Re Fraser Coast Pharmacy Pty Ltd and Australian Community Pharmacy Authority
[2007] AATA 1472
•27 June 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1472
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/0799
GENERAL ADMINISTRATIVE DIVISION ) Re FRASER COAST PHARMACY PTY LTD Applicant
And
AUSTRALIAN COMMUNITY PHARMACY AUTHORITY
Respondent
DECISION
Tribunal Deputy President P E Hack SC Date 27 June 2007
PlaceBrisbane (heard in Hervey Bay)
Decision The Tribunal:
(a) sets aside the decision under review;
(b) substitutes a decision to recommend to the Secretary of the Department of Health and Ageing that approval of the premises at 79 Boat Harbour Drive Urraween be granted.................Signed.................
Deputy President
CATCHWORDS
HEALTH AND COMMUNITY SERVICES – pharmaceutical benefits - application for approval for relocation of a pharmacy – definition of “catchment area” - whether more than one pharmacy in catchment area – decision under review set aside – substituted decision recommending to respondent that approval of proposed premises be granted
National Health Act 1953 – ss 90(1), (3A), (3B), 99L (1), 99K (2)
National Health (Australian Community Pharmacy Authority Rules) Determination 2006 – ss9, 10
Hargreaves and Australian Community Pharmacy Authority (No 2) (1995) 41 ALD 147
REASONS FOR DECISION
27 June 2007 Deputy President P E Hack SC 1.The applicant, Fraser Coast Pharmacy Pty Ltd (“Fraser Coast”), operates a pharmacy at “approved premises” at 36 Murphy Street, Point Vernon. In January 2007 Fraser Coast made application for approval for a relocation of the approved premises to new premises at 79 Boat Harbour Drive, Urraween (“the proposed pharmacy”).
2.The application by Fraser Coast was considered by the respondent, the Australian Community Pharmacy Authority (“the Authority”). The Authority was not satisfied that the application met statutory criteria and determined to recommend to the Secretary, Department of Health and Ageing that approval not be given to the proposed pharmacy. Fraser Coast was informed of that decision by letter dated 6 March 2007.
3.Fraser Coast seeks a review of that decision. Despite the volume of material in evidence before me the issue I have to decide may be stated simply. It is whether, within the catchment area for the proposed pharmacy, there is more than one existing pharmacy.
The Statutory Setting
4.The legislation in issue is the National Health Act 1953 (“the Act”). It does not operate by controlling directly where pharmacies may be located but it has that effect by regulating the premises from which pharmaceutical benefits may be supplied. By virtue of s 90(1) of the Act the Secretary may approve a pharmacist for the purpose of supplying pharmaceutical benefits at or from particular premises. An application for such approval is required by s 90(3A) to be referred to the Authority.
5.The task of the Authority is to consider applications made under s 90 and to make a recommendation to the Secretary whether or not the application for approval should be approved in respect of the particular premises. The Secretary is not bound by a favourable recommendation but may not grant approval without one[1].
[1] See s 90(3B) of the Act.
6.The Minister for Health and Ageing must determine rules governing the Authority’s recommendation power[2] and the Authority (and thus the Tribunal in its stead) must comply with the rules determined by the Minister[3]. The rules governing the recommendation power are contained in the National Health (Australian Community Pharmacy Authority Rules) Determination 2006 (“the Determination”). There has been a subsequent amendment to the Determination[4] but neither party suggests that any part of that amendment impacts upon my task.
[2] See s 99L(1) of the Act.
[3] See s 99K(2) of the Act.
[4]By the National Health (Australian Community Pharmacy Authority Rules) Amendment Determination 2007 (No. 1).
7.Section 9 of the Determination requires the Authority to recommend approval under s 90 of the Act where criteria, set out in that section, are met. It is not necessary, in the present case, to set out those requirements in detail; those that are in issue are examined below. Conversely s 10 of the Determination requires that the Authority recommend that an applicant not be approved if a requirement of s 9 is not met.
