to provide pharmaceutical benefits from particular premises may be a new application or it may be an application to transfer an existing approval from one particular premises to another. As a result, a market has been established for “approvals” and, as was pointed out by Deputy President Muller in Re Rogers and Secretary, Department of Health and Ageing (2003) 38 AAR 255 at 259:
“While it is obvious that pharmacies will be bought and sold … one of the unintended consequences of the scheme of control of approvals is to create a significant market for approvals.”
6. As in certain circumstances, to cancel an approval would be harsh or cause inconvenience, a practice has developed of “deactivating” approvals. This procedure allows for the temporary closure of pharmacies or the preservation of an approval while a pharmacy is moved to new premises. To enable delegates of the Respondent to make decisions, guidelines have been issued entitled “Deactivation of Pharmacist Approvals Made Under s 90 of the National Health Act 1953 – Guidelines” (“the Guidelines”): see document T-30 of the documents prepared for the Tribunal pursuant to s 37 of the Administrative Appeals Tribunal Act 1975.
7. The relevant part of the Guidelines reads:
1.Purpose of these Guidelines
These Guidelines aim to assist pharmacists who wish to temporarily ‘deactivate’ an approval to supply pharmaceutical benefits under s 90 of the National Health Act 1953.
This process was formerly known as ‘parking an approval’.
2.Background
Section 98(3) of the National Health Act 1953 provides that the Secretary of the Department of Health and Aged Care (or his/her delegate, normally an officer of the Health Insurance Commission) may cancel an approval where he/she is satisfied that an approved pharmacist is not carrying on business as a pharmacist at the premises in respect of which the pharmacist is approved.
Accordingly, any pharmacist who ceases to carry on business at the premises in respect of which he/she is approved – subject to these Guidelines – places themselves at immediate risk of having their approval cancelled.
Meaning of the term ‘deactivate’
These Guidelines outline the circumstances in which the delegate may be prepared to allow an approval to be temporarily ‘deactivated’.
This is not an expression used or defined in the National Health Act 1953. It is, instead an administrative concept, intended to describe – in a shorthand way – the situation which arises when a delegate decides not to cancel an approval under s 98(3) notwithstanding that the statutory precondition to such a decision (namely, that the holder of an approval under s 90 of the National Health Act 1953 has ceased to carry on business at relevant premises) has been satisfied.
This process involves the exercise of a statutory discretion. These Guidelines are designed to ensure the consistent and appropriate use of that discretion by delegates on a national basis. …
3.General Statement of Policy
In general terms, delegates will give consideration to permitting an approved pharmacist to deactivate a s90 approval by closing a pharmacy where it can be shown that:
§arrangements are in train to allow the approval to be transferred to another location and the Australian Community Pharmacy Authority (ACPA) is aware of that transfer, or
§the holder is able to demonstrate that the closure is temporary and that the premises will re-open within a reasonably short time frame (not more than 6 months).
In all cases, the delegate will not entertain an application for deactivation where the decision to close the premises is linked to the continuing commercial viability of the site.
As set out below, circumstances which may warrant the favourable exercise of the discretion to deactivate an approval may include:
§where the holder wishes to relocate the approval to new premises;
§where there has been a change of ownership at the premises;
§where the holder is obliged to close the pharmacy in order to take leave absence; and
§where the premises are closed to allow a redevelopment to the premises themselves or the surrounding commercial areas.
WARNING: No approved pharmacist should close their pharmacy or otherwise cease trading without first notifying the HIC Pharmaceutical Benefits Scheme Manager, in their state of their intention to do so. Persons who close their pharmacy without proper notice to the HIC should expect to be advised that their approval has been cancelled under s 98(3).
