Island Ajna Medicinal Herbs Pty Ltd and Minister for Health and Aged Care

[2022] AATA 4062

Island Ajna Medicinal Herbs Pty Ltd and Minister for Health and Aged Care [2022] AATA 4062 (30 November 2022)

Division:GENERAL DIVISION

File Number:          2021/0666

Re:Island Ajna Medicinal Herbs Pty Ltd

APPLICANT

AndMinister for Health and Aged Care

RESPONDENT

Decision

Tribunal:Dr Stewart Fenwick, Senior Member

Date:30 November 2022  

Place:Melbourne

The Tribunal affirms the decision under review dated 8 January 2021.

.......................[sgd].................................................

Dr Stewart Fenwick, Senior Member

Catchwords

NARCOTIC DRUGS – medicinal cannabis licence – cultivation of cannabis plants – fit and proper person requirements – body corporate – previous business experience of directors and officers – financial background and circumstances – capacity of body corporate – suitability of location – decision affirmed

Legislation

Access to Medicinal Cannabis Act 2016 (Vic)
Administrative Appeals Tribunal Act 1975 (Cth)
Biosecurity Act 2015 (Cth)
Migration Act 1958 (Cth)
Narcotic Drugs Act 1967 (Cth)
Narcotic Drugs Amendment (Medicinal Cannabis) Act 2021 (Cth)

National Consumer Credit Protection Act 2009 (Cth)

Cases

Australian Broadcasting Tribunal v Bond [1990] HCA 33
Hughes & Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28

Secondary Materials

Explanatory Memorandum, Narcotic Drugs Amendment Bill No. 12 2016 (Cth)
Single Convention on Narcotic Drugs, opened for signature 24 January 1961, 520 UNTS 151 (entered into force 13 December 1964)

REASONS FOR DECISION

Dr Stewart Fenwick, Senior Member

30 November 2022

background

1. The Applicant in this matter, Island Ajna Medicinal Herbs Pty Ltd (Island Ajna), is a company that unsuccessfully applied for cannabis cultivation and research licences under the Narcotic Drugs Act 1967 (the Act). The Applicant company was represented before the Tribunal by Ms Anita Andrew, who is the sole shareholder and officeholder. She was not legally represented.

2. The decision under review was made by a delegate of the Minister for Health on 8 January 2021, with an application made to the Tribunal for review of this decision on 5 February 2021. The licence applications were originally made to the regulator, the Office of Drug Control (ODC), on 29 May 2019.

3. Legislative amendments after the lodging of the application for review in the Tribunal[1] introduced a single licence structure into the Act. While a savings provision permits the Tribunal to deal with review of the refusal to grant a cannabis research licence, Ms Andrew abandoned that part of the application relating to a licence for research purposes.

   [1] Under the Narcotic Drugs Amendment (Medicinal Cannabis) Act 2021.

4. This matter arises, essentially, from the desire of Ms Andrew, together with her husband and business associate, to expand their current herb growing business, Country Fresh Herbs, in Cowes, Victoria, to include the cultivation of medicinal cannabis.

5. The Andrews bought Country Fresh Herbs in 2018 following the sale of a transport business they had run for many years in suburban Melbourne. The herb business was bought as a going concern together with facilities, staff and an existing distribution base. It sits on the Southern edge of Cowes, which is the main township on the popular holiday destination Phillip Island, in the Gippsland region of Victoria. Country Fresh Herbs sits adjacent (on its northern boundary) to the relatively newly established Our Lady Star of the Sea Primary School.

6. Ms Andrew was assisted in making the application for a cannabis cultivation licence by an agribusiness consultancy company, PharmOut Pty Ltd (PharmOut). Following the original application, the ODC made two substantive requests for further information in August 2019, and March 2020. Further submissions were accordingly made by PharmOut, on behalf of Island Ajna, in April 2020.

7. The ODC informed Ms Andrew in May 2020 of its intention to refuse the grant of licences, and an initial decision to refuse was then made on 25 August 2020. Ms Andrew sought reconsideration of this decision in November 2020.

8. The refusal to grant a cultivation licence to Island Ajna was based upon the determination that it is not a fit and proper person having regard to its financial background, or financial circumstances, that may limit its ability to meet its obligations under a licence. A further ground for refusal was pursued by the Respondent Minister before the Tribunal, being that the location of the premises is not suitable.

