Pharmacy Restructuring Authority v Martin

No judgment structure available for this case.

PHARMACY RESTRUCTURING AUTHORITY AND SECRETARY, DEPARTMENT OF COMMUNITY
SERVICES AND HEALTH v LORRAINE ELIZABETH MARTIN, NATALIE RIDGEWAY, KIM PHUONG
TRAN aka, KIM PHOUNG LAM, PHOUNG LAM AND LILY PHOUNG LAM
No. NG556 of 1994
FED No. 906/94
Number of pages - 10
Social Welfare
(1994) 53 FCR 589

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
WILCOX, FOSTER AND WHITLAM JJ

CATCHWORDS

Social Welfare - Pharmacy industry - Approval of pharmacists supplying pharmaceutical benefits - Application to Secretary for approval of supply at new premises - Reference of application to Pharmacy Restructuring Authority for recommendation - Guidelines specified in Determination made by Minister - Whether Authority is bound by guidelines - Reference in guidelines to calculation of distance "by normal access routes" - Meaning of this term - Whether or not Authority is bound to notify application to persons whose financial interests may be affected adversely by approval and to hear them before making a decision as to its recommendation.

HEARING

SYDNEY, 12 October 1994 #DATE 28:11:1994

Counsel for the Appellants: D M J Bennett QC with R C

Henderson

Solicitors for the Appellants: Australian Government

Solicitor

Counsel for the First
Respondents: S D Rares SC with A Hughes

Solicitors for the
First Respondents: Colinard and Co

ORDER

THE COURT ORDERS THAT:
1. The appeal be allowed.
2. The orders made by the primary Judge on 5 August 1994 be set aside and in lieu thereof it be ordered that the Application be dismissed with costs.
3. The first respondents, Lorraine Elizabeth Martin and Natalie Ridgeway, pay the costs incurred by the appellants, Pharmacy Restructuring Authority and Secretary, Department of Community Services and Health, in connection with the appeal.
4. Leave be reserved to the said first respondents to apply to a member of this Court, sitting in Chambers, for a costs certificate pursuant to s.6(1) of the Federal Proceedings (Costs) Act 1981.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

WILCOX, FOSTER AND WHITLAM JJ This is an appeal from a decision of a Judge made in relation to an application under the Administrative Decisions (Judicial Review) Act 1977. The applicants for judicial review were Lorraine Elizabeth Martin and Natalie Ridgeway. Ms Martin and Ms Ridgeway, who are the first respondents to this appeal, carry on business as pharmacists at 16 John Street, Lidcombe. They succeeded in obtaining from the learned primary Judge an order setting aside a decision by the first appellant, Pharmacy Restructuring Authority, to recommend to the second appellant, the Secretary of the Department of Community Services and Health, approval of an application made under s.90 of the National Health Act 1953 by the second respondents, Kim Phuong Tran, Phoung Lam and Lily Phoung Lam. The second respondents participated in the hearing before the primary Judge but took no part in the hearing before us. The statutory scheme

Section 90(1) of the National Health Act empowers the Secretary to approve pharmacists "for the purpose of supplying pharmaceutical benefits at or from" particular premises. By subs.(3B), however, the Secretary may grant an approval only if the Authority has so recommended. Section 99L requires the Minister to determine guidelines subject to which the Authority is to make recommendations in respect (inter alia) of s.90 applications. Section 99K(2) provides that, in making a recommendation, "the Authority must comply with the relevant guidelines determined by the Minister under section 99L". In Smoker v. The Pharmacy Restructuring Authority (17 November 1994, not yet reported) a Full Court of this Court (Wilcox, Burchett and Hill JJ) held that the guidelines were binding on the Authority; an approval may be granted only in accordance with the guidelines, the Authority has no residual or overriding discretion. In the present case, counsel for the first respondents contended that compliance with the guidelines is not mandatory. For the reasons given in Smoker, we reject that submission.

The interpretation of the guidelines
3. The main issue in this case concerns the proper interpretation of one of the guidelines. In order to indicate how the point arises it is necessary to state some additional facts.

