Jian v Downing

Case [2023] FCA 1018

FEDERAL COURT OF AUSTRALIA

Jian v Downing [2023] FCA 1018

File number(s): QUD 174 of 2022
Judgment of: MEAGHER J
Date of judgment: 28 August 2023
Catchwords: ADMINISTRATIVE LAW – Pharmaceutical Services Federal Committee of Inquiry (“the Committee”) – Whether participation by a Member of the Committee gives rise to a reasonable apprehension of bias – Whether reasonable apprehension of bias extends to entire Committee by reason of interaction – Whether Counsel Assisting’s involvement in proceeding is a further reason to apprehend bias on part of the Committee
Legislation:

Federal Court of Australia Act 1976 (Cth) ss 21, 23

Judiciary Act 1903 (Cth) s 39B

National Health Act 1953 (Cth) ss 90, 92A, 95, 113, 114, 126, 134A
Cases cited:

Aurora Funds Management Ltd v Australian Government Takeovers Panel (Judicial Review) [2020] FCA 496

Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd & Qantas Airlines Ltd (1996) 65 FCR 215

Burgess v Minister for Immigration & Border Protection (2018) 259 FCR 197

CNY17 v Minister for Immigration and Border Protection (2019) 268 CLR 76; [2019] HCA 50

Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337

Hot Holdings Pty Ltd v Creasy (2002) 210 CLR 438; [2002] HCA 51

Isbester v Knox City Council (2015) 255 CLR 135; [2015] HCA 20

Kostov v Director of Public Prosecutions (NSW) (No 2) [2020] NSWCA 94

Minister for Immigration and Multicultural Affairs v Jia (2001) 205 CLR 507

Oakey Coal Action Alliance Inc v New Acland Coal Pty Ltd (2021) 272 CLR 33; [2021] HCA 2

Ogawa v Australian Information Commissioner [2014] FCA 229

QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 409 ALR 65; [2023] HCA 15

R v ABT; Ex parte Hardiman (1980) 144 CLR 13

R v Doogan; Ex parte Lucas-Smith (2005) 193 FLR 239

Reece v Webber (2011) 192 FCR 254

Smits v Roach (2006) 227 CLR 423; [2006] HCA 36

Webb v The Queen (1994) 181 CLR 41

Whalebonev Auto Panel Beaters & Radiators Pty Ltd (In liq) [2011] NSWCA 176
Division: General Division
Registry: Queensland
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 129
Date of last submission/s: 30 June 2023
Date of hearing: 8 March 2023
Counsel for the First, Second, Third and Fourth Applicants: Mr J Horton KC and Mr P Hay
Solicitor for the First, Second, Third and Fourth Applicants: Bennett & Philip Lawyers
Counsel for the First, Second, Third, Fourth and Fifth Respondents: The First, Second, Third, Fourth and Fifth Respondents submitted to any order of the Court
Counsel for the Sixth Respondent: Mr A Berger KC and Mr H Rogers
Solicitor for the Sixth Respondent: Australian Government Solicitor

ORDERS

QUD 174 of 2022
BETWEEN:

MS NANCY JIAN

First Applicant

HENPHARM PTY LTD ACN 612 561 421

Second Applicant

MR WILLIAM HO (and another named in the Schedule)

Third Applicant
AND:

MR PETER DOWNING

First Respondent

MS RENAE BEARDMORE

Second Respondent

MS HELEN…

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Details
AGLC
Jian v Downing [2023] FCA 1018
Case
[2023] FCA 1018
Decision Date

CaseChat Overview and Summary

In the case of Jian v Downing, the applicants, approved suppliers of pharmaceutical benefits, challenged the integrity of the Pharmaceutical Services Federal Committee of Inquiry (the Committee) on grounds of bias. The Committee, established under the Act, was tasked with investigating whether the applicants had breached the Act by claiming payment for pharmaceutical products not supplied from their approved premises. The applicants contended that the presence of Mr Downing, a part-owner of a Capital Chemist Group (CC) pharmacy, on the Committee created a reasonable apprehension of bias. This contention was predicated on the close proximity of CC pharmacies to the applicants' pharmacies, the competitive nature of the pharmacy industry, and the potential conflict of interest arising from Mr Downing’s business interests.