9. The Respondent provided a collated copy of all documents lodged under ss 37 and 38AA of the Administrative Appeals Tribunal Act 1975 (the AAT Act), which will form the source of references in these reasons. This bundle includes material lodged by Ms Andrew, who also lodged a statement in the form of a letter to the Tribunal dated 17 September 2021. The Respondent lodged a Statement of Facts, Issues and Contentions (SFIC), dated 17 August 2021, a SFIC in reply to the statement of Ms Andrew dated 14 October 2021, an outline of opening submissions, and a hearing book (comprised of legal material and submissions).

10. Ms Andrew gave evidence at the hearing, and evidence was also given by her accountant, Mr John Lidonnici.

11. Following the hearing, I sought submission from the parties about whether an order under s 35 of the AAT Act should be made. This was primarily given the potential for certain evidence to have an adverse impact on the business interests of Island Ajna or Ms Andrew should it be made public. I have ultimately determined that an order is not necessary.

    legislation

12. The provisions of the Act discussed here remain unchanged following the legislative amendment noted above. Licences under s 8E of the Act are now granted in respect of cultivation (s 8E(1)(a)), production of cannabis or resin (s 8E(1)(b)), drug manufacture (s 8E(1)(c)), and other activities associated with these things (s 8E(1)(d)).

13. Under s 8G, the Secretary of the Department administering the Act must refuse to grant a licence if satisfied on reasonable grounds as to one of a number of specified considerations. These include, relevantly:

    (1)   …

    (a)   the Secretary is not satisfied on reasonable grounds that:

    (i)the applicant is a fit and proper person to hold the licence; and

    (ii)each of the applicant’s relevant business associates for the application (see subsection (2)), whether in relation to a business relating to the medicinal cannabis licence, or in relation to any other business, is a fit and proper person to be associated with the holder of a medicinal cannabis licence; or

    …

    (e)  the Secretary is not satisfied on reasonable grounds of the suitability of the location, facilities or proposed security arrangements at the premises where activities authorised by the licence will take place …

    Relevant business associate

    (2) A business associate of an applicant is a relevant business associate for the application if the Secretary considers it is reasonable, in the circumstances of the application, to take that business associate into account.

14. A business association is defined in s 4 as arising where each of two or more persons hold a ‘relevant financial interest’ or are entitled to exercise a ‘relevant power’ in the business and, because of that interest or power, is ‘able to exercise a significant influence over, or with respect to, the management or operation of the business’. Alternatively, such association arises where each person holds a ‘relevant position’ in the business. Such a position is defined as one of director, partner, trustee, manager, executive, or secretary.

15. The term ‘relevant financial interest’ is further defined to mean a share in the capital of the business or an entitlement to income derived. ‘Relevant power’ means power exercisable by voting or otherwise, alone or in association with others, to participate in directorial, managerial or executive decisions, or to elect or appoint any person to a ‘relevant position’.

16. Division 1 of Chapter 2 of the Act, in which the licence provision above is found, goes on to provide for the nature and content of any licence granted and, further, for application to be made for a permit. A permit with regard to cultivation may specify such things as the type and strain of cannabis, and maximum size of a crop (s 9B(1)). In short, a cultivator requires both a licence and a permit.

17. Section 8B specifies matters to be taken into account in deciding whether a body corporate is a fit and proper person to hold a licence, however the Secretary (or decision maker) is not restricted to the matters specified. This provision includes matters such as a history of civil and criminal penalties, which are not engaged in this matter and, relevantly:

    …

    (f) the previous business experience of the directors and officers of the body corporate, and of the shareholders of the body corporate who are presently in a position to influence the management of the body corporate;

    (g)  whether the body corporate has a sound and stable financial background or is in financial circumstances that may significantly limit the capacity of the body corporate to comply with its obligations under a licence;

    (h)  the capacity of the body corporate to meet the conditions of the licence;

    …

18. Finally, the Object of the Act (s 2A) is stated as being to give effect to Australia’s obligations under the Single Convention on Narcotic Drugs, 1961 (the Convention). In its article 28, the Convention specifies that should a state party permit the cultivation of cannabis, that the same controls provided in its article 23 for the control of the opium poppy be established. Article 23 of the Convention provides for the establishment of national agencies to, among other things, designate land for cultivation, and to licence cultivators.

    issues

19. The issues in this matter are whether I am satisfied on reasonable grounds:

    (a)that Island Ajna is a fit and proper person to hold a medicinal cannabis licence; or

    (b)of the suitability of the location of the business.