The second respondents, the applicants for s.90 approval, carried on business as pharmacists at the corner of Bridge and Joseph Streets, Lidcombe. They sought to relocate to premises at 20 John Street, Lidcombe, two doors from the pharmacy operated by Ms Martin and Ms Ridgeway. The learned primary Judge noted the relationship between the two premises:

"Joseph Street and John Street are main streets of Lidcombe. However, they are not continuous, one with the other, but are separated by a railway and railway station. John Street is on the northern side of the railway whilst Joseph Street is on the southern side. There is a footbridge over the railway at the railway station and a road overpass to the east of the station. The main traffic passing north along Joseph Street appears to veer into Bede Street and to pass under the railway line some distance to the west of the station. In stating this, I rely upon a quick glance at a street directory.

The (second respondents) supported their application for approval by the report of a registered surveyor who stated that the distance between the (second respondents') existing premises and the proposed premises was 318.7 metres if measured by walking down Joseph Street across the footbridge over the railway line, using either the ramps or stairs which connect the footbridge to the roadways, and walking down John Street. The report did not state, however, that the distance by road was over 600 metres, via the road overpass, which was the shortest route a vehicle could take."

Counsel for the first respondents pointed out that the evidence does not indicate whether or not the Authority regarded the railway footbridge as a "normal" access route between the two locations. But, as counsel for the appellants responded, it is clear it was open for public use and regularly used; the photographs and geography make the normality of the route clear. We approach the matter in the same way as the learned primary Judge. The footbridge clearly provided one "normal" access route; the question is whether this was enough.
The relevant Ministerial determination sets out guidelines applicable to a recommendation by the Authority in respect of an application under s.90. They commence with a prohibition which, the parties agree, is applicable unless overcome by sub-paragraph (d):

"(a) subject to subparagraphs (d) to (h), approval of a pharmacist shall not be recommended in respect of premises located within 5 kilometres by normal access routes from other premises in respect of which a pharmacist is already approved;" Sub-paragraph (d) reads:

"(d) notwithstanding anything contained in subparagraphs

(a), (b) and (c), approval of a pharmacist in respect of particular premises shall be recommended where those premises are located not more than 500 metres by normal access routes from other premises in respect of which that pharmacist is already approved under section 90 of the Act and from which the pharmacist proposes to cease supplying pharmaceutical benefits;"

The primary Judge noted there was no dispute:

"that the surveyor's report was correct in determining that the distance between the Joseph Street pharmacy and the proposed premises is less than 500 metres for a pedestrian walking over the footbridge, which would be the usual route for a pedestrian moving from Joseph Street to John Street. However, it is in dispute that the walking distance satisfies the test of 'not more than 500 metres by normal access routes'".

He went on:

"The term 'normal access routes' is a difficult expression. Although s.23 of the Acts Interpretation Act 1901 (Cth) provides that, unless the contrary appears, the plural includes the singular, it seems to me that the term 'normal access routes' has been deliberately chosen so that the Authority will take into account not one, but all the normal access routes, though that is not to say that the plurality of 'all' must be satisfied in every case. I am unable to read the term as denoting 'any normal access route'. Although the guidelines bind the Authority, they are nevertheless guidelines, not statutory criteria. They are therefore not necessarily drawn with the care, skill and detail that one might expect of statutes or regulations prepared by Parliamentary Counsel. It is consistent with the use of guidelines that an element of value judgement on the part of the Authority should be involved, namely that the Authority should be required to take into account all relevant information and should satisfy itself whether, on the basis of that information, the premises to which the pharmacy will be relocated meet the criterion of 'not more than 500 metres by normal access routes' from the premises from which the business was being carried on. Guidelines, as distinct from regulations, tend to lay down principles which may be applied with flexibility to a variety of different circumstances. Guidelines 3(a), (b), (c), (d) and

(e) are, in my opinion, guides, albeit binding ones, and express a principle rather than an inflexible measurement. The current guidelines no longer express the criterion which was set out in the agreement of 6 December 1990, that '(d) existing approvals can be relocated within their business centre, which is defined as the area within 500 metres of the existing approved site'. The present criterion refers to 'normal access routes'. I do not read it or guidelines 3(a), 3(c) and 3(e) as referring to only one route, be it a pedestrian route or a vehicular route. In my opinion, all these paragraphs require the Authority to make a judgment which takes account of the objects of the Act and the guidelines and the normal movement of people in any given area. Thus, if for the purposes of paragraphs 3(a) and 3(c), it were found that 75% of persons would travel over 5 kilometres to go from one location to the other, I think that weight could be given to that fact although 10% or more of persons might travel a shorter distance which was under 5 kilometres. In a particular case, road, rail and pedestrian access may have to be considered. Although with respect to a distance which is less than 500 metres, one might ordinarily think in terms of walking, that might not be the case where a shopping area in a suburb is separated by a railway or a freeway. The material before the Authority did not show that the premises were less than 500 metres apart 'by normal access routes', merely that the distance was less than 500 metres by a normal access route. If the preponderance of travel is via the road overpass, and if the excess of distance on that route is more than minimal, then it will be arguable that the relocation does not appropriately meet the description of 'not more than 500 metres by normal access routes."

