Inas Karem Holdings Pty Ltd and Secretary, Department of Health and Aged Care
[2023] AATA 754
•14 March 2023
Inas Karem Holdings Pty Ltd and Secretary, Department of Health and Aged Care [2023] AATA 754 (14 March 2023)
Division:GENERAL DIVISION
File Number(s): 2022/2583
Re:Inas Karem Holdings Pty Ltd
APPLICANT
AndSecretary, Department of Health and Aged Care
RESPONDENT
DECISION
Tribunal:Senior Member Linda Kirk
Date:14 March 2023
Place:Sydney
The Reviewable Decision of the Respondent dated 11 February 2022, to cancel the Applicant’s approval under section 98(3) of the National Health Act 1953 (Cth), is affirmed.
..............................[SGD]..........................................
Senior Member Dr Linda Kirk
Catchwords
HEALTH LAW — cancellation of Applicant’s approval to supply pharmaceutical benefits — not carrying out business as a pharmacist at the approved premises — exercise of discretion to cancel under section 98(3) of the National Health Act 1953 (Cth) — decision under review affirmed.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
National Health Act 1953 (Cth)
Cases
Inas Karem Holdings Pty Ltd and Secretary, Department of Health and Aged Care [2022] AATA 2883
Secondary Materials
Deactivation of an Approved Pharmacist – Guidelines
REASONS FOR DECISION
Senior Member Dr Linda Kirk
14 March 2023
BACKGROUND
On 3 November 2011, Inas Karem Holdings Pty Ltd (‘the Applicant’) was granted approval to supply pharmaceutical benefits (‘the approval’) at Priceline Pharmacy Railway Square, Shops 18-19, Henry Deane Plaza, Lee Street, Sydney NSW 2000 (‘the approved premises’) under section 90(1) of the National Health Act 1953 (Cth) (‘the Act’).[1]
[1] Exhibit R2, ST1, 36 and 39.
On 10 January 2022, a delegate of the Secretary, Department of Health (‘the Respondent’) issued a Notice of Intention to Cancel the approval (‘NOIC’) held by the Applicant. The Applicant was invited to show cause as to why the Respondent should not make a decision to cancel the approval under section 98(3) of the Act.[2] This NOIC was addressed to the approved premises and sent by way of registered post.[3] The Applicant did not respond to the NOIC.
[2] Exhibit R1, T6, 25-26.
[3] Ibid, T7, 27.
On 11 February 2022, the Respondent made the decision to cancel the approval on the basis that the Applicant was not carrying on business as a pharmacist at the premises in respect of which the Applicant was approved (‘the Reviewable Decision’).[4] The Reviewable Decision was addressed to the approved premises and sent to the Applicant by way of registered post.[5] The Australia Post tracking information records that the item was delivered on 16 February 2022, and was awaiting collection at GPO Box Centre Sydney on 18 February 2022.[6]
[4] Ibid, T2, 7.
[5] Ibid, T8, 28.
[6] Ibid, T9, 29.
On 24 March 2022, at the request of the Applicant, an officer of the Respondent’s Department emailed a copy of the Reviewable Decision to the Applicant.[7]
[7] Ibid, T11, 34.
APPLICATION FOR REVIEW
On 30 March 2022, the Applicant lodged an application with the Tribunal seeking review of the Reviewable Decision.[8]
[8] Ibid, T1, 1.
On 7 September 2022, the first Tribunal made an interlocutory decision (‘the interlocutory decision’) that the Reviewable Decision was given to the Applicant on 18 February 2022 and accordingly, the application for review was lodged 12 days out of time.[9] The first Tribunal granted an extension of time to 30 March 2022 pursuant to section 29(7) of the Administrative Appeals Tribunal Act 1975 (Cth) (‘AAT Act’).[10]
[9] Inas Karem Holdings Pty Ltd and Secretary, Department of Health and Aged Care [2022] AATA 2883, [15].
[10] Ibid, [16].
