Shaffer and Department of Health and Aged Care
[2001] AATA 426
•21 May 2001
DECISION AND REASONS FOR DECISION [2001] AATA 426
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2000/1318
GENERAL ADMINISTRATIVE DIVISION )
Re SUSAN HENRIETTA SHAFFER
Applicant
And SECRETARY, DEPARTMENT OF HEALTH AND AGED CARE
Respondent
DECISION
Tribunal M J Sassella, Senior Member
Date21 May 2001
PlaceSydney
Decision The Tribunal affirms the decision under review.
[Sgd] M J Sassella
Senior Member
CATCHWORDS
PHARMACEUTICAL BENEFITS – decision to cancel approval number of approved pharmacist – pharmacist not carrying on business as a pharmacist at premises in respect of which the pharmacist is approved – whether decision to cancel approval number was the correct or preferable decision
National Health Act 1953
National Health Amendment Act (No 1) 2000
Re Da Rui and Health Insurance Commission [2001] AATA 237
W H Soul Pattinson & Co Ltd v Secretary, Department of Health and Family Services (1997) 155 ALR 419
Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106
Re Farmakis Australian Community Pharmacy Authority and others (AAT 10863, 11 April 1996)
REASONS FOR DECISION
21 May 2001 M J Sassella, Senior Member
The decision under review
On 5 July 2000 a delegate of the Secretary of the Department of Health and Aged Care ("the Department"), the State Manager of the Health Insurance Commission ("the HIC"), New South Wales, decided under s 98(3) of the National Health Act 1953 ("the Act") to cancel approval to dispense pharmaceutical benefits in the form of approval number 00865M ("the approval number"), held by the Applicant (T3). The cancellation was to take effect at close of business 5 July 2000.
Factual chronologyThis chronology is based on a chronology in T2 within the Section 37 Statement (Exhibit TD1) and a chronology provided by counsel for the Applicant.
In May 1990 Ms Shaffer acquired a pharmacy at 145 Canterbury Rd, Canterbury ("the premises") (Exhibit A1 paragraph 2). She sought approval to dispense pharmaceutical benefits pursuant to the Act (T5).
The Applicant was approved as a pharmacist for the purposes of section 90 of the Act and was given the approval number on or around 14 May 1990 (T7).
In April 1997 Ms Shaffer first became aware of the intention of the local council (Canterbury Council) to build a shopping complex immediately adjacent to the premises at the Jeffrey St car park site. She sent letters to the property owners proposing they consider participating in the development (Exhibit A1 paragraph 5).
On or about 19 December 1997 the Applicant contacted the Respondent to advise that her pharmacy was to be demolished to make way for a new shopping complex. Apparently the Applicant hoped to relocate into the new shopping complex. The Applicant requested that her pharmacist approval be suspended for 12 to 18 months. A file note records that the Applicant was advised to submit her request in writing (T11).
On 22 January 1998 the Respondent received a letter from the Applicant stating that her "shop is earmarked for demolition...I would like to shelve the approval and reopen in the new shopping centre." A letter from the Council dated 21 January 1998 was attached. The Council letter suggested some enthusiasm for the development (T12). It should be noted that in oral evidence the Applicant told the Tribunal that the shop has not been demolished. It is merely closed.
On 17 March 1998 the Respondent replied to the Applicant's letter that "...not until the Council finally makes public its redevelopment plans for the shopping centre...can a course of action be taken". The Applicant was provided with information regarding whether the Australian Community Pharmacy Authority ("the Authority") would support the Applicant's request to relocate her approved pharmacy more than once in 2 years (T13).
On 26 May 1998 Ms Shaffer anticipated that the Jeffrey St development would be completed by the end of the year and asked that the HIC permit her to close the pharmacy for 6 months without cancelling her approval number for personal reasons (including the fact that she had suffered severe head injuries as a result of a violent robbery at the premises) as well as to permit the development to be completed (T14).
On 11 June 1998 the Respondent replied that the approval would not be suspended and that "(n)ot unless you have been given a 'Notice to Quit' these premises would I be prepared to reconsider...In the meantime I would expect you to continue to trade under the terms of your approval." (T15)
In July 1998 Ms Shaffer notified the Council of those owners interested in participating in the development (Exhibit A1 paragraph 6).