4.…
5.Applications for Deactivation
Generally speaking, the HIC will entertain an application to deactivate an approval in the following circumstances:
(1)Owner on leave of absence:
Where the current holder of the approval wishes to close his/her business:
(a) for a short and specified period of time (a maximum of 6 months) for reasons, which are either beyond the control of the pharmacist (eg shopping centre renovation, etc); or
(b) for compelling and demonstrated personal reasons (eg requirement to be interstate attending to a sick relative)
which are not connected with the continuing commercial viability of the business and the services of a locum pharmacist could not be obtained to continue the business of the pharmacy.
(2)…
8. The cancellation of the Applicant’s approval took effect from 22 July 2005 although a stay of that decision was granted by the Tribunal. At the outset of these proceedings, I ruled that the Tribunal must consider whether the decision to cancel was the correct or preferable decision as at the time of cancellation. That does not mean however that later events cannot be examined to ascertain what light they might throw upon the circumstances at the time of cancellation: see Freeman v Department of Social Security 87 ALR 506 and Re Wong and Minister for Immigration and Multicultural Affairs [2002] AATA 54.
9. The Applicant was approved pursuant to s 90 of the Act to supply pharmaceutical benefits from premises at 210 Oxford Street, Paddington, New South Wales (“the Premises”) on 21 October 2003.
10. I note that the approval does not refer to any particular part of the Premises and that the building is of two storeys.
11. On 14 February 2005, Ms Wong who is the approvals clerk at Medicare Australia (formerly known as the Health Insurance Commission), had a conversation with a Ms Roache of Pharmacy Guild Sales and Valuations NSW Pty Ltd. As a result of that conversation, she telephoned the Applicant at the pharmacy conducted by her at Cronulla, New South Wales.
12. I accept Ms Wong’s evidence that in that conversation the Applicant told her that she had closed the pharmacy on Christmas Eve intending to re-open in January but had not done so. I also accept that the Applicant at that time told Ms Wong it was her intention to sell her approval.
13. The Applicant has given various reasons for the closure of the pharmacy. In a notice of closure forwarded to the Pharmacy Board of NSW (“the Pharmacy Board”), the Applicant stated that the pharmacy had closed on 25 January 2005 and that the reason was:
“Paddington has suffered from a decline in business and I was affected drastically. The pharmacy became financially unviable. Also we experienced many building/ structural difficulties which compounded the problem.”
14. In a later letter to the Pharmacy Board dated 10 February 2005, the Applicant said:
“The Paddington pharmacy has ceased to trade. I apologise for the delay in notifying the Board. At this stage it is unlikely that the pharmacy will re-open and I am currently considering the options of either re-locating or selling the license.”
15. Following her conversation with Ms Wong on 14 February 2005, the Applicant wrote to the Health Insurance Commission (HIC) on 16 February 2005. In that letter she stated that she had suffered significant financial loss due to building and other remedial works that had to be carried out on the Premises but also stated:
“I had experienced three burglaries during the short time the pharmacy was open. In particular, the third of these burglaries was an armed hold-up, in respect of which I was robbed at gunpoint causing me significant psychological trauma, in respect of which I continue to suffer …”
16. She concluded that letter by seeking the “deactivation” of her approval.
17. The Respondent by letter dated 28 February 2005 informed the Applicant that deactivation of the approval could not be entertained when the decision to close the pharmacy was linked to the commercial viability of the site. A deactivation was granted until 18 April 2005 to enable the Applicant either to re-open the pharmacy, sell the approval provided it remained at the current approved location, or apply for a relocation (of the approval).
18. On 15 April 2005, the Applicant’s solicitor wrote to the HIC. In that letter he pointed out that as a result of the armed robbery of the pharmacy in September 2004 the Applicant had developed a psychiatric illness (actually a post-traumatic stress disorder) and as a result of that illness was inhibited from returning to the Paddington pharmacy. A report of Dr Durrell, Psychiatrist, was enclosed.
19. I accept the Applicant’s evidence in these proceedings that she had not previously revealed the full extent of her illness as she did not consider it necessary for the Pharmacy Board to know of it. I further accept her evidence that as a result of her illness she was unable to make rational decisions.