    Evidence

20. At the hearing, Ms Andrew stated that she and her husband purchased Country Fresh Herbs in 2018 with a combination of cash and loans that were repaid within a year. She understood that in applying for a medicinal cannabis licence, funds would not be required until after the grant of a licence. Ms Andrew stated further that she engaged PharmOut to assist with the application process which commenced with a site evaluation that took location into consideration. She added that she would not have proceeded with the application if she thought it was not legally compliant.

21. In cross-examination, Ms Andrew was asked about a letter of support provided by the Principal of Our Lady Star of the Sea Primary School dated 16 June 2022 (ST30). Ms Andrew stated that she had dealt with the school and Parish Priest over the past years, noting that the school had been under development when contact commenced. She stated that they did not have a problem when shown her plans.

22. Ms Andrew was specifically asked if she had revealed that the objective was to cultivate cannabis to which she replied ‘totally’. She acknowledged that all letters of support refer to ‘medicinal herbs’, and that she could have used either this term or cannabis in discussions. Ms Andrew stated that she had not been misleading in her conversations, but confirmed that ‘medicinal herbs is the wording I used’.

23. When asked if the licence application was discussed with anyone else, Ms Andrew nominated the nearby RSL, stating that clarification was being sought from the Board which was due to meet the week of the Tribunal hearing. Ms Andrew stated she had not approached other local businesses for support: ‘no one knew outside the Police’ (ST3.16, p 701). She further confirmed that she had obtained written support from the Bass Coast Shire Council (T45.02, ST3.1). Ms Andrew understood the Parish Priest and RSL representative had spoken to some community members.

24. I put some questions to Ms Andrew about engagement with the Council, whose letters of support were addressed to the Federal Minister for Health. Ms Andrew explained that she had met with the officer responsible for investment and economic development who had ‘gone through the plans’, and had visited the site.

25. The Respondent’s representative then took Ms Andrew to aspects of the plan, and she stated ‘things have changed’ since then. Ms Andrew also accepted that the quote for greenhouses (ST3.11, p 692) was in effect modular. Two modules were envisaged originally, but it ‘depended on the licence and what we could get financed’. She stated the price had ‘definitely’ increased from that quoted, shipping costs have ‘skyrocketed’, and construction labour would be an additional cost.

26. Ms Andrew was then asked about an odour mitigation strategy mentioned in the Site Assessment Report (ST16, p 750) completed by her consultant. She responded that this related to vents in the greenhouses, and the redirection of crop odour. Ms Andrew stated that ‘we hardly get a Southerly’ and the prevailing wind was North/North-East. When informed that the report recorded a prevailing Southerly wind, she responded ‘if there was, it would affect the school’. Ms Andrew accepted the proposition that she was still determining what the site would look like and noted that technology had changed in the years since the application was made. She accepted that air filtration may be an option.

27. With respect to the financial affairs of the Applicant, Ms Andrew confirmed she is the sole Director and shareholder of Island Ajna, which was incorporated just before the licence application was lodged. She confirmed that it has no funds or assets. Ms Andrew confirmed that she and her husband are both officeholders of a corporate entity that is trustee of a family trust. The company is the representative of the business Country Fresh Herbs, and the business name is owned by the trust.

28. Ms Andrew was referred to email correspondence concerning payment of the application processing fee (T5-8) and acknowledged that she had trouble arranging for payment. It was ultimately paid on behalf of Island Ajna by Country Fresh Herbs, and the delay was a result of cash flow issues at the time.

29. I sought some further background about Country Fresh Herbs and Ms Andrew’s business experience. She stated that she and her husband had previously run a trucking business in Melbourne for 26 years. She stated that the idea of expanding into medicinal herbs came from cost pressure in the herbs business including the pricing strategy of purchasers. Ms Andrew ‘came across’ the idea of cultivating medicinal herbs, and the plan came together in six weeks.