On 19 January 1999 the Council wrote that it expected that the redevelopment would be completed by the end of 1999 (Council letter and time line) (T16).
On 25 January 1999 Ms Shaffer convened a meeting with local shopkeepers and the Council to discuss the development.
On 14 September 1999 the Applicant provided documents and advised that she had "been given notice to quit by 1 November 1999." (T16) On T16 there is an annotation by a HIC officer, addressed to the decision-maker, that states, "This matter has been 'happening' for 20 months now, in which time Ms Shaffer could have submitted an application to relocate to an interim site (although she now says that no sites are available – nor does she appear willing). Given that Ms Shaffer has not provided a time frame for redevelopment, I suggest HIC encourage her to relocate (to obtain her views and reasons)". The decision-maker annotated the document on 20 September 1999 with, "Please 'park' the approval for 3 months from 1/11/99. I would usually allow 2 months to re-locate however given the Xmas period I will allow a further 1 month in this case."
On 30 September 1999 the Respondent wrote to the Applicant and said that he had decided not to cancel the approval for a period of three months with effect from 1 November 1999. Effectively, the Section 37 statement said, the Applicant was given almost four months in which to consider an option that would suit her situation (T17).
Between September 1999 and January 2000 Ms Shaffer attempted to find alternative premises in the local Canterbury area (Exhibit A1 paragraphs 9 – 13).
On 4 January 2000 the Applicant wrote and advised "...there are no other shops available for relocation." The Applicant hoped to be able to keep the approval until the new shopping complex was completed (T18). The letter enclosed confirmation that she had been selected as the approved pharmacist by the developer of the site which was represented by MFLO (architects, engineers and urban planners).
On 11 January 2000 MFLO provided a timetable for the Jeffrey St development, projecting that the site would be completed by early 2001 (T19).
On 12 January 2000 the Respondent spoke with the Applicant and advised of his decision to cancel the approval. On 13 January 2000 the Respondent formally cancelled the approval granted to the Applicant to supply pharmaceutical benefits at the approved premises, effective from the close of business on 1 February 2000 (T20).
On 14 January 2000 the Applicant telephoned the Respondent to advise that she would temporarily relocate her pharmacy from 145 Canterbury Road to 197 Canterbury Road. A letter of intent to that effect was supplied (T25). The Applicant completed a Request for Cancellation of Approval (for 145 Canterbury Road) pursuant to section 98 of the Act (T21) and an Application for Approval (for 197 Canterbury Road) as a Pharmacist pursuant to section 90 of the Act (T22). The reference to 197 Canterbury Road was an error and the correct address was 193 Canterbury Road (T25).
On 14 January 2000 the Applicant confirmed in writing her appointment of solicitors during a temporary absence overseas. The Applicant also requested that the cancellation not take effect and that she be given an extension of time until 1 May 2000 to enable her to alter part of some newsagency premises to make them suitable as a pharmacy (T 23 and 24). The Applicant requested an extension of time for her approval until 1 May 2000 (T23).
On 17 January 2000 Ms Shaffer left Australia to go overseas on business until 5 March 2000. She left her application in the hands of her solicitors (Exhibit A1 paragraph 16).
On 19 January 2000 the Respondent advised the Applicant's solicitors that the cancellation of the approval was rescinded, on the basis that the Applicant proposed to apply to the Authority to relocate her approved pharmacy. The approval was to be reviewed on or about 1 May 2000 (T26).
On or about 25 January 2000 the Applicant's application was referred to the Authority and registered as NA468 (T27). On 28 February 2000 the Authority requested additional evidence, such as a copy of a lease, to confirm the relocation of the approval (T29).
On 5 March 2000 the Applicant returned from overseas. She decided not to proceed with the proposal to relocate to the newsagency premises at 193 Canterbury Road because she believed the rent being demanded was too high and she believed the security of the premises to be a problem. She then considered buying shops 18 and 19 at 193 Canterbury Road (Exhibit A1 paragraph 16).