8.It is agreed that the only matter in s 9 of the Determination that is in issue here is whether the requirements in column 3 of Part 1 of Schedule 1 are met. It is also agreed that the appropriate classification of the present application is Item 108 of Schedule 1, described as “Relocation to urban locality (additional pharmacy)”. The requirements of paragraphs 1 and 2 of Item 108 are not, and have never been, in issue. What is in issue concerns only paragraph 3 which provides:
“3. The Authority is satisfied that:
(a) the resident population of the catchment area for the proposed premises:
(i) is, for most of the year, at least 8 000; and
(ii) has grown at least 5% in each of the 2 years before the date the application is made; and
(b) the catchment area for the proposed premises contains 1 approved premises.”
8.Whilst at an earlier time the Authority was not satisfied that the requirements of paragraph 3(a) were met it is now satisfied that it is, and that is so regardless of how the controversy regarding the catchment area is determined. And it is agreed that paragraph (b) is to be read in such a way that the requirement was that there be one existing pharmacy only in the catchment area.
9.It is the definition of the catchment area and the operation of paragraph 3(b) that is in issue here. That is important because, on the way that the Authority describes the catchment area, there is more than one existing pharmacy within that catchment area. That, says the Authority, means that the requirements of paragraph 3 are not satisfied and the application cannot be recommended. Mr Geoffrey McWilliam, a pharmacist and director of Fraser Coast and its representative at the hearing, contended that the catchment area was such that there was only one existing pharmacy within it and that, accordingly, the application for the proposed pharmacy ought to have been recommended by the Authority to the Secretary.
What is a Catchment Area
10.The first task is to determine what is meant by the expression “catchment area” in paragraph 3(b) of Item 108. The term is not defined in either the Act or the Determination. The term, as used in an earlier version of the Determination, was considered by Deputy President Forgie in Hargreaves and Australian Community Pharmacy Authority (No 2)[5]. At paragraph [101] the Deputy President held that the words ought be accorded their ordinary dictionary meaning and that the catchment area ought be regarded as being “that area from which people may flow or gravitate to the pharmacy”.
[5] (1995) 41 ALD 147 at p. 169, [101].
11.Deputy President Forgie then expanded upon the matters involved in determining the catchment area in the following terms[6],
“A catchment area, by way of contrast [to a market] is concerned with the area populated by those who may come to the pharmacy. In determining that area, the actual choices which people will make are not relevant. What is relevant in identifying the catchment area are many matters which people consider relevant in making their choice as to the area in which they will available [sic] themselves of a particular service. It seems to me that considerations of price and substitutability of other goods are too peculiar to each individual to be relevant in determining a catchment area which is concerned with people who may use the pharmacy rather than those who will. Considerations of distances and the existence of other attractions in the area are more broadly based considerations and do[[7]] seem to me to be relevant in determining the catchment area. They are features that could either encourage or discourage people from travelling to that pharmacy. Other features which would tend to do the same would include the distribution of the population in the area, people’s ease of access to Walloon, geographical features of the area and other services and attractions located in the area. The existence of other pharmacies in the general area is not relevant in itself for that is more associated with the consumer’s choice, with competition and with a market than with a catchment area.”
[6] 41 ALD at p. 170, [103].
[7] At this point in the report the word “not” appears. The parties agree, properly in my view, that the context suggests that the Deputy President intended these considerations to be relevant and that “not” should be disregarded. It was read (and reproduced) in that way by Federal Magistrate McInnis in Strutt v Australian Community Pharmacy Authority (2006) 92 ALD 608 at p. 631-2, [98] – [99].
12.It is, I think, necessary to give greater content to the concept of a catchment area if it is to be regarded in terms of those who may come to the proposed pharmacy. Entire areas would be sterilised, proper competition would be prevented and community needs would not be met if the test for determining a catchment area was based solely upon the mere possibility of use. And equally, potential use by only a small proportion of persons within a given area could not be regarded as, of itself, creating a catchment area defined by reference to the place from whence those persons came. Something more, beyond the mere possibility of use, is required to give meaning to the term “catchment area” in its present context.