30. With respect to financial information provided by Ms Andrew (ST3.17), she agreed that the assets of Country Fresh Herbs included plant and equipment and ‘probably’ also their greenhouses. She agreed that the only substantial debt is an amount outstanding on a truck.

31. Ms Andrew accepted that the lease under which Country Fresh Herbs operates includes an option to purchase the land at the greater of a nominated sum, or market price, and that negotiations were underway. Purchase would involve a mortgage, and Ms Andrew considered it likely the costs of finance would be similar to present rental costs. Ms Andrew also confirmed that a sub-lease would be granted to Island Ajna for the licenced operations, and the present landowner is not aware of the proposal. Ms Andrew was concerned of the effect this information would have on purchase negotiations.

32. Ms Andrew confirmed there are presently no investors committed to providing finance for the new business. She stated that her preference was to pursue loans split between two institutions, however ‘no bank will look at it’ until they have a licence, business plan, and costings.

33. When asked if there was a budget for the new business, Ms Andrew replied she ‘was not doing any research into it’, nor had she obtained quotes for fencing, a vault, or odour mitigation. Ms Andrew stated that a seven-figure budget had been prepared with PharmOut, and from her understanding, this covered capital expenses but not project management costs. When asked whether she knew if the business would require staff (three, four or five being proposed), Ms Andrew responded that it ‘depends’, and that any staff would ‘probably’ be fulltime.

34. I sought further evidence from Ms Andrew about whether she had secured expertise in the field of cannabis cultivation, and she agreed that she had access to horticultural expertise. I understood from her evidence that she intended to obtain advice from the individual who was finalising the purchase of the business to which she intended to sell cannabis grown by Island Ajna. Ms Andrew stated that her current team were capable of cultivating, but they would obtain advice about how to get mother plants to a productive stage, which would take 6-12 months. I asked Ms Andrew if she required the services of other staff and she replied, ‘from my understanding’, but was not aware of precisely who to employ in order to run the facility.

35. Mr Lidonnici stated that he had assisted Ms Andrew and her family with their tax affairs for over 20 years. He stated that he also has extensive experience as a general financial adviser with respect to business structures, services and advice.

36. Mr Lidonnici stated that he had originally sought out investors from among individuals with some relevant experience, but since Covid he considered bank lending had eased. As Country Fresh Herbs had ‘runs on the board’ the application process would be easier. Mr Lidonnici added that in his experience, investors like to have an element of control over a business.

37. When asked about the outline for this business, Mr Lidonnici stated that he worked with Ms Andrew regarding costs and concluded it was a viable venture, adding that the prices of everything have now gone up ‘across the board’. He stated it was ‘best not to put a number on’ the expected cost of the venture but suggested it would be a seven-figure sum.

38. Mr Lidonnici expressed a very positive view about the general business aptitude of Ms Andrew. He stated that Country Fresh Herbs was originally underfunded, but that she was very hard working, and that initial borrowing was paid back in a short space of time. He considered she had done well given prior lack of experience in agriculture.

39. When asked about the financial status of Country Fresh Herbs, Mr Lidonnici stated that it had a small debt to the family trust which, as a ‘credit loan’, is not payable. He explained that the annual turnover of the business was substantial and at a net level was providing a ‘good return’. Due to pressure on margins discussions were underway to modify the Country Fresh Herbs business model to also include distribution.

40. Mr Lidonnici stated that it was intended that Country Fresh Herbs would cover the initial funding for Island Ajna and was in a perfect position to do so. However, external funds would be required for establishment costs.

    Documentary Material

41. The Respondent lodged a document identifying the various corporate entities discussed in evidence (ST21). This overview of the relationship between individuals and entities reflects the evidence provided by Ms Andrew.

42. The Respondent also lodged a map view of the location (ST22) identifying Country Fresh Herbs and a number of nearby sites, including the primary school. I note that this image indicates that the present herb growing facilities are adjacent to the southern boundary of the primary school. The related Catholic Church is also adjacent to the property, but not proximate to the present infrastructure.