On or about 21 March 2000 the Applicant completed another set of forms that indicated an alternate site for relocation of her pharmacy. The subject site of her application to the Authority was 18/193 Canterbury Road, Canterbury, which was to become available to her on 1 May 2000. The forms were duly passed on to the Authority so that Ms Shaffer's original application could be replaced. The registration number given to her original application was unaffected (T33).
On 24 March 2000 the Authority made a further request for evidence of relocation to the proposed address identified in the Applicant's application for relocation (T30).
On 20 April 2000 and 26 May 2000 the Secretary to the Authority advised the Applicant's solicitors that, at separate meetings, the Authority had recommended that Ms Shaffer's application "...be approved subject to additional documentation being provided in relation to evidence of legal right to the proposed premises." (T36 and T37). In addition the Authority noted that the Applicant's "...approval ran out on 1/5."
On 4 May 2000 Montano Realty sent a letter to the Authority enclosing a Commercial Lease for the relevant premises (T38).
On 1 June 2000 the Authority recommended that the Applicant ask for an extension of the time allowed for the parking of the approval (T40).
On 1 June 2000 the Respondent orally extended the time for the Applicant to obtain a relocation approval until 30 June 2000, to allow her application to be considered by the Authority on 28 June 2000. The Respondent indicated it would not cancel the approval in that time (T41).
On 2 June 2000 Ms Shaffer informed the Authority that she was withdrawing her application to move to shop 18 at 193 Canterbury Rd (T42) (Exhibit A1 paragraph 19). The Applicant took this step because she was able to obtain only $136,500 finance to enable her to buy the premises at 193 Canterbury Road. She required $390,000 (Exhibit A1 paragraph 13).
On 7 June 2000 the Applicant orally advised the Respondent that, after careful consideration, she had decided not to proceed with her relocation. Later that day the Applicant e-mailed the Respondent indicating that there was the prospect of an interested party purchasing the approval. The Applicant stated "(w)e should submit the paperwork before the next meeting" (T44).
On 7 June 2000 the HIC agreed to extend approval to enable relocation to take place (T45) until 30 June 2000 (T46).
On 19 June 2000 the Respondent's delegate formally advised the Applicant that he was "prepared to honour my [ie his] date of 30 June 2000". However it was indicated that the timeframe was already two months longer than the recommended maximum length (T46).
On 26 June 2000 the Applicant's representative, Ms A Mihulka, a health industry consultant, indicated to the HIC that "(o)ne of my clients wishes to relocate Ms Shaffer's approval number." The application would be ready to be submitted to the Authority for its September meeting. Ms Mihulka requested that the parking be approved for a further 12 weeks (T47). Ms Shaffer expected that Ms Mihulka would file a relocation application on her behalf by 30 June 2000 (Exhibit A1 paragraph 22) pursuant to an authority given to Ms Mihulka on 6 June 2000 (T48) but none was. At the time, Ms Mihulka informed the HIC that a purchaser had been located in Western Australia, but the papers had not been completed (T3).
On 5 July 2000 the delegate of the Secretary to the Department of Health and Aged Care (the Respondent) under section 98 of the Act cancelled the approval of the Applicant, trading as Susan Shaffer Chemist located at 145 Canterbury Road, Canterbury, 2193, (the approved premises) designated number 00865M, to supply pharmaceutical benefits under the Act (the approval). The cancellation of the approval was effective on and from 5 July 2000 (T3). The approved premises had been closed and unable to supply pharmaceutical benefits from at least 1 November 1999.
On 11 July 2000, Ms Mihulka requested a statement of reasons for the decision dated 5 July 2000 (T48).
On 20 July 2000 the Respondent provided further reasons for his decision (T49). These were:
'the pharmacy at 145 Canterbury Road, Canterbury, 2193, has been closed since 1 November 1999
'at my discretion I delayed the cancellation of the approval to allow Ms Shaffer to consider alternate options with a view to keep active the approval – in February 2000 Ms Shaffer submitted papers to relocate her approval
'in June 2000 Ms Shaffer decided not to proceed with the relocation preferring to transfer the approval instead – again at my discretion I delayed the cancellation of the approval for one month
'transfer papers were not received by 30 June 2000, the date I had set".