20. Exhibit A4 in these proceedings is a medical report from the Applicant’s general practitioner dated 25 September 2005. That report also refers to depression and an inability, due to psychiatric illness, to deal with the affairs of the Paddington pharmacy. Interestingly, the general practitioner says in her report:
“I believe she was so unable to deal with the situation that she had simply removed herself from it.”
21. Following the solicitor’s letter of 15 April 2005, the Respondent consented to an extension of the deactivation of the approval to the close of business on 30 June 2005 (Tribunal’s emphasis).
22. In that letter, the Respondent’s delegate said:
“I can see no reason why locum pharmacists and/or a pharmacist manager cannot be employed to reopen the pharmacy and hence, continue to supply pharmaceutical benefits on Ms Grewal’s behalf.”
23. It would appear no further contact was made with the Respondent or the HIC until an email was sent by the Applicant’s solicitor (who is also her husband) at 23:29 hours on 30 June 2005. For some reason unexplained, the contents of that email have been unable to be retrieved by the Respondent but the Applicant’s solicitor in an affidavit (Exhibit A6) states the email read:
“I advise that my client has now established on online facility at the Paddington Pharmacy which she proposes to re-open. Please advise of your further requirements.”
24. That notification was received well after the nominated deadline, namely the “close of business” on 30 June. Given that the Applicant and her solicitor had been notified of the deadline by the letter of 19 April, I cannot understand why it was left until nearly midnight on 30 June to notify the Respondent. As the email states, the pharmacy had not been re-opened but merely an on-line facility established.
25. Meanwhile, the owner of the Premises, which is a company of which the Applicant and her husband are shareholders, had leased the ground floor of the Premises to a florist with a one year lease commencing on 1 March 2005 with an option to renew for a period of three years.
26. The Applicant discusses the creation of the “on-line” pharmacy in her affidavit of 13 January 2006. She states:
“I was under an enormous amount of stress in trying to have the website operational by 30 June 2005. I was also at this time under enormous stress in light of my medical condition and medical advice that I should not have dealings with matters relating to the Paddington pharmacy, and in particular advice not to attend the premises. I believe that to the detriment of my medical condition, I had no choice but to continue to be involved with matters pertaining to the Paddington Pharmacy, given the 30 June 2005 deadline imposed by the respondent.”
27. Both in her affidavit and evidence the Applicant stated that post-June 2005, she had intended supplying Pharmaceutical Benefit Scheme (PBS) scripts from the Paddington pharmacy, but had not done so due to the Respondent, by his internal solicitors (not the solicitors in these proceedings) warning her that if she were unsuccessful in her application to the Tribunal, he would seek to recover from her the cost of PBS scripts dispensed by her. This threat to the Applicant was made despite there being in existence a stay order by this Tribunal. Prima facie, this action by the Respondent would seem to be a contempt of the Tribunal.
28. Counsel for the Applicant made the submission that the Guidelines referred to earlier relating to the deactivation of approvals, are not relevant to this Tribunal’s consideration of the matter as there is no legislative power enabling an approval issued pursuant to s 90 of the Act to be “deactivated” as opposed to cancelled. I reject this submission. Where the Respondent applies policy, even if there is no specific legislative head of power, this Tribunal should have regard to that policy, keeping in mind of course that the policy must be consistent with the statute: see Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 640 and Skoljarev v Australian Fisheries Management Authority (1995) 39 ALD 517 at 520 to 524.
29. Applying the policy enunciated, it seems clear that the Respondent had regard not only to the personal circumstances of the Applicant, but also to her stated reason as expressed in her letter of 16 February 2005 of financial non-viability.
30. The Applicant had stated in her letter of 16 February 2005:
“It was virtually impossible for me to carry the Paddington Pharmacy with the abovementioned unforseen expenses, not to mention, annual overheads in the ordinary course of business exceeding $200,000.00, taking into account the constant interruptions in trading.”