43. There are several versions of a site plan for the proposed business in the materials. I note from ‘Revision 03’ lodged with the licence application (T3.03, p 70) that existing Country Fresh Herbs greenhouses occupy approximately half of that part of the property adjacent to the primary school. The plan indicates that the proposed area of works for the new cultivation facility is the remaining half of that portion of the property, with a suggested indoor floorspace of some 4,000 square metres (T3.03, p 71). The other revisions of the site plan depict a different proposed greenhouse layout and orientation but otherwise reflect a similar approach to the layout (ST3.7, 3.8 and 3.9).

1. The report of the site assessment conducted by PharmOut (ST16) does not appear to form part of the licence application and was provided to the Respondent at a later point. The report identifies that greenhouse power needs will need to be defined, and that: ‘[t]he odour from the cannabis plants will be problematic given the southerly wind and proximity to residential zones. The odour will require management’ (ST16, p 750). Later correspondence from the consultancy company also suggests that low odour plants may be an option (ST20).

2. The quote for cannabis greenhouses dating from April 2020 from a company in Boulder, Colorado, is included in the materials (ST3.11). The pricing is stated to be an estimate and the total unit cost of what is described as a ‘base greenhouse’ with corridor is €750,000 plus shipping.

3. The property lease was submitted as part of the licence application (T3.02). The tenant is specified as the company identified in evidence as being the organisational representative for Country Fresh Herbs. Clause 4.1 of the attached terms provide that written consent of the landlord is a requirement for any sublease (T3.02, p 57). In a response to issues raised by the Respondent (ST2), Ms Andrew confirmed that a sublease would be provided to Island Ajna by Country Fresh Herbs (ST3.15, p 699).

4. With respect to various letters of support, I note:

   (a)the CEO of the Bass Coast Shire Council wrote to the Federal Minister for Health (T45.02, ST3.1) and refers to the project as involving medicinal cannabis, noting the Council’s support for local cultivation to supply the emerging cannabis industry in the region, in the form of an existing extraction facility;

   (b)the principal of the adjacent primary school (ST30) states that the school community ‘have no problem’ with Ms Andrew expanding her business with ‘medicinal herbs’;

   (c)the Parish Priest provides support for the expansion of Ms Andrew’s business, but does not refer specifically to medicinal herbs nor cannabis cultivation (ST31); and

   (d)a Senior Sergeant in the Bass Coast region confirmed that Victoria Police are aware of the licence application (ST3.16).

5. The body of the licence application appears to be constructed from an online checklist together with additional information fields, accompanied by character limits (T3). It appears that most fields are completed with relatively minimal text, however the application was also accompanied by a large amount of other information, including what I take to be standard operating procedures for various aspects of operation (SOPs) (listed at T3, p 34 and T3.09, p 103). I infer from the manner in which the ODC application screening checklist has been completed (the ticking of checkboxes in T9) that this material satisfied, or went some way to satisfying, fundamental information needs associated with the application. Aspects of these matters are the subject of further explanation in the response provided to requests for information and accompanying documents (T17.02).

6. Additional financial information provided with the licence application consists of a letter from Mr Lidonnici attesting to the solvency of Ms Andrew (ST1). I note that the application also included correspondence from both a supplier of genetic material to commence cultivation (T3.08), and a cannabis producer to accept the cannabis cultivated by Island Ajna (T3.07). Further information was provided by Mr Lidonnici in 2020 about interested investors, noting that opportunities remain speculative in the absence of a licence (T19.01). Further correspondence ensued later in 2020 regarding specific potential identified investors (ST3.12-3.14).

7. The materials include the Australian Government Regional Investment Corporation ‘AgriStarter Loan Guidelines’ dated January 2021 (ST15). In her response to financial issues raised by the Respondent, Ms Andrew states that she anticipates ongoing funding from National Australia Bank and Banjo Loans (ST3.15, p 697). I have not identified any NAB documents in the material but note emails from the loan company describing six-figure borrowing limits being available to both Ms Andrew and her husband (ST3.20-21).

8. Ms Andrew’s response also refers to heads of agreement between Country Fresh Herbs and Island Ajna (ST3.15, p 697), apparently in reply to questions raised about the relationships between the identified entities. I am unable to identify such a document in the materials.