13.In my view, when the issue is whether a particular area is within or without the catchment area of a proposed pharmacy the question that needs to be considered is this – “is it likely that a significant number of customers from within the area in dispute will naturally and reasonably gravitate or flow to the proposed premises?”
14.The parties seemed, at the hearing, content to accept that the question could be propounded in this way although I should note that Mr McWilliam submitted that “customers” should refer only to residents. I do not accept that argument. While it is true that the term “resident population” is used in paragraph 3(a) of Item 108, that use supports the construction urged by Mr Dillon, who appeared for the Authority, which was that sub-paragraphs (a) and (b) express different concepts. In sub-paragraph (a) the drafter has specified population requirements by reference to the resident population (i.e. “of at least 8,000”). The absence of a similar qualification in sub-paragraph (b) suggests that a different measure is to be applied. In a modern and mobile age, where shopping is frequently undertaken on the way to and from work premises and during breaks from employment, it would be wrong to regard sub-paragraph (b) as being referable only to the resident population within the area.
15.The requirement of a significant number of customers will prevent an application being defeated in circumstances where it is likely that the great majority of customers from within the area would not be expected to use the proposed premises. But it would not need to be shown that a majority of customers might use the proposed premises; for that would mean there could only be one pharmacy within each catchment area, a notion quite foreign to the requirement in paragraph 3(b) that there already be one pharmacy in the area. Further the requirement that the potential customers will “naturally and reasonably gravitate or flow” to the proposed premises excludes influences of the market and subjective choices. I respectfully agree with the conclusion of Deputy President Forgie that actual choices, while relevant to defining a market, are not relevant to determining a catchment area.
What is this Catchment Area
16.I start by observing that the nature of the task is such that it is never going to be possible to define a catchment area with any degree of precision. And despite the parties in the present case drawing “boundaries” to what each side contends to be the catchment area for the proposed pharmacy, the nature of the task is such that it will never be as precise as setting lines to a map. This is so because of the vagaries of human behaviour. In some instances it will be possible to set precise boundaries for a catchment area as, for example, where geography creates a natural barrier, but by and large the issue must be determined by reference to the likelihood of use of the proposed pharmacy from persons within a given area. But because the parties here have defined the issue in terms of catchment areas as marked upon maps, the question that is posed is which of the disputed areas is to be regarded as falling within the catchment area.
17.For the purposes of determining the catchment area for the proposed pharmacy I had the benefit of evidence from Mr McWilliam. He has lived and worked in the Hervey Bay area for some 50 years. I had, as well, the benefit of evidence from Mr Rodney Cullen, a town planner and surveyor who also is a long-term resident in the Hervey Bay area. Mr Cullen’s views and opinions were based, in large part, upon an analysis that he had undertaken of vehicle movements within the critical area.
18.I also had the benefit of conducting a view of the area on the morning of the first day of the hearing with the parties. In the course of that view Mr McWilliam and Mr Dillon pointed out geographical and physical features of the area that were thought to be of significance in the matter. That view was of great assistance in understanding the evidence and the issues that I must decide. As I understood Mr Dillon he conceded, in the course of argument, that I had to reach my own view, aided and assisted but not bound, by the opinions expressed by Mr Cullen and, to a lesser extent, by Mr McWilliam.
19.The locality of Hervey Bay was originally a collection of small hamlets situated some 45km to the east of Maryborough. The spaces between many of the hamlets are now filled in and the Hervey Bay area extends from Burrum Heads, a small fishing village some 28km west north-west of the proposed site, to Boat Harbour to the east. The locality is more urbanised to the east of the Bay, from about Point Vernon.
20.Point Vernon is a finger of land to the north of the proposed premises. Point Vernon is a dividing point between the less built-up areas to the west, Eli Creek and Dunrowan and the western beaches, and the more built-up areas to the east, Pialba, Torquay and Urangan. The “central business district” (CBD) of the Hervey Bay area is in Pialba.