The Applicant has appealed the decision dated 1 July 2000 (T1).
On 31 October 2000 the Applicant signed a lease for three years commencing 10 November 2000 giving her tenure of premises at 181 Canterbury Road, Canterbury. She proposes to reopen the pharmacy in these premises if her approval number is restored to her. She currently runs a wholesale pharmaceutical business from these premises. She has a NSW licence for wholesale and export of pharmaceuticals (Exhibit A1 paragraph 24).
LegislationThe relevant legislation in this matter is the National Health Act 1953 ("the Act"), in particular ss 84 – definitions of "approved pharmacist", "approved supplier", "pharmaceutical benefit"; 90(1), (3AA), (3AB), (3B); 95(1), (3)-(10); 98(1)(a), (2)(a), (3); 99K(1), (2); 99L(1), (2); 105AB(8A).
"National Health Act 1953
84 Interpretation(1) In this Part, unless the contrary intention appears:
…
approved pharmacist means a person for the time being approved, or deemed to be approved, under section 90;
approved supplier means an approved pharmacist, an approved medical practitioner or an approved hospital authority;
…
pharmaceutical benefit means a drug or medicinal preparation in relation to which, by virtue of section 85, this Part applies;
…
90 Approved pharmacists(1)Subject to this section, the Secretary may, upon application by a pharmacist who is willing to supply pharmaceutical benefits on demand at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at or from those premises.
…
(3AA)Subsection (3A) does not apply to an application for an approval arising out of a change in the ownership of a pharmacy situated at particular premises if the change results or resulted from:
(a) the sale of the pharmacy; or
(b)the death of the owner or one of the owners of the pharmacy; or
(c)a change in the constitution of a partnership that owned the pharmacy;
if the pharmacy is to continue to operate at the same premises.
(3AB) In subsection (3AA):
pharmacy means a business in the course of the carrying on of which pharmaceutical benefits are supplied.
(3B)An approval may be granted under this section in respect of an application to which subsection (3A) applies only if the Authority has recommended the grant of the approval, but the Secretary may refuse to grant an approval even if the grant has been recommended by the Authority.
…
95 Suspension or revocation of approval(1)The Minister may, after investigation and report by the appropriate Committee of Inquiry, by notice in writing:
(a) reprimand an approved pharmacist; or
(b)suspend or revoke the approval of the pharmacist under section 90;
and may, at any time, by notice in writing, remove that suspension or restore that approval.
(3)A suspension under subsection (1) has effect for such period as the Minister determines and specifies in the notice of suspension.
(4)If the Secretary considers that it is necessary in the public interest so to do pending investigation and report by the appropriate Committee of Inquiry, the Secretary may suspend an approval referred to in subsection (1) and the Secretary may at any time remove the suspension.
(5)Where the approval of a pharmacist is suspended under subsection (4), the Secretary shall forthwith refer the matter to the appropriate Committee of Inquiry for investigation and report to the Minister.
(6)A suspension by the Secretary under subsection (4) has effect only until the Minister has dealt with the matter in accordance with subsection (7).
(7)On receipt of a report from a Committee of Inquiry on a matter referred to it in accordance with subsection (5), the Minister may, by notice in writing, further suspend the approval for such period as the Minister specifies in the notice, revoke the approval or remove the suspension.
(8)The Minister shall not suspend, further suspend or revoke an approval under the preceding provisions of this section unless, having regard to the evidence before the Committee of Inquiry and the report of the Committee, the Minister is satisfied that the pharmacist has, in relation to or arising out of the approval, been guilty of conduct which is an abuse of that approval or is an abuse or contravention of this Act or the regulations or shows the pharmacist, as the case may be to be unfit to continue to enjoy the approval.
(9)The suspension or revocation of the approval of a pharmacist under this section may be in respect of all of the premises in respect of which the approval was granted or may be in respect of particular premises.
(10)For the purposes of this section, a reference to a pharmacist is taken to include a person to whom subsection 90(6) applies.