   FIT AND PROPER PERSON CONSIDERATION

   Submissions

9. Ms Andrew made some brief submissions at the hearing. I set out here those contentions raised in her letter of 17 September 2021 not already addressed in the outline of evidence, which are structured as a response to the Respondent’s SFIC (RSFIC):

   (a)that she is the sole director of Island Ajna and, were any change to be made, she would ask any prospective director to undergo a security check, as would any investors;

   (b)information provided about other business entities supported the intention that Island Ajna would be ‘an extension of Country Fresh Herbs’, which would guarantee loans made to the Applicant company;

   (c)Covid lockdown prevented engagement of and consultation with a lawyer to prepare related documentation; and

   (d)final costs for building the new facility would be provided when a licence is granted.

10. Ms Andrew also contended that she understood the licencing process ‘was designed to assist people who are waiting for their licences before investors provide funds…’, and Island Ajna’s application was denied ‘knowing [they] could not qualify for any borrowed monies from banking bodies without the licence as that is what they are lending against’.

11. In closing submissions, the Respondent’s representative referred to authorities cited in its written outline of opening submissions. These highlight that a fit and proper person requirement involves ‘honesty, knowledge and ability’ (Hughes & Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28 at 9) (Hughes & Vale) and also that the expression carries no precise meaning, but takes its meaning from its context (Australian Broadcasting Tribunal v Bond [1990] HCA 33 at 40) (Bond). It was submitted that the words in Hughes & Vale are of long standing and reflect what Parliament would have had in mind in enacting a fit and proper person test. It was contended that the words map to elements of the test set out in s 8B of the Act.

12. Submissions also drew on the reference made in written submissions to the Explanatory Memorandum of the 2016 Bill that introduced ss 8B and 8G into the Act. The extract cited in the RSFIC ([47]) notes that the fit and proper person test was intended to reduce the influence of criminal elements and that ‘financial status and business experience is clearly relevant as it could be a point of vulnerability to outside influence’.

13. It was contended that the previous business experience of the sole officer of the Applicant company was limited to a few years in the agriculture sector, unrelated to conducting business in a complex regulatory scheme, and Ms Andrew had been reliant on the advice of a consultant. Emphasis was also placed on the lack of a business plan or detailed costings, which weighed against the Applicant.

14. It was contended the factors in s 8B(g) have both a past and forward-looking nature and that Island Ajna has no financial background of any kind. No loan approvals are in place, and there is no legal agreement in place with Country Fresh Herbs.

15. It was submitted that evidence at the hearing and the wider material indicate that there are likely to be significant costs associated with establishing and managing the cultivation business, which could be expected to have risen since the original application. Various other costs remain unknown, including that of physical infrastructure, the ongoing cost of managing the business, and there are ongoing negotiations over the purchase of the land.

    Consideration and Findings

16. A fit and proper test is found in different forms in a number of federal acts. Relevant specified considerations commonly include financial integrity, for example whether a person has experienced bankruptcy, and whether they have a history of civil or criminal penalties. In several instances, a decision maker may take into account any other relevant matter.[2]

    [2] See Biosecurity Act 2015 (Cth) s 530(3)(b), National Consumer Credit Protection Act 2009 (Cth) s 37B(2)(k), and Migration Act 1958 (Cth) s 290(2)(h).

17. The test as set out in the Act has specific characteristics not found in other versions of the test. These features are however nearly identical to those contained in repealed Victorian legislation, the Access to Medicinal Cannabis Act 2016 (Vic), which was in force until the commencement of the federal licensing scheme. The equivalent test in the Victorian legislation was informed by ‘suitability factors’ defined in s 5 in terms that include a ‘sound and stable financial background’, and ‘financial circumstances that may significantly limit the applicant’s capacity to meet the applicant’s obligations in conducting activities under the licence’.

18. I acknowledge the authorities cited by the Respondent with respect to the interpretation of a fit and proper person test. The passage from Bond cited above in large part reinforces the well-established principle of statutory interpretation that a provision is to be understood in the context of the legislation in question, and consistent with the purpose of the statute (see for example Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 at 69). It also appears that the fit and proper person provision considered in Bond was not accompanied, as is the case here, by a set of factors to aid in its determination.