The matter was heard by the currently constituted Tribunal (‘the Tribunal’) on 7 December 2022. Mrs Inas Karem, the sole director of the Applicant, gave oral evidence and was cross-examined at the hearing.
The material before the Tribunal consists of:
·Exhibit A1 – Statement of Inas Karem dated 7 November 2022
·Exhibit A2 – Statement of Inas Karem dated 5 December 2022
·Exhibit R1 – T-Documents (T1 –T11, pp. 1 – 35) filed 28 April 2022
·Exhibit R2 – Supplementary T-Documents (ST1 – ST4; pp. 36 – 53) filed 5 August 2022
·Exhibit R3 – Further Supplementary T-Documents (ST5 – ST10; pp. 54 – 83) filed 28 November 2022
·Exhibit R4 – Search Certificate provided under Section 174 of the Personal Property Securities Act 2009 dated 6 December 2022
·Exhibit R5 – Company Search dated 6 December 2022 for Pharmacy 4 Less Pty Ltd
·Exhibit R6 – ASIC Company Search for AK Family Pty Ltd dated 6 December 2022
·Exhibit R7 – Company Search for FKFT Pty Ltd dated 6 December 2022
LEGISLATION
Under section 90(1) of the Act, the Respondent may, upon application by a pharmacist for approval to supply pharmaceutical benefits at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at those premises. Relevantly, pursuant to section 90(3B) of the Act, upon a recommendation for grant of approval from the Australian Community Pharmacy Authority, the Respondent may grant approval to supply pharmaceutical benefits at particular premises.
Section 98(3) of the Act states that if the Respondent 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 premises 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 Respondent may (at his or her discretion), by notice in writing to the pharmacist, cancel the approval of the pharmacist under section 90.
For the purposes of section 98(3), an approved pharmacist is taken not to be carrying on business as a pharmacist if the approved pharmacist is not supplying pharmaceutical benefits in the course of carrying on the business: section 98(6) of the Act. Where this applies, the reference to ‘an approved pharmacist carrying on business as a pharmacist at premises’ in section 98(3) is a reference to an approved pharmacist carrying on a business for the supply of pharmaceutical benefits at the premises: section 98(5) of the Act.
For the purposes of the above provisions, section 84 of the Act provides the following definitions:
approved pharmacist means a person for the time being approved under section 90 and includes:
(a)a person treated as having been so approved under any provision of a law of the Commonwealth other than section 91 or 91B; and
(b)except so far as subsection 90(3) is concerned—a person treated as having been so approved under section 91 or 91B.
…
pharmaceutical benefit means the following:
(a)if a declaration under subsection 85(2) is in force in relation to a drug or medicinal preparation (the drug) and paragraph (b), (c) and (d) do not apply—the drug;
(b)if a determination under subsection 85(3) is in force in relation to a form of the drug and paragraph (c) and (d) do not apply—the drug in that form;
(c)if a determination under subsection 85(5) is in force in relation to a manner of administration of that form of the drug and paragraph (d) does not apply—the drug in that form with that manner of administration;
(d)if a determination under subsection 85(6) is in force in relation to a brand of a pharmaceutical item that is the drug in that form with that manner of administration—that brand of the drug in that form with that manner of administration.
ISSUES FOR DETERMINATION
The issues for the Tribunal’s determination are:
(1)whether the Respondent’s discretionary power in section 98(3) of the Act was enlivened at the time of the decision to cancel because either:
(a)the Applicant was not carrying on business as a pharmacist at premises in respect of which the pharmacist was approved; or
(b)the premises was not accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the respondent, were reasonable; and
(2)if so, whether the Respondent’s discretionary power in section 98(3) of the Act should be exercised.
EVIDENCE BEFORE THE TRIBUNAL
In July 2000, Mrs Inas Karem purchased the Priceline Pharmacy business located at Shop 1 Pedestrian Subway, 816 George Street, Sydney NSW 2000 for a total price of $750,000. In May 2002, the business relocated to Shop 9, and in 2006 it moved to Shop 16, Pedestrian Subway, 816 George Street, Sydney NSW 2000.