…
98 Cancellation by Secretary of approval of pharmacists etc.
(1)Whenever:
(a)an approved pharmacist requests that his or her approval under section 90 in respect of all or any of the premises in respect of which he or she is approved be cancelled;
…
the Secretary shall cancel that approval.
(2)Where:
(a)an approved pharmacist gives the Secretary notice in writing that the pharmacist has ceased to carry on business as a pharmacist at premises in respect of which the pharmacist is approved; or
…
the Secretary may cancel the approval.
(3)Where the Secretary is satisfied that an approved pharmacist is not carrying on business as a pharmacist at premises in respect of which the pharmacist is approved, the Secretary may, by notice in writing to the pharmacist, cancel the approval of the pharmacist under section 90.
…
(4)If a person becomes an approved pharmacist in respect of premises in an area in respect of which a medical practitioner is approved under section 92, the Secretary shall cancel the approval of the medical practitioner in respect of that area or of that part of the area in relation to which that section no longer applies.
(4A)If a pharmacist:
(a)before 18 December 1990, was granted an approval to supply pharmaceutical benefits at or from particular premises; and
(b)because of the operation of subsection 90(5A), is taken to have been granted such an approval in respect of other premises;
the Secretary is taken, immediately after the commencement of section 20 of the Health and Community Services Legislation Amendment Act (No. 2) 1993, to have cancelled the approval in respect of the premises referred to in paragraph (a).
(5)A reference in this section to an approved pharmacist carrying on business as a pharmacist at premises is a reference, in the case of an approved pharmacist to whom subsection 90(6) applies, to an approved pharmacist carrying on a business for the supply of pharmaceutical benefits at or from the premises.
…
99K Functions(1) The functions of the Authority are:
(a) to consider applications under section 90; and
(b) to make, in respect of an application under section 90:(i) a recommendation whether or not the applicant should be approved under that section in respect of particular premises; and
(ii) if an approval is recommended—recommendations as to the conditions (if any) to which the approval should be subject; and
(2)In making a recommendation under subsection (1), the Authority must comply with the relevant rules determined by the Minister under section 99L.
…
99L Determination of rules by Minister(1)The Minister must, by writing, determine the rules subject to which the Authority is to make recommendations under subsection 99K(1).
(2) A determination under subsection (1) is a disallowable instrument
…
105AB Application for review by Tribunal
…
(8A) An application may be made to the Tribunal for a review of a decision of the Secretary under subsection 98(3) or (3A) to revoke an approval.
Sections 99K(1) and (2) as quoted above are as they now stand. Section 99K as it previously appeared was amended by Schedule 1 of the National Health Amendment Act (No. 1) 2000 (the "Amendment Act"). The Amendment Act repealed s 99K(1)(a) by omitting all references to applications under the then sections 99ZA, 99ZAA and 99ZDA (Division 4C of Part VII, where those sections appeared, was repealed by the Amendment Act, Schedule 1) none of which is relevant to the decision under review. The Amendment Act also repealed ss 99K(1)(c), (da), (db) and (c), which are also not relevant to the decision under review. The decision under review relates to an application under section 90.
The Amendment Act also revoked the previous s 99L(1)(a) and substituted the current s 99L(1), which is quoted above. The previous s 99L(1)(a) read in the same as way as s 99L(1) now does.
Appearances
Mr Burley of counsel represented the Applicant. Mr Gath, Counsel in the HIC, represented the Respondent. At the hearing the following material was taken into evidence:
Documents prepared pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 Exhibit TD1
Statement of the Applicant dated 3 April 2001 Exhibit A1
Book – "Australian Community Pharmacy Authority, Applications Handbook, July 2000-June 2001" Exhibit R1
Third Community Pharmacy Agreement Exhibit R2
Commonwealth of Australia Health Act No PB 11 of 1999 Exhibit R3
Commonwealth of Australia Health Act No PB 8 of 2000 Exhibit R4
Deactivation of Pharmacist Approvals made under s 90 of the National Health Act 1953 - Guidelines Exhibit R5
Applicant's evidence
The Applicant prepared a written statement which was Exhibit A1. It is largely a chronology of events and has received some attention already in the chronology. The additional matters of relevance in the statement were:
The delays in progressing the redevelopment of the area are explained somewhat in paragraph eight of Exhibit A1. Initially the Council indicated that it had a preferred developer selected from a range of proposals it had received. "However, after engaging a consultant, Council then decided to put the whole project out to tender. This occurred in about January 2000."