19. The Act specifies factors in s 8B that a decision-maker may take into account in considering whether a body corporate is a fit and proper person to hold a licence, but does not limit a decision-maker to these factors. Thus, to the extent there is discretion to take into consideration other factors, it is reasonable to construe this as meaning other relevant factors, taking into account the nature and purpose of the legislation. ‘Honesty, knowledge and ability’ (Vale at 9) could be considered relevant factors. Equally, business experience (s 8B(f)) can be read as embracing knowledge and ability, understood within the purpose of the Act.

20. I consider it appropriate to commence by addressing the question of whether Island Ajna has any relevant business associates. This was not addressed in the decision under review, and the issue is raised in passing only in the RSFIC ([9(a)]). I raised it with the parties at the hearing, albeit briefly.

21. This question needs some attention because of the range of additional parties, either potential investors or related individuals and entities, arising on the evidence and material before me. It is important due to the fact that the Act requires (s 8G(1)(a)(ii)) consideration of relevant business associates where licence refusal arises from the fit and proper person consideration.

22. I accept the evidence of Ms Andrew that she no longer intends to pursue external investors to advance the project, and would rely upon financial institutions. Notwithstanding, the evidence regarding steps taken or to be taken by Island Ajna to raise capital to establish the new business is scant.

23. Ms Andrew appears on the evidence to be the only individual capable of holding power in respect of the Applicant company as the position of her husband in respect of the project remains somewhat ambiguous. As noted above, I can see no evidence of a documented relationship between Island Ajna and Country Fresh Herbs. Nevertheless, on the evidence there is clearly intended to be a close relationship between the two entities, and Mr Andrew is evidently an active business partner in Country Fresh Herbs.

24. On balance, I do not consider the evidence overall to demonstrate to my satisfaction that Island Ajna does have a relevant business associate in the terms required by the Act. However, this is only due to a lack of adequate and meaningful documentation, and I will now deal with the wider implications of this issue.

25. The licence application appears to have at its core a pro forma document, but I accept that a substantial amount of additional documentation was provided, both with the initial application and subsequent requests for further information, including the numerous SPO’s.

26. This material, overall, gives the general impression that the Applicant has the fundamental information at hand to implement systems needed to operate a cannabis cultivation business. It is worth noting, however, that this also gives the impression of being ‘off-the-shelf’ material. While representations were made on Island Ajna’s behalf by the council, the specific intent and impact of these remains somewhat obscure. Some relevant local consultation has also taken place, including with the primary school and Church immediately adjacent to the property.

27. However, the evidence demonstrates there are a number of critical ‘unknowns’ with respect to the proposed cannabis cultivation business, including:

    (a)the number and cost of greenhouses;

    (b)what odour mitigation strategy might be implemented;

    (c)the staffing required for the business;

    (d)the budget for the construction and operation of the new facility and a robust business plan;

    (e)whether neighbours or the community may have a different understanding to the Council or Police as to the nature of the business to be undertaken at the location; and

    (f)pending conclusion of any successful land transfer, whether a sub-lease will be granted by the present landlord.

28. Turning to the question of financial affairs of the Applicant, I am satisfied that Island Ajna is a body corporate that has no capital or assets. As noted above, the company maintains no documented relationships with any other entity including, critically, with the existing business that was intended to underwrite the cultivation venture. I accept, nonetheless that the evidence indicates that this is in fact the intention. While the evidence overall suggests that Country Fresh Herbs may well have been in a position to do so, the manner in which this intention may have been executed remains elusive.

29. The material overall appears to demonstrate that Ms Andrew and her husband are successful business operators. Indeed, they would appear to have made a profitable transition to herb cultivation, albeit their experience in the sector remains brief. I accept that Ms Andrew stated repeatedly that she understood, to summarise, that once a licence was granted that factors including those I have identified as unknowns would be resolved. I also accept that Ms Andrew appears to have considered that she was entitled to rely upon the assistance of an agribusiness consultant in the application process, which is not an unreasonable position.

30. However, there is no evidence of a business plan, and an absence of detail as to critical features relating to how the business would be staffed outside some concept of engaging assistance with cultivation. There is some merit in the Respondent’s contention that a few years’ experience in agriculture is not a firm basis for a shift to this new crop.