31. And a theme which was repeated in her solicitor’s letter of 15 April 2005, namely;
“… despite the exacerbation caused by the financial and other matters that have also been put forward to you in previous correspondence.”
32. Reference can also be made to the reasons for closure note to the Pharmacy Board quoted previously.
33. The cancellation of the Applicant’s approval in respect of the Paddington pharmacy will result in financial loss to her. As stated in Re Rogers (supra) there exists a market for approvals and the Applicant estimates that the cancellation of her approval will involve her in a loss of some $280,000.00 plus of course the fitting out costs. This estimate of the value of the approval was not disputed by the Respondent.
34. Given the clear indication to the Applicant that the Guidelines would be applied and that the deadline was the close of business on 30 June 2005, I consider that the decision of the Respondent was not unreasonable. As Senior Member McCabe said in Re Martin and Secretary, Department of Health and Ageing (2004) 84 ALD 528 at 529, there is good reason for the 6 month time limit in deactivation.
35. The above comments were made by the learned Senior Member in the context where a deactivation had been permitted from August 2001 to July 2003. He went on to state in paragraphs 25 and 26:
“Approval holders should not be able to close their pharmacy and ‘sit’ on approvals. The market is recognised and tolerated because it allows the efficient and timely reallocation of approvals. Allowing approval holders to close pharmacies and withhold approvals from the market until they identify an advantage for themselves, would only encourage strategic behaviour that is not necessarily consistent with the objects of the scheme.
The decision-maker should not exercise the discretion inflexibly, of course. Circumstances arise where it is appropriate to extend the deactivation. …”
36. In this matter the Applicant has been unable to give full attention to her Paddington pharmacy because of her post-traumatic stress disorder caused by an armed robbery at the pharmacy. As pointed out in her psychiatrist’s report, her condition would be aggravated if she attempted to return to that pharmacy, although she has been forced to do so under the circumstances.
37. In her report, the Applicant’s general practitioner stated that the effect of the Applicant’s illness was that she was so unable to deal with the situation, she had simply removed herself from it.
38. No doubt the Respondent would point out that the Applicant is the proprietor of a successful pharmacy at Cronulla, New South Wales. I do not see it as incongruous that a person can conduct a successful business at one site but, because of illness, have an inability to work from another site that has negative connotations such as in this case where she was the victim of an assault at the Premises.
39. There are certainly precedents for approvals being “deactivated” for periods of more than six months: see Re Martin (supra) and Re Shaffer and Secretary, Department of Health and Aged Care [2001] AATA 426.
40. In this matter, I consider that the Respondent paid insufficient regard to the special circumstances of the Applicant, namely her post-traumatic stress disorder and its sequelae. In many ways, the Applicant was ill-advised in that she did not immediately confront the Respondent with the diagnosis and then, when granted an extension to June 2005, both she and those advising her, unduly delayed making any decision and notifying the Respondent of the proposed course of action.
41. Nevertheless, given the serious consequences to the Applicant resulting from cancellation, I find that the preferable decision is that the decision cancelling the Applicant’s approval be set aside.
42. The Applicant’s evidence is that she is currently conducting a pharmacy practice at the site and would be dispensing PBS medicines but for the threat by the Respondent to recover the costs of those medicines if she was unsuccessful in the Tribunal. In these circumstances, although I possess all the powers and discretions of the Respondent (see Australian Securities and Investments Commission v Donald (2003) 203 ALR 566), I do not see any requirement for any consequential orders following the setting aside of the decision under review.
I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member M D Allen
Signed: (E.Pope) .....................................................................................
Associate
Date of Hearing 16 January 2006
Date of Decision 3 February 2006
Counsel for the Applicant Mr M Seymour
Solicitors for the Applicant Kalmath Lawyers
Counsel for the Respondent Mr J Stephenson
Solicitors for the Respondent Phillips Fox Lawyers
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