We respectfully agree with his Honour that the guidelines were not drawn with the care and skill ordinarily associated with statutes and regulations. But we do not agree that they assumed "an element of value judgment on the part of the Authority". As we have said, the statute evinces a clear intention that the Authority shall be bound by the guidelines. We see no more reason to assume flexibility of application than in the case of a statute or regulations.
The problem in this case is that there is more than one normal access route. The normal vehicular access route exceeds 500 metres, the normal pedestrian route does not. It is not possible to lump the two together and make a general statement about the distance between the two locations "by normal access routes". Why should one route be preferred to the other? His Honour's answer was that the Authority must make a "value judgment" about this. With respect, that answer involves enormous difficulties. By what criteria is the value judgment to be made? Should particular weight be given to those who have to walk from one location to the other? Or is the Authority to count heads?
The membership of the Authority is specified by s.99N of the Act. It is to consist of a total of seven people, all serving part-time. The seven members consist of a Chairperson, two persons chosen from four nominees of the Pharmacy Guild of Australia, one other person having experience in matters relating to the pharmacy industry and three other persons. The Authority has to consider applications in respect of premises all around Australia. It would be impossible, in practical terms, for Authority members to acquire personally the information about each shopping area necessary for the value judgment contemplated by his Honour. No doubt it would be possible, although extremely expensive, for the Authority to retain consultants to carry out traffic studies of each shopping centre in respect of which it received an application. But this would only provide information about the number of people using a particular access route. In the present case, the consultant could count the number of pedestrians on the railway footbridge and the number of vehicles using the Bede Street underpass. But these counts would give the Authority no indication as to the number of people using each route to travel from the second respondents' previous location on the corner of Bridge and Joseph Street to their new location at 20 John Street. To achieve that information, pedestrians and vehicles would have to be followed. Even if the information were obtained, it would be information about the situation before the application for removal was approved and the business relocated. It would have no relevance to the position after relocation.
Supposing it was somehow established that 75% of people presently made the journey between the two points by car and that this proportion was likely to hold good after the relocation, what would that signify in practical terms? After parking their cars, how far would the travellers need to walk to their destination? Not only may the driver of the car be unable to park outside the premises, traffic regulations may not even permit a passenger to alight there. Anyway, if what is involved is truly a "value judgment", rather than a mere head count, why disregard the minority because of the practice of the majority? If 25% of people use the railway footbridge to walk from one location to the other, that is a "normal access route".
The layout of the Lidcombe shopping area, as evidenced by the plans tendered to his Honour, is replicated in hundreds of Australian suburbs. Most of our major cities have a metropolitan railway system. Especially in older suburbs, it is common to find shops on both sides of the railway line, directly linked by a railway footbridge or pedestrian underpass. A pharmacist moving from one side of the line to the other will typically take up premises within 500 metres of the old location, if the distance be measured by the most direct pedestrian route. Usually, however, the most direct vehicular route is by way of a vehicular bridge or underpass some distance from the railway station. If the bridge or underpass is as close as 200 metres to the railway station, the door-to-door vehicular distance between two locations on different sides of the railway line will probably exceed 500 metres. In our opinion, the Minister could not have intended that, in this recurring situation, the Authority should commission a traffic study, and then make a value judgment by reference to indeterminate criteria, before determining the prosaic question whether the application complies with sub-para.(d) of the guidelines.
The difficulty arises, of course, out of the fact that sub-para.(d) uses the plural: "normal access routes", not "a normal access route". If the singular had been used, there would be no problem. It would be enough that there was one access route, of not more than 500 metres, that was "normal"; that is, generally available, suitable and regularly used. Usually, the shortest route would be a pedestrian route; but sometimes it might also be a vehicular route.
However, sub-para.(d) uses the plural, not the singular. The question arises whether this was done with the intention of forcing the Authority to the type of exercise contemplated by the primary Judge, or whether it simply represents an unthinking use of a precedent. The evolution of the sub-paragraph suggests the latter.
The genesis of the guidelines, and indeed the statutory provisions on which they are based, is an agreement dated 6 December 1990 between the Minister for Aged, Family and Health Services and the Pharmacy Guild of Australia. The document recited an agreement between the Minister and the Guild concerning the implementation of a "restructure package" for approved pharmacists in Australia and that a statutory body, to be known as Pharmacy Restructuring Authority, was to be established:

"to make recommendations to the Secretary to the Department of Community Services and Health based on guidelines determined by the Minister for the closure and amalgamation packages, essential pharmacy allowances and for the approval of pharmacists".

The agreement dealt with the cost of closure and amalgamation of pharmacies, the main burden of which was to to be borne by the Commonwealth. After other provisions, it dealt with guidelines relating to the grant of s.90 approvals. Paragraph 8.5 provided:

"8.5 Subject to the guidelines issued under the Act not being disallowed by the Federal Parliament, the Authority will consider applications for approval based on the following guidelines:

(a) a new approval will not be granted where there is an existing approved pharmacy operating within 5 kilometres by normal access routes from the proposed site;

(b) a new approval will require the demonstration of a definite unmet public need;

(c) a new approval will not be granted if a closure or amalgamation payment has been made with respect to a previous approved site within 5 kilometres of the proposed new pharmacy;

(d) existing approvals can be relocated within their business centre, which is defined as the area within 500 metres of the existing approved site;

(e) existing approvals can be relocated to a new business centre where the new location is between 500 metres and 5 kilometres of the original site and a closure or amalgamation payment has not been made for a site within 5 kilometres of the new site and a definite unmet public need can be demonstrated."

It will be noted that the term "normal access routes" was used in sub-para.(a) in the context of a distance up to 5 kilometres. Presumably, the drafter had in mind that there would very likely be more than one "normal" and convenient way of travelling a distance so great. The provision dealing with relocation within an existing centre (sub-para.(d)) required merely a linear measurement of the distance from the existing approved site to the new location; it took no account of any obstacle that required people to travel more than 500 metres to get from one place to the other. This possibility of an obstacle might have been overlooked.

The first Determination made by the Minister, on 9 January 1991, reproduced this criterion. It included a guideline 3(d) that:

"approval of a pharmacist in respect of particular premises shall be recommended where those premises are located not more than 500 metres from other premises in respect of which that pharmacist is already approved under section 90 of the Act and from which the pharmacist proposes to cease supplying pharmaceutical benefits."

Two of the other sub-paragraphs (sub-paras.(a) and (c)) referred to premises situated "within 5 kilometres by normal access routes" from other premises. Sub-paragraph (e) referred to premises "located more than 500 metres but not more than 5 kilometres by normal access routes from other premises".

The Determination of 9 January 1991 was replaced on 16 May 1991. Sub-paragraph (d) was retained in the same form, as were the two paragraphs referring to premises "within 5 kilometres by normal access routes" and sub-para.(e) relating to premises between 500 metres and 5 kilometres from other premises by "normal access routes".
The May 1991 Determination was amended on two occasions and finally revoked by a Determination dated 22 April 1993. Before that happened, on 22 December 1992, a decision was given in the Administrative Appeals Tribunal (Breen DP) concerning the interpretation of sub-para.(a). See Re Kaderbhai and Secretary, Department of Health, Housing and Community Services (1992) 31 ALD 784. In that case the vehicular travelling distance between an existing approved pharmacy and the appellants' proposed premises, starting at the existing pharmacy and having regard to a system of one-way streets in the area, was 5.3 kilometres. Travelling in the opposite direction, the distance between the two sites was only about 4.5 kilometres. Breen DP accepted the argument of counsel for the applicant that the word "from" indicated that the starting point, for the purpose of measuring the distance, must be the existing premises. He said, at 785-786, that the guideline should be read as if it read:

"Approval of a pharmacist shall not be recommended in respect of premises located within 5 km of other premises in respect of which a pharmacist is already approved, such distance to be computed having regard to normal access routes from those other premises."

He explained:

"(26) As I have said, these systems of approval are designed to enhance the efficiency and to minimise the drain on the public purse of the pharmaceutical drugs prescriptions scheme. The purpose of the scheme itself is the maintenance of the health of the community.