21.The proposed premises are located in a newly developed part of a shopping centre, the Fraser Shores Shopping Centre (“Fraser Shores”) located at 79 Boat Harbour Drive, Pialba. Fraser Shores is a medium-sized shopping centre. It includes a medium-sized grocery store (486 sqm) with a newsagency sub-agency, a 7 day bulk billing medical centre, a Medicare office[8], a pathology collection centre, a fish and chip shop, a restaurant, a “day spa”, a retail insurance office, a mobility aid company, a flower shop, a dentist, a gymnasium, a hair salon and a childcare centre. At some stage after the decision in issue here a travel agency and a shoe shop have opened in the new part of the centre, the same part in which the proposed premises is located.
[8] The only such office in Hervey Bay.
22.There is a cluster of existing pharmacies in the Pialba CBD which is north-east of the proposed premises. Neither party suggests that the Pialba CDB falls within the catchment area of the proposed premises. Approximately 790 metres east of the proposed premises is the Centro Shopping Centre (“Centro”) located on the corner of Boat Harbour Drive and Main Street. This is a much larger shopping complex than Fraser Shores Shopping Centre. Mr Cullen describes Centro as being bigger than the Pialba Shopping Centre. Within Centro is an existing pharmacy, together with a department store, a large grocery store (2,000 sqm) and some 48 specialty shops.
23.To the south of Centro is Central Park Estate, a residential development, bounded by Main Street and Urraween Road. To the south of that development and on the opposite side of Main Street is the Kawungan Shopping Centre. It contains an existing pharmacy.
24.To the south-west of Centro, and to the south-east of Fraser Shores, is Golden Shores Retirement Village. To the west of Fraser Shores, and on the main Maryborough–Hervey Bay Road shortly before its intersection with Boat Harbour Drive, is the Eli Waters Shopping Centre. It also contains an existing pharmacy. To the north of the proposed premises is the older established residential area of Point Vernon. There is, within Point Vernon, an existing pharmacy located in a small local shopping centre.
25.There is considerable difference between the parties as to the boundaries of the catchment area for the proposed pharmacy. Mr Cullen, for example, has included large areas of land to the west and south-west of the subject site that Mr McWilliam contends ought not be included. I need not decide, even where it would be possible to do so, the precise catchment area for the purpose of this matter. In practical terms the issue that I am required to decide is whether areas containing an existing pharmacy fall within the catchment area for the proposed pharmacy.
26.Both parties are agreed that the existing pharmacy at Eli Waters Shopping Centre is within the catchment area of the proposed pharmacy. What is in issue is whether two other areas are within that catchment. The parties have described them as “Point Vernon” and “Urraween Areas E” and I will continue to use those descriptions. Each area contains an existing pharmacy and thus if either, or both, is to be regarded as falling within the catchment area of the proposed premises then the catchment area would contain more than one approved premises and Paragraph 3(b) of Item 108 could not be satisfied.
Point Vernon
27.Point Vernon is a small suburb to the north of the proposed premises. It has mainly older residential premises. It is contained on the west, north and east by the ocean. There are two main access routes to and from Point Vernon. The eastern route is along the Esplanade to the Pialba CBD. The traffic studies by Mr Cullen suggest that the majority of vehicle movements out of Point Vernon are along this route. The western route is via Tooth Street to its intersection with Old Maryborough Road, some 650 metres to the west of the proposed premises but not on a direct path to it.
28.At that intersection a driver coming from Point Vernon could turn west to travel onto Old Maryborough Road then onto the Maryborough-Hervey Bay Road travelling away from the proposed pharmacy. That traffic could not be regarded as “gravitating” to the proposed pharmacy.
29.A driver turning east from Tooth Street onto Old Maryborough Road can proceed to the subject site, albeit with some difficulty; it is not a direct path. Mr Cullen describes it as a journey “via one set of traffic lights across Boat Harbour Drive without passing any school precinct speed control areas”.