In 2008, the Applicant was incorporated. Mrs Karem is currently its sole director. In 2011, Mrs Karem transferred the ownership of the pharmacy business to the Applicant.[11]
[11] Applicant’s outline of submissions, [43b].
In November 2011, the business relocated to the approved premises and traded as Priceline Pharmacy Railway Square (‘Priceline’).
On 3 November 2011, the Applicant was granted approval to supply pharmaceutical benefits at the approved premises under section 90(1) of the Act.[12] The approval letter relevantly stated:
‘You should advise Medicare Australia if changes occur to the pharmacy or the approved pharmacist/s (a new application will be required) or you cease to carry on the business of a pharmacist at the approved premises. Failure to do so may result in the cancellation of your approval.
It is also important to note that if approval has been granted in accordance with the Pharmacy Location Rules, restrictions apply to subsequently relocating the approved premises.’
[12] Exhibit R2, ST1, 36.
In 2019, Priceline held a month-to-month lease for the approved premises as the business was marketed for sale.[13] In October 2019, a potential buyer was interested in purchasing the business, but the sale did not proceed.[14]
[13] Exhibit A1, [5].
[14] Transcript of proceedings, 7 December 2022, 12.
Priceline remained trading during the COVID-19 pandemic from April 2020 to August 2021. During this period, the Applicant was actively seeking an alternative buyer for Priceline. Due to the month-to-month lease that Priceline had with respect to the approved premises, prospective purchasers of Priceline had little interest in the business.[15]
[15] Exhibit A1, [7].
The Applicant attempted to keep Priceline trading during the second lockdown of July 2021. It was, however, unable to do so due to there being almost no customer traffic. In August 2021, the decision was made to temporarily close Priceline until normal customer traffic resumed.[16] This decision was also made due to staffing issues as COVID-19 had affected employee availability, especially pharmacists.[17] The Applicant’s intention was to reopen Priceline once the lockdowns were lifted, and trading conditions returned to normal.[18]
[16] Ibid, [9].
[17] Ibid, [10].
[18] Ibid, [11].
Following the closure of Priceline in August 2021, the landlord of the approved premises attempted to have the Applicant enter into a new lease. The Applicant was not comfortable doing so as it had concerns about economic uncertainty due to COVID-19 and the Henry Deane Plaza being flagged for a redevelopment. The potential redevelopment led to a decline in interest by prospective purchasers for Priceline due to the possible disruption the construction would cause, as well as the demolition clause that the landlord held over the lease.[19]
[19] Ibid, [12]-[13].
In October 2021, an application was made and approved for a change of business name to Henry Deane Plaza Pharmacy.[20]
[20] Transcript of proceedings, 7 December 2022, 16; Exhibit R2, 40.
When the second lockdown was lifted in November 2021, the expected increase in foot traffic within the CBD did not occur. The Applicant decided to extend the temporary closure of Priceline to the end of January 2022, at which time it expected local office and universities to reopen for normal trade.[21]
[21] Exhibit A1, [14].
During cross-examination, Mrs Karem was asked what measures were put in place to ensure that any phone calls made, or mail sent to the business, were received during the closure of Priceline from November 2021. She explained that all the companies and contractors had her personal contact details. In addition, the Applicant’s head office has always been a secondary contact for the Applicant. Mrs Karem explained that in December 2021, her entire family contracted COVID. It took them a while to recover, so where the mail was going was ‘the last of [her] concerns’.[22] In relation to phone calls, her mobile number has always been provided to Medicare, the Department and to every other company that trades with the business.[23]
[22] Transcript of proceedings, 7 December 2022, 19.
[23] Ibid, 19.
Mrs Karem agreed that she did not put into place any mail forwarding system with Australia Post, because one was not needed at that point as they always had a secondary contact being their head office. She also agreed that she cannot recall putting into place any call forwarding of the business phone number to anyone at the head office.[24]
[24] Ibid.