31. Outside good general business experience, Ms Andrew does not demonstrate any experience conducting a business in a regulated industry, or one operating within a statutory framework. Specific prior experience is not a requirement on the face of the Act for obtaining a licence. I have also identified that the elements exist on paper, such as SOP’s, for the conduct of the business. Equally, the Act provides for conditions to any licence, which may offer an opportunity for some adjustment, in consultation with the ODC, of business specifics.

32. In this case, however, Ms Andrew held the belief that grant of a licence would operate as a form of gateway to the resolution of key features of business planning and operation including, critically, finance. As I have noted, the Applicant body corporate has no financial background at all. It also has no formally established or documented commercial relationships with entities that might provide finance. Moreover the amount of finance, any conditions associated with its use or repayment, cannot presently be determined due to the absence of a budget and business plan.

33. Some elements of this immaturity of planning arise from the location of the property. As at the time of the hearing, there was no evidence as to whether a sublease would be granted. I am unable to make a definitive finding about the views of those consulted by Ms Andrew as there is some ambiguity from the oral and written evidence as to how well understood the cultivation idea was. Perhaps more importantly, as odour mitigation was identified as an important issue by the Applicant’s own consultant, there is at least some likelihood that Ms Andrew would need to reengage in consultation.

34. On the basis of the evidence and my findings above, I consider it appropriate to make an overall finding that the proposed cannabis cultivation business is at an immature state of development which can best be described as nascent. I consider this to be a critical issue in the context of considering whether Island Ajna is a fit and proper person to hold a licence.

35. This finding alone may be sufficient to support a finding that Island Ajna is not a fit and proper person for a cannabis cultivation licence. Equally, I consider this finding informs consideration of the specified factor in s 8B(f), being the previous business experience of officeholders of a licence applicant. The number and nature of the unknowns arising in respect of the proposed business, set out above, are a matter of concern. Written and oral evidence before the Tribunal did not resolve these issues, but rather tended to reinforce them.

36. The significance of this is that Ms Andrew is, at this point, still unable to answer how a number of fundamental issues will be resolved. Without wishing to be critical of her general business experience, together with her husband, it does not appear to have prepared her for the relative complexity arising from the planning of a specialist crop that can only be produced under a regulated regime.

37. More fundamentally, it is clear that Island Ajna has no capital, assets, or tangible support from associated entities or financial institutions. This alone supports a finding under s 8B(g) that the body corporate does not have a sound and stable financial background, such that it may significantly limit its capacity to comply with its obligations under a licence.

38. I must consider that the existence of this specific factor in the elements specified as informing the fit and proper person test in the Act is, in the wider context of this statutory test, is deliberate. The upper limits of the purpose for ensuring financial viability appears to be marked by concern to reduce the potential for criminal influence in the legalised drug trade. This is not, however, the issue that presents itself for consideration in this matter. Here there is a more fundamental problem, being that the Applicant body corporate presently has no visible means of financial support at all.

39. I consider, given the nature of this statutory scheme and it stated purpose, that the prospect alone of finance is insufficient. Moreover, as I have noted, this prospect sits within an immature and underarticulated business plan. I consider it reasonable to find that the scheme established by the Act requires more than this to justify the grant of a licence.

    conclusion

40. On the basis of my findings, I am not satisfied on reasonable grounds that Island Ajna is a fit and proper person to hold a cannabis cultivation licence.

41. The grounds specified in s 8G are alternative grounds, any one of which is sufficient to base a refusal. Accordingly, it is not necessary to make a finding on the other issue, being the suitability of the location. I have set out evidence about the location primarily to provide background and context, but have also noted that the site location plays a role in my finding with respect to the fit and proper person consideration.

    decision

1. For the reasons given above, the Tribunal affirms the decision under review dated 8 January 2021.

I certify that the preceding 85 (eighty-five) paragraphs are a true copy of the reasons for the decision herein of Dr Stewart Fenwick, Senior Member

...........[sgd]...........................................................

Associate

Dated: 30 November 2022

Date of hearing:	19 September 2022
Applicant:	Anita Andrew (self-represented)
Advocate for the Respondent:	Joshua Smith
Solicitors for the Respondent:	Department of Health and Aged Care