30.Mr Cullen expressed his conclusions regarding Point Vernon in this way:
“Given the traffic numbers and their direction, it is still the view of this consultant that the population from Pt Vernon should be included in the proposed pharmacy catchment. Ease of access to the proposed pharmacy from the outlet of Tooth St onto Old Maryborough Road compared to access from here to the Pialba CBD is notable. We have mentioned speed controls as a deterrent to through traffic around school sites, but a greater deterrent is the sheer volume of traffic around the school precincts during school start and finish times.”
31.Whilst I accept Mr Cullen’s conclusion that the presence of school precincts is a disincentive to Point Vernon residents travelling to the Pialba CBD via Tooth Street, I am unable otherwise to accept his contention that the residents of Point Vernon ought be regarded as falling within the catchment area of the proposed premises.
32.When the question posited in paragraph 14 of this decision is considered in terms of the residents of Point Vernon, I consider that it is unlikely that a significant number of customers from within Point Vernon would naturally and reasonably gravitate or flow to the proposed premises. I reach that conclusion because I take the view that there are other pharmacies to which the general population of Point Vernon would be much more likely to patronise.
33.There is already a pharmacy within Point Vernon. To Point Vernon residents who have no other shopping to attend to that pharmacy is the logical place to shop. To those who have other shopping errands to conduct there are the alternative pharmacies in the Pialba CBD or the Centro Shopping Centre.
34.Whilst Mr Cullen’s traffic flow analysis demonstrates that some traffic may flow from Point Vernon to or past the proposed premises, my impression, from my own observations and by reference to the road hierarchy plans, is that this is not the natural traffic flow. Having regard to the geography of the area I take the view that Point Vernon is more naturally to be regarded as being within the catchment area of the existing Point Vernon pharmacy, with the Pialba CBD pharmacy and the pharmacy in Centro a first and second alternative. That is, I do not regard the proposed pharmacy as being one to which a significant number of Point Vernon residents would naturally or reasonably gravitate or flow.
35.The proposed premises are reached by a more complicated journey than that involved in travelling from Point Vernon to the Pialba CBD or from Point Vernon to Centro. I consider that the much wider range of shops and other facilities on offer would make those destinations the more logical, and thus the more likely, destination for the Point Vernon customer who has more than merely pharmacy shopping in mind and that the natural traffic flow would be in the direction of those centres rather than towards the proposed pharmacy.
36.Thus I conclude that Point Vernon is not within the catchment area for the proposed pharmacy.
Urraween Area E
37.This area is the area to the east and south-east of the proposed premises. It is predominantly a retail and commercial area. It is bounded by Main Street to the east and Boat Harbour Drive to the north. To the south is the area described in the evidence as Urraween Area F, comprising the Central Park residential estate. Urraween Area E encompasses Centro and thus the existing pharmacy in that shopping centre.
38.There is only one residential area within Area E, the Golden Shores Retirement Village. Mr Cullen regarded the residents of that village as likely to use the proposed premises. He also took the view that the balance of Area E, which comprises the commercial and retail development in Boat Harbour Drive and Main Street, could be regarded as being the catchment area for the proposed premises because persons working within that commercial/retail precinct would find it convenient to use the proposed pharmacy on their journey to or from work or during work hours.
39.Mr Cullen’s conclusions in relation to the first of these matters was set out in his report in these terms:
“The applicant notes area E has only one residential precinct, that of Golden Shores Retirement Village. The distance via the footpath north and west to the proposed pharmacy is 500m from the entry to Golden Shores. The distance via footpaths eastwards across Central Ave extension and through the car park to the pharmacy at Centro is 487m. To access Centro the residents need to cross the extension of Central Ave, which is projected to carry 2100 vehicles per day in 2005 in a southerly direction. The easier alternative for the residents is to move west along [a] footpath not having to cross any traffic systems to the proposed pharmacy. Given the ease and safety of pedestrian access to the proposed pharmacy, some residents of this retirement village may prefer the proposed pharmacy as opposed to risking the traffic on Central Avenue and the busy car park in Centro shopping centre.”
40.Given that the residential area within Area E is a retirement village I consider that Mr Cullen is correct to regard the traffic flow as being pedestrian rather than vehicular. Any vehicular traffic would, in my view, prefer Centro (other things being equal) because the vehicular journey is more direct.