Canterbury Road is a very busy arterial road. 24 hour clearway conditions have applied long much of the road over the past 12-15 years. "This has had an adverse effect upon retail outlets, which has resulted in many of them closing down and being converted into residential flats or small workshops/factories."
"There are a large number of non-retail businesses located on Canterbury Road within 1.5 kilometres of the Pharmacy which are unsuitable for retail use, even if they were available, because of their size and design."
"My enquiries for alternative premises resulted in locating three shops which are available. One of these shops was a very small, freestanding shop adjacent to the railway line, on Canterbury Road. I considered that the shop's location made it a security risk, although its size would not have made it viable for me to relocate the Pharmacy there. The other two shops were newly built and located adjacent to the old post office and fronted onto King Street, near the corner of Canterbury Road. I made enquiries about renting one of these shops from the Managing Agent." He told the Applicant that the owner would not rent them and would only sell as a pair. The Applicant decided to try and buy both shops. She would have leased the second shop to doctors. She wrote, "I applied for a loan with Advance Investment Securities Australia Pty. Limited, whom I had already dealt with previously. I lodged my application in about May 2000. Each shop was selling for $195,000." As noted in the chronology this resulted in an offer of finance to the extent of only $136,500.
The Applicant did not approach any banks because she had previously been refused bank finance. She did not follow up on an approach to a finance broker because he suggested she falsify her income when seeking finance.
The managing agent prepared the lease in T38 and T39 in respect of 18/193 Canterbury Road but it was understood that the lease would not be effected if the Applicant failed to secure finance.
The loss of the approval number has meant that the Applicant has lost the opportunity to reopen her pharmacy or to sell the approval number for an estimated $50,000 to $60,000.
In oral evidence the Applicant explained to Mr Gath that her trip overseas between 17 January 2000 and 5 March 2000 was to Pakistan to attend to her non-pharmacy business as a migration agent. This trip had been planned for some time. She was in constant e-mail contact with her representatives in Australia. She had arranged for solicitors, Ebsworth & Ebsworth, to look after developments during her absence (T24).
Mr Gath observed that in January 2000 the Applicant knew that there was a limited amount of time in which to sort things out, yet she still went overseas. He also observed that the paper trail from January to March 2000 does not indicate frantic activity to resolve the situation on the part of the Applicant and Ebsworth & Ebsworth. The Applicant did not really accept that proposition but she had little to say in response.
As regards the Applicant's current place of business, 181 Canterbury Road, this premises had come to her attention as an option on 11 November 2000. She signed a lease on that date. She was allowed a month's free rent. It took eight weeks to prepare the premises for opening. She would still like to go into the redeveloped area incorporating her previous shop premises.
Mr Burley's submissions for the Applicant on the basis of the facts were as follows.
The Applicant ceased to dispense pharmaceutical benefits pursuant to the Act from 1 November 1999. Her approval number was cancelled by a decision dated 5 July 2000. In total the discretion exercised pursuant to section 98(3) of the Act lasted for 8 months.
The chronology of events indicates that the Applicant made strenuous efforts to secure premises from which to conduct her pharmacy. Indeed, from a period of two years prior to her eviction from the premises Ms Shaffer had been aware that plans were afoot that might threaten her tenure at the premises, and had actively campaigned to ensure that the proposed Jeffrey St car park development was suitable and carried out expeditiously. Her preferred option was to become the pharmacist for the development.
Ms Shaffer was under no obligation to notify the HIC of the plans of the Council to develop the site, yet it would appear that the HIC considered that by the time of the notice to quit, Ms Shaffer had somehow prejudiced her own position. This is from the handwritten notes to the decision-maker in T16 (discussed in the chronology of events earlier in these reasons). This may well have coloured the delegate's attitude to subsequent events.