The court was required to determine whether Mr Downing's participation on the Committee gave rise to a reasonable apprehension of bias and whether this apprehension extended to the entire Committee. Additionally, the court needed to consider if the involvement of Counsel Assisting in the proceedings contributed to any apprehension of bias on the part of the Committee. The court examined the nature and extent of Mr Downing's disclosure of his interests and associations, as well as the process followed by the Committee in conducting its inquiries.

The court concluded that while the Committee's failure to adequately disclose Mr Downing's interests and associations was unsatisfactory, it did not lead to a reasonable apprehension of bias on the part of the entire Committee. The court found that Mr Downing’s participation in the Committee did indeed create an appearance of a reasonable apprehension of bias. Consequently, the court ordered the reconstitution of the Committee and the initiation of a fresh inquiry concerning the first applicant. For the second, third, and fourth applicants, the court ruled that the inquiries should proceed without Mr Downing’s involvement.

The court issued orders restraining Mr Downing from taking any further steps in the inquiries related to specific referrals. It also restrained other members of the Committee from proceeding with the inquiry concerning the first applicant. The court directed the parties to file submissions on costs and further orders, with the costs question to be determined subsequently based on the submissions provided.

Orders

Orders of the court

2. Pursuant to s 39B(1) and (1A) of the Judiciary Act 1903 (Cth) and s 23 of the Federal Court Act, Mr Downing be restrained from taking any further step in connection with the following referrals made to the Committee by the Secretary:

(i) Ms Nancy Jian, referred on 4 August 2020;

(ii) Henpharm Pty Ltd, referred on 29 April 2021; and

(iii) Mr William Ho and Ms Louisa Young, referred on 13 July 2021.

3. Pursuant to s 39B(1) and (1A) of the Judiciary Act and s 23 of the Federal Court Act, Ms Renae Beardmore (as Chair), Ms Helen Dowling, Ms Juliana Sestan and Dr Nick Simpson, as Members of the Committee, be restrained from taking any further step in connection with the following referral made to the Committee by the Secretary:

(i) Ms Nancy Jian, referred on 4 August 2020;

4. By 4:00 pm AEST on 4 September 2023, the applicant must file and serve any written submissions regarding costs and, to the extent that it is necessary, any further orders required by the Court.

5. By 4:00 pm AEST on 11 September 2023, the respondent must file and serve any written submissions regarding costs and, to the extent that it is necessary, any further orders required by the Court.

6. Pursuant to s 20A of the Federal Court of Australia Act 1976 (Cth), the question of costs be determined on the papers thereafter.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The parties filed a Statement of Agreed Facts on 23 November 2022 and a Statement of Further Agreed Facts on 22 December 2022. The Agreed Facts are attached to these reasons as Annexure A, and the Further Agreed Facts are attached to these reasons as Annexure B. There are 17 annexures to the Agreed Facts, all of which are annexures to the affidavit of Mr Lambros affirmed on 23 May 2022. The Agreed Facts and Further Agreed Facts need to be read in their entirety to properly understand the matter. Below is a brief summary only. The first, second, third and fourth applicants (collectively, the applicants) are approved under s 90 of the Act to supply pharmaceutical benefits. The applicants also operate franchisees of Chemist Warehouse (CW) branded pharmacies. The first, second, third and fourth respondents (collectively, the respondents) are members of the Committee established under the Act to investigate whether the applicants acted in breach of the Act and the conditions of their approvals. In this case, the investigation is specifically as to whether the applicants claimed payment of the PBS for pharmaceutical products which were not supplied from their approved premises. Each of these respondents have filed submitting notices. The Commonwealth is the sixth respondent and was joined as the contradictor in these proceedings pursuant to the Hardiman Principle: R v ABT; Ex parte Hardiman (1980) 144 CLR 13. As to the location of the various pharmacies, the closest Capital Chemist Group (CC Group or CC) pharmacy to the:·Relevant pharmacy operated by the first applicant is Lockhart Pharmacy, which is approximately 379km away;·Relevant pharmacy operated by the second applicant is CC Dapto, which is approximately 97km away;·Relevant pharmacy operated by the third and fourth applicants is CC University of Canberra, which is approximately 3.1km away. The only CC Group pharmacy part-owned by Mr Downing, located in the ACT, is approximately 15km away from the location of the third and fourth applicants pharmacy. The Agreed Facts contains a detailed table of the density of CW and CC pharmacies within a 5km and 10km distance from each other in the ACT, as well as the density of other pharmacies within 5km of CW pharmacies in the ACT. As set out in the Agreed Facts, CW pharmacies are operated under franchisee agreements. It is the largest pharmacy group in Australia, operating in all States and Territories. As of 30 May 2022, it comprised 474 pharmacies, including five in the ACT. The CC Group consists of 21 pharmacies in the Australian Capital Territory (ACT) and 27 in NSW. It is the largest pharmacy group in the ACT, and is therefore the largest competitor of CW in the ACT. Both CC Group and CW operate their stores as retail pharmacies, however CW aims to price its products below the normal market rate. This has caused an increase in price competition between pharmacies in the ACT since CW first opened its pharmacies there.First Applicant On 9 June 2017, the first applicant was approved under s 90 of the Act to supply pharmaceutical benefits from 33 Beewar Street, Greensborough, Victoria (VIC), 3088. The first applicant is also a franchisee owner of CW Watsonia, located in VIC.