41.But it is the pedestrian flow that is of importance in this area. So far as this is concerned I regard the routes to Centro or to the proposed premises as being very much on a par. What is critical to the issue of pedestrian flow is not the journey but the purpose of the journey. I do not doubt that the residents of Golden Shores Retirement Village who have more than pharmacy-shopping in mind or who want a broader shopping centre “experience” will naturally gravitate to Centro.
42.But in my view there will be a significant number of pedestrians who would gravitate to the proposed premises, not on the basis of relative ease of journey, but because Fraser Shores has, and Centro does not, a 7 day medical centre, a pathologist’s collection centre and a Medicare office. Human experience shows that the residents of retirement villages are likely to have a greater call upon the services of medical practitioners and upon pathology services for tests ordered in those consultations than the average population. Thus, it is likely that a significant number of residents from within Golden Shores Retirement Village would naturally and reasonably gravitate to the proposed premises.
43.I am however not persuaded by Mr Cullen’s other category of potential user - the employees within the retail/commercial precinct around Centro Shopping Centre. In my view the logistics of working in that area and travelling to and from that area for work make a stop at Centro before, during or after work hours a much more likely proposition than a visit to the proposed premises. To those who work within the retail/commercial part of Area E a trip out of the area to Fraser Shores during a work break seems an unnatural journey; it is shorter in distance, and seems to me to be more natural, to visit Centro.
44.Similarly the traffic journeys involved do not support the notion that persons working within Urraween Area E would use the proposed pharmacy. Those travelling to Area E from the west or the north would need to negotiate the west-bound traffic in a busy road, Boat Harbour Drive, in order to access the proposed pharmacy. It seems unlikely that those travelling from the east or the south would go past Centro to access the proposed pharmacy on their way to Area E. At the end of the day those returning to homes in the west or north would have the benefit of having the proposed pharmacy on the side of the road that does not involve any turn across traffic however I regard it as unlikely that they would pass Centro and its pharmacy to do so. Those travelling to the south or east would not travel in the opposite direction, and likely past Centro, to visit the proposed pharmacy.
45.I am, for these reasons, unable to agree with Mr Cullen that those who work within the retail/commercial part of Urraween Area E should be regarded as falling within a catchment area for the proposed pharmacy. The result, so far as Urraween Area E is concerned, is that I regard the Golden Shores Retirement Village but not the remaining retail/commercial areas as being within the catchment area of the proposed pharmacy.
Urraween Area F
46.I should, for completeness make brief mention of Area F which comprises the residential estate called Central Park Estate to the south of Area F. I find myself unable to agree with Mr Cullen’s view that it ought be included in the catchment area for the proposed premises. There is only one exit from the estate which is onto Urraween Road. I consider it most unlikely that the residents of that area would prefer to turn to the east, across a busy road, and drive to Fraser Shores Shopping Centre in preference to travelling north to the larger Centro Shopping Centre or, for those with only pharmacy shopping in mind, that they would not go to the adjacent Kawungan shopping centre.
Conclusions
47.In the result I do not consider that the Point Vernon area is to be regarded as falling within the catchment area. Nor do I consider that that part of Urraween Area E that includes the Centro Shopping Centre falls within the catchment area.
48.On the basis of these conclusions, together with what is common ground between the parties, there is, within the catchment area for the proposed pharmacy, only one existing pharmacy, that at Eli Waters Shopping Centre.
49.It follows that in my view paragraph 3(b) of Item 108 is satisfied and that the recommendation of the Authority that approval not be given ought be set aside. I would substitute a decision to recommend to the Secretary that approval of the premises at 79 Boat Harbour Drive, Urraween be granted.
I certify that the 49 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC
Signed: ...............Signed......................................................
Eleanor O’Gorman, AssociateDates of Hearing 14 and 15 May 2007
Date of Decision 27 June 2007
Representative for the Applicant Mr G McWilliam
Counsel for the Respondent Mr A Dillon
Solicitor for the Respondent Australian Government Solicitors
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