Initially the HIC permitted Ms Shaffer 3 months, until February 2000, to decide what to do (T17). Ms Shaffer had not been offered premises in the development, and so she sought alternative premises within the local area. Commercially, this would have enabled Ms Shaffer to benefit from the goodwill that she had developed in the business that she had operated since 1990. It would also have facilitated an easier relocation pursuant to paragraph 6(a) of Ministerial Determination PB 8 of 2000.
On 4 January 2000 Ms Shaffer informed the HIC that she had received confirmation from the developers that she would be included as the pharmacist on the Jeffrey St project, which was expected to be completed by the beginning of 2001 (T18). The response to this notification was a letter on 13 January 2000 purporting to cancel the approval number (T20).
This decision was reversed the next day when Ms Shaffer put forward a proposal for the lease of other premises on Canterbury Rd.
Given the peremptory manner of the cancellation – one month before the stated period of the extension - it is to be noted that Ms Shaffer moved with great speed to find alternative premises at that stage. Such conduct is entirely consistent with Ms Shaffer's desire to reopen her premises as soon as possible.
The delegate then agreed to give Ms Shaffer an extension of time until May 2000 to lodge a relocation application. In March 2000 Ms Shaffer found that she could not reach satisfactory terms with the landlord of the proposed premises. She found the proposed rent to be too high, and also that the security of the premises was inadequate. This latter point was a matter of particular (and understandable) concern for her because she had been the victim of violent robberies in the area in the past (T14).
The change in Ms Shaffer's plans in March 2000 led her to find premises in the area which she might purchase. These premises were shops 18 and 19, 193 Canterbury Rd. An application to raise the finance to purchase these premises was lodged and Ms Shaffer believed that the finance would be granted.
By this stage it is to be noted that in a very short period of time (from November 1999 until March 2000), Ms Shaffer was required to:
quit the premises of her business;
change her long-held hope to secure premises within the development project;
at very short notice find rental premises within the area;
in securing such premises ensure that they were commercially viable and provided a suitable, safe, working environment; and
when this failed, find and raise the finance to purchase alternative premises.
Whilst the finance application was under consideration the delegate granted Ms Shaffer an extension until the June 2000 meeting of the Authority (T44).
On 2 June 2000 Ms Shaffer was told that the finance application had been rejected. At this stage, having exhausted all options available to enable her to continue to trade in the area, Ms Shaffer elected to sell her approval number (T48).
With this end in mind, on 6 June 2000 she appointed Ms Mihulka to act on her behalf to sell the number (T48). The delegate granted her an extension to enable the relocation to occur provided that the application was lodged by 30 June 2000.
No application was lodged by the set date, and the delegate cancelled the approval number on 5 July 2000 (T3). However, on 26 June 2000 Ms Mihulka had informed the delegate that, whilst a purchaser of the approval number had been found, for reasons beyond Ms Shaffer's control (namely, the need for the purchaser to fulfil certain relocation requirements), the relocation application could not be submitted until the September 2000 meeting of the HIC.
It is submitted in these circumstances that refusal to provide Ms Shaffer with an extension to permit the relocation to take place was premature. It had the effect of depriving her of a valuable entitlement, for reasons that were by then wholly outside of her control. It was not suggested that Ms Shaffer could, in June 2000, have found a purchaser with any greater speed.
In a letter of 20 July 2000 the delegate listed the reasons for cancelling the approval number (T49). In those reasons, the delegate addressed Ms Shaffer's decision not to relocate the approval number as being one of preference rather than necessity. It is submitted that the circumstances before the Tribunal make it clear that Ms Shaffer did not make a voluntary or capricious decision to abandon the relocation application.
It is submitted that the decision to terminate the approval number on 5 July 2000 was, in the light of all of the circumstances, premature. An extension of 12 weeks in June 2000 would have enabled the transfer to Currmabine in WA to proceed. That extension would have meant that the total extensions granted were for 11 months. During that period Ms Shaffer had made strenuous efforts to recommence trading in her local area. As a last refuge she elected to sell the approval number. The decision of the delegate prevented that sale from occurring.