Evidence

Evidence Before The Court

The culmination of the tests for a reasonable apprehension of bias reflects the importance of impartial decision making and maintaining public confidence in the administration of justice, and demonstrates that the fair-minded lay observer adapts to the contemporary demands of modern society: QYFM at [46] (Kiefel CJ and Gageler J). While the application of the tests may be flexible and is unique according to the circumstances of each case, disqualifying an individual by reason of an apprehension of bias is necessary to afford a party procedural fairness.EVIDENCE Mr Horton KC for the applicants read the originating application filed 24 May 2022, the affidavit of Mr Lambros affirmed on 23 May 2022 and the affidavit of Mr Gance affirmed on 30 May 2022. Mr Berger KC for the Commonwealth read the affidavit of Mr Downing affirmed on 29 August 2022, the supplementary affidavit of Mr Downing affirmed on 4 October 2022, the affidavit of Ms Sestan affirmed on 9 December 2022, and the affidavits of Mr Giugni affirmed on 1 August 2022 and 8 March 2023. Committee Process Mr Giugini, solicitor from the Australian Government Solicitor (AGS), in an affidavit dated 30 August 2022, deposes that he is “the supervising solicitor with conduct of this matter on behalf of the respondents”, and also “the supervising solicitor for work performed by the AGS to assist [the Committee] with the conduct of its inquiries”. He deposes, inter alia, to the processes adopted by the Committee. The Committee meets monthly to consider referrals made by the Minister or Secretary pursuant to s 114 of the Act. The Committee is required to inquire into and report to the Minister on any matter referred to it. The process of the Committee is to consider the initial referral and materials provided in order to establish potential lines of inquiry in relation to the referral. The Committee will then notify the relevant pharmacist as to the matters being considered by the Committee. Pursuant to s 126 of the Act, the Committee has the power to, and often will, issue summonses to produce documents relevant to the established line of inquiry. This also includes to the pharmacist to whom the inquiry relates. Once the material has been inspected, the Committee conducts a hearing to take oral evidence from the pharmacist the subject of the inquiry, and any other person who may be relevant. Counsel assists the Committee (Counsel Assisting) during the hearing. The pharmacist to whom the inquiry relates, either personally or by a legal representative, has the opportunity to make oral submissions, call witnesses and question witnesses. The transcript of the Committee hearing regarding the first applicant was annexed to the Agreed Statement of Facts. According to it Counsel Assisting prepares written submissions to the Committee after the hearing which addresses the evidence given before the Committee, both written and oral, and the legal significance of the evidence. This submission is provided to the person to whom the inquiry relates, who is provided with an opportunity to respond.

Decision

Reasons for decision

The failure by the Committee to volunteer any disclosure of Mr Downing’s interests and associations from the outset, and failure to provide full and adequate disclosure of Mr Downing’s interests and associations after being asked, while unsatisfactory, is not a factor that would give rise to a reasonable apprehension of bias on part of the entire Committee. As has been seen, the Committee and secretariat itself were not privy to all of Mr Downing’s interests and associations. Further, the incomplete disclosure was on Mr Downing’s instructions. It would not be reasonable to attribute these failings to the other members of the Committee. CONCLUSION Mr Downing’s participation in the Committee is attended with the appearance of a reasonable apprehension of bias. With respect to the first applicant, the Committee should be reconstituted and the inquiry should start afresh. With respect to the second, and third and fourth applicants, the inquiries should continue without Mr Downing’s participation. Given the outcome, I will hear from the parties as to costs.

Ratio Decidendi

Legal Principle Established

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