In January 2022, the landlord again pressed the Applicant to enter into a new lease. The Applicant could not agree with the terms, as the economic recovery was nowhere near acceptable considering the lockdown impacts.[25] In late February 2022, the Applicant gave notice to the landlord to terminate the monthly lease, and it removed all stock with a de-fit completed.[26]
[25] Exhibit A1, [15].
[26] Ibid, [16].
In March 2022, the Applicant completed a handover of the approved premises back to the landlord.[27]
[27] Ibid, [18].
Mrs Karem accepted during cross-examination that she or someone in the Applicant’s head office should have known that if the Applicant was not conducting a pharmacy business from the approved premises, that the Department needed to be informed. She stated that in August 2021 when Priceline was temporarily closed, they were intending to re-open again for business. She agreed however that in February 2022, the decision was made to no longer operate the business from the approved premises. She confirmed that when this decision was made, she was unaware that the approval had been cancelled. She agreed that she did not contact the then Department of Health (‘the Department’) or the Department to advise that the Applicant had given up the approved premises.
Mrs Karem’s evidence is that she became aware of another pharmacist approval belonging to a relative, Oxford Pharmacy, being cancelled in March 2022. Due to the similarity of the events of the two pharmacy closures, Mrs Karem made enquiries regarding the status of the Applicant’s approval. Her husband, Assad Karem, contacted the Department on 23 March 2022 and was advised of the cancellation of the approval.[28]
[28] Ibid, [17].
Following this notification, Mrs Karem began looking for new premises for the business to relocate to. However, she was unsure if the business could relocate with a cancelled approval.[29] She sought legal advice with respect to the cancellation of the approval and escalated her search for new premises. In July 2022, the Applicant contracted retail tenancy agents to actively seek a site to relocate the approval.[30] From July 2022 to September 2022, Mrs Karem inspected over 20 suitable sites, however many had issues with security or disabled access, which limited the options significantly.[31]
[29] Ibid, [19].
[30] Ibid, [20].
[31] Ibid, [22].
Mrs Karem’s evidence is that the cancellation of the approval affected the Applicant’s ability to find new premises, as many landlords were not willing to make leases conditional on reinstatement of the approval.[32]
[32] Ibid, [24].
Mrs Karem’s evidence is that even though the business is closed, the Applicant still owes a considerable amount of money to the National Australia Bank (‘the Bank’) as a part of the business debt.[33] She claims the approval was used as collateral security for the debt which still remains in effect. The Applicant is seeking for the approval to be reinstated, otherwise Mrs Karem fears that the Bank will call upon the debt to be paid in full.[34] She has only a very short period of time to deal with this debt and a reinstatement of the approval would resolve that issue.[35]
[33] Ibid, [25].
[34] Ibid, [26].
[35] Ibid, [27].
On 29 September 2022, a lease agreement was executed between Pharmacy 4 Less Pty Ltd (lessee) and Gold International Pty Ltd (lessor) for the premises known as 318 Elizabeth Street, Surry Hills NSW 2010 (‘Surry Hills premises’). These premises are about 500 metres away from the approved premises.[36] The sole director of Pharmacy 4 Less Pty Ltd is Feras Atef Karem, the older brother-in-law of Mrs Karem. Clause 20.1 of the lease agreement requires the lessee to have obtained approval as a pharmacist by 16 February 2023. If this approval is not obtained, the lessee can terminate the agreement.
[36] Applicant’s outline of submissions, [43u].
In her oral evidence, Mrs Karem explained that the Applicant plans to enter into a sub-lease agreement with Pharmacy 4 Less Pty Ltd for the Surry Hills premises.[37] An unexecuted copy of the sub-lease agreement was provided as an attachment to a statement of Mrs Karem dated 5 December 2022.[38] Mrs Karem told the Tribunal that she believes that her brother-in-law has obtained the permission of the lessor for the sub-lease of the Surry Hills premises to the Applicant.[39] Mrs Karem told the Tribunal that Pharmacy 4 Less Pty Ltd is unable to obtain a new approval for the Surry Hills premises,[40] but if the Applicant’s approval is reinstated it will be able to apply to relocate the approval to permit it to operate the pharmacy business from the Surry Hills premises as sub-lessee.[41]
[37] Transcript of proceedings, 7 December 2022, 29; Exhibit A2.