(27) The imposition of a minimum distance is a factor in the system of approval that serves the purpose of that system. The computation of the minimum distance calls for a balancing act which accommodates the rationale of the approval system and which also accommodates the reasonable needs of the intended beneficiaries of the scheme itself - the members of the community.

(28) Thus my reasoning in the matter has taken account of the position of a hypothetical customer needing to have a prescription for drugs filled by an approved pharmacist, attending the Seagulls Pharmacy in the Tweed Mall for that purpose and finding that it is not open for business. The striking of the 5 km distance from those premises to an alternative one has been construed by the Minister as a reasonable balance between the requirements of the approval scheme and the position of the customer who in those circumstances then needs to travel elsewhere to secure the prescription for drugs."

It is not necessary for us to determine whether or not we agree with Breen DP. The significant thing about the decision is not whether it was right or wrong, but simply that it was given when it was. The Deputy President commented at 785 that Ms Banks, who appeared for the respondent Secretary, told him "that the Authority is looking to the Tribunal for general guidance as to how it should approach the matter of interpreting the Ministerial guidelines which bind it". In that situation, it is likely that his approach influenced the belief that the words "within 5 kilometres by normal access routes from (existing) premises" meant within five kilometres by one normal access route (having regard to one-way streets and the like) of the existing premises. It seems significant that, when the May 1991 Determination was replaced in April 1993, the concept of "normal access routes" was applied, for the first time, to a distance of not more than 500 metres. As we have seen, that was repeated in the current Determination, of 8 July 1993, that replaced the April 1993 Determination.
Having regard to the evolutionary history of the guidelines, it seems to us that the phrase "by normal access routes" should be interpreted to mean "by at least one normal access route". This achieves a practical and fair result. It is practical because it will normally be easy for the Authority to determine whether or not there is at least one normal access route of not more than 500 metres between the two locations. It is sensible because it deals with the problem in market terms; and that was the concept underlying the original agreement between the Minister and the Pharmacy Guild. A pharmacist who moves to a location that is within 500 metres by a normal access route of the pharmacist's old shop can reasonably be regarded as continuing to serve the same community.

Procedural fairness
23. Counsel for the first respondents argued that procedural fairness required the Authority to afford their clients a right of hearing before deciding to recommend approval of the application. They cited no authority in support of that submission. Alphapharm Pty Ltd v. Smith Kline Beecham (Australia) Pty Ltd (1994) 121 ALR 373 suggests the contrary.

There are cases where a statutory authority, charged with the duty of considering an application to use premises for a particular purpose, is expressly obliged to publicise the receipt of the application and to consider objections. Liquor legislation is a well known example. There are cases where such an obligation is implied by the scope and purpose of the legislation. But we do not know of any general principle to the effect that a statutory authority charged with the duty of considering an application is obliged by the principles of procedural fairness to notify and hear everybody whose economic interests may be damaged by an approval. To promulgate a general rule imposing such an obligation would be to visit upon statutory decision makers a potentially massive task of indeterminate reference. In the present case, nothing is to be implied from the scope and purpose of the Act. The relevant provisions are not concerning with minimising competition in the pharmaceutical industry but with reducing the Commonwealth's financial burden in providing pharmaceutical benefits while maintaining an acceptable level of community service. In the absence of authority, we are not prepared to hold that, if it had a discretion about its decision, the Authority had any obligation to notify or hear pharmacists, non-parties to the application for approval, merely because an approval might commercially damage them.
However, even if we took a different view about that matter, in this case the Authority has no discretion. The guidelines govern its recommendations to the Secretary. And sub-para.(d) provides that "approval ... shall be recommended" where the new premises are located not more than 500 metres "by normal access routes", from the old. If, as we have held, the term "by normal access routes" means "by at least one normal access route", it is clear that the premises at 20 John Street are located not more than 500 metres, by a normal access route, from the old. The Authority is bound to recommend approval. There would be no purpose in the Authority affording the first respondents a hearing.

Orders
26. The appeal should be allowed. The decision of the primary Judge should be set aside. In lieu thereof it should be ordered that the Application be dismissed with costs. The first respondents must pay the appellants' costs of the appeal. However, the case may fall within s.6(1) of the Federal Proceedings (Costs) Act 1981. Leave should be reserved to the first respondents to make an application for a certificate under that section. The application may be made to any member of the Court sitting in Chambers, as provided by s.12.