[38] Exhibit A2.
[39] Transcript of proceedings, 7 December 2022, 30.
[40] Ibid; Applicant’s outline of submissions [43v]-[43[w]. Referring to Rules 130-136.
[41] Transcript of proceedings, 7 December 2022, 30.
CONSIDERATION AND REASONS
1) Was the Respondent’s discretionary power to cancel the approval under section 98(3) of the Act was enlivened at the time of the decision?
The Tribunal must be satisfied that the power to cancel the approval, under section 98(3) of the Act was enlivened at the time of the decision to cancel on the basis that:
(a)the Applicant was not carrying on business as a pharmacist at the approved premises; and/or
(b)the premises was not accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the Tribunal, were reasonable.
The evidence before the Tribunal is that, on 11 February 2022, being the date on which the Reviewable Decision was made, the Applicant was neither carrying on business as a pharmacist at the approved premises nor were the premises accessible by members of the public for the purpose of receiving pharmaceutical benefits at reasonable times. Mrs Karem confirmed that Priceline was closed in February 2022. The Applicant was not supplying PBS items at or from the approved premises in the lead up to, and on the date of, the Reviewable Decision. Data collected by the Department records that no claims had been made by the Applicant to the Department for pharmaceutical benefits supplied at or from the approved premises between September 2021 and January 2022.[42] Accordingly, for the purposes of section 98(3) of the Act, the Applicant was taken not to be carrying on business as a pharmacist because it was not supplying pharmaceutical benefits in the course of carrying on the business in the months up to and at the time the Reviewable Decision was made: section 98(6) of the Act.
[42] Exhibit R1, T5, 20; Exhibit R2, ST8, 60.
The evidence before the Tribunal also indicates that, up to and on the date of the Reviewable Decision, the approved premises were not accessible by members of the public for the purpose of receiving pharmaceutical benefits at reasonable times. Mrs Karem’s evidence is that Priceline closed in August 2021, and it did not re-open. She did not dispute that when an officer of the Department attempted to call the approved premises on 4 January 2022 at 2:05pm and 2:08pm and on 6 January 2022 at 9:18am there was no answer.[43]
[43] Exhibit R1, T5, 21; Transcript of proceedings, 7 December 2022, 19.
Based on the evidence before it, the Tribunal finds that the Applicant was not carrying on business as a pharmacist at the approved premises. It further finds that the approved premises were not accessible by members of the public for the purpose of receiving pharmaceutical benefits at reasonable times.
The Tribunal finds that the Respondent’s discretionary power to cancel the Applicant’s approval under section 98(3) of the Act was enlivened at the time of the Reviewable Decision.
2) Whether the discretionary power to cancel the approval under section 98(3) should be exercised?
For the reasons that follow, the Tribunal is satisfied that the discretionary power to cancel the Applicant’s approval under section 98(3) should be exercised.
The Applicant asks the Tribunal to set aside the Reviewable Decision and allow the Applicant the opportunity to seek permission to relocate the approval to the Surry Hills premises
The evidence before the Tribunal is that Applicant failed to inform the Respondent that it had ceased carrying on business as a pharmacist at the approved premises. It did not contact the Respondent when it decided to temporarily close Priceline in August 2021, nor did it do so in February 2022 when it gave notice to the landlord that it intended to terminate its month-to-month rental agreement. The Applicant did not actively attempt to locate alternative premises for the business until July 2022 when it contracted retail tenancy agents to seek a site to relocate the business.
The Applicant asserts that, had the Respondent been aware of its circumstances, he would have deactivated the Applicant’s approval rather than making the decision to cancel.[44] The term “deactivate” is not used or defined in the Act. It is an administrative concept intended for situations where the Respondent (or his delegate) decides not to cancel an approval under section 98(3), notwithstanding that the statutory precondition to such a decision has been satisfied.[45]
[44] Applicant’s Statement of Facts, Issues and Contentions (‘ASFIC’), [24].
[45] Deactivation of an Approved Pharmacist – Guidelines
There is guidance on deactivation in the Deactivation of an Approved Pharmacist – Guidelines (‘Deactivation Guidelines’).[46] The Deactivation Guidelines provide guidance to decision makers on the administrative process and the circumstances in which a delegate will consider a request to deactivate an approval.[47] The Deactivation Guidelines state that an approved pharmacist who needs to close their pharmacy temporarily must first request deactivation, in writing, before ceasing supply of pharmaceutical benefits. Closure of a pharmacy without first seeking deactivation may result in the cancellation of the pharmacist’s approval to supply pharmaceutical benefits at those premises. The Deactivation Guidelines state that a request to deactivate must be made in writing and emailed to [email protected], clearly articulating the reasons for the closure and seeking deactivation and, if required, supporting documents. The application must also include the period of time for which the applicant is seeking deactivation.
[46] Ibid.
[47] Exhibit R2, ST9, 61-63.
The evidence before the Tribunal is that the Applicant did not apply to have its approval deactivated prior to, or at any time after, ceasing carrying on business as an approved pharmacist at the approved premises in August 2021. The Applicant submits that it was unaware of its ability to apply for deactivation.[48] It claims that its ‘failure to request deactivation was quite excusable’ given the circumstances surrounding the closure of the pharmacy were ‘unprecedented’.[49]
[48] Ibid, ST1, 36; Applicant’s outline of submissions, [24].
[49] Applicant’s outline of submissions, [44].
The Applicant contends that the circumstances which led to the temporary closure of Priceline, followed by its ultimate closure and attempt to relocate within one kilometre, ‘are completely suitable circumstances’ for the Respondent ‘to follow its usual ‘deactivation’ policy’ and ‘refrain from cancelling the Applicant’s approval so as to afford the Applicant an opportunity to relocate the approval, thus limiting the financial damage to the Applicant and maintaining the public’s adequate access to PBS items’.[50]
[50] ASFIC, [26].
Despite the second lock-down lifting in November 2021, the Applicant did not resume trade at the approved premises. It did not inform the Department in February 2022 that it had given notice to the landlord that it wished to terminate the month-to-month lease. It did not notify the Department in March 2022 that it had completed a handover of the approved premises back to the landlord. This is despite the fact that until 23 March the Applicant wrongly believed that it still held an active approval in relation to the premises.
On the basis of the evidence before it, the Tribunal finds that the circumstances warrant the exercise of the discretion to cancel the Applicant’s approval. If the discretion to cancel the approval is not exercised, the effect would be to reinstate the Applicant’s approval with respect to the approved premises. However, the Applicant no longer has an entitlement to occupy the approved premises as it has terminated its monthly tenancy and has not entered into a new lease agreement with the landlord. The outcome therefore would be to continue to deny the public the service of the supply of pharmaceutical benefits items in the location of the approved premises, which it has been denied for a period well in excess 12 months.
It is open to the Applicant to make an application for an approval as a pharmacist under section 90 of the Act with respect to the Surry Hills premises should it wish to operate a pharmacy business from this location.
DECISION
The Reviewable Decision of the Respondent dated 11 February 2022, to cancel the Applicant’s approval under section 98(3) of the Act, is affirmed.
I certify that the preceding 50 (fifty) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr Linda Kirk
...............................[SGD].........................................
Associate
Dated: 14 March 2023
Date(s) of hearing: 7 December 2022 Solicitors for the Applicant: M. Flaherty, Michael Flaherty Solicitors Solicitors for the Respondent: G. O'Keefe, Sparke Helmore Lawyers
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