The relevant questions for determining whether an extension should be granted are summarised, said Mr Burley, in Re Da Rui and Health Insurance Commission [2001] AATA 237. At paragraph 112 the Tribunal stated:
"Having arrived at that point the Tribunal finds that it prefers the arguments of the applicant. He had acted reasonably to pursue his goal of relocation up to February 1999. In making this finding the Tribunal disagrees with the Respondent's submission that Mr Da Rui did too little to try and achieve a reopening of his business. The Tribunal notes, as Mr Burley pressed it to do, that extensions up to that time had been granted to Mr Da Rui. This is less important, in the Tribunal's view, than the evidence of positive steps Mr Da Rui took in that period to pursue relocation. That is because Mr Burley's argument relates to considerations of the time taken to finalise plans for relocation. While relevant considerations, in the Tribunal's view they are less relevant than consideration of the positive steps taken, and being taken, to achieve relocation and recommence supplying pharmaceutical benefits for the sorts of reasons put by Mr Gath." [emphasis added].
It is submitted that the facts of this case primarily demonstrate the positive steps taken by Ms Shaffer. Whilst some of those steps (the plan to be part of the development; the newsagency re-fit and lease; the shop purchase) turned out to be blind alleys, there was no way that Ms Shaffer could have been aware of that in advance. Others might have abandoned the search for suitable local premises earlier. Ms Shaffer elected not to do so. At each stage she was tantalised by a realistic prospect of relief from her dilemma, only to be dashed at the last moment. That is not a course of events for which she could be properly criticised.
Unfortunately, the delegate lost "patience" with Ms Shaffer's applications. Whilst from an administrative point of view such an attitude can be understood, it is important (and consistent with the intention of the legislation) to recognise that the varying circumstances that impacted upon Ms Shaffer's decisions were largely outside of her control. A vice in the decision of the delegate was a failure to recognise that fact.
In concluding, Mr Burley said that Ms Shaffer had, on the facts, pursued four options.
Her primary option was relocation in the Council development.
Her second option, when the primary option did not pan out timewise, was to go into the newsagency.
When the newsagency option fell through because of rent and security difficulties, the Applicant opted to buy the two shops at 193 Canterbury Road.
When the finance for the shop purchase was inadequate for the purpose the Applicant opted to sell her approval number.
The Tribunal observed that there was apparently a fifth option, that is the decision the Applicant ultimately took to open a business at 181 Canterbury Road in November 2000. In response it was clarified that the Applicant, if successful in these proceedings, would want to seek an approval number for her current premises.
Respondent's evidenceAs far as strict evidence is concerned, the Respondent relies on the Section 37 Statement and documents.
Mr Gath addressed Mr Burley's submissions. He commented that Mr Burley had tried to downplay the Applicant's contacts with the HIC in 1998-1999. He had described these early approaches as notification to the HIC of the plans of the Council to develop the site. This, he had said, led the HIC to take a prematurely adverse attitude to Ms Shaffer's request for a suspension of her approval number in September 1999. Mr Gath pointed out that the original contact with the HIC had been in January 1998 (T12) when she had attempted to secure a decision to permit her to park her approval number. That was denied to her in T13.
Again, in her letter to the HIC in May 1998 (T14) the Applicant sought to park her approval.
Mr Gath did not accept that the Applicant had been desperately seeking options. There were some moments of desperation and high activity but this was not so for the totality of the period in question. There were times when the Applicant had been less than diligent.
The Applicant had the benefit of more than two years warning (starting in April 1997) that there was to be a redevelopment before she had to close her premises on 1 November 1999. She had plenty of time to develop contingency plans. She knew her position would be pressured but she failed to develop a better strategy to handle the transition.
As regards the period from the closure of the previous premises on 1 November 1999 and January 2000, the Applicant knew that she had a limited period in which to arrange her affairs. It was suggested that the HIC had reneged in some way on the understandings in place and she had been pushed towards the newsagency option. There is, however, no evidence that the Applicant seriously looked at the range of available options in that period of months.
The Applicant's absence overseas between 17 January 2000 and early March 2000 saw her focused on her other affairs at the potential expense of her pharmacy business. She placed reliance on a firm of solicitors. Could she really expect them to be proactive in trying to resolve her problems? There seems to have been little done by the solicitors in that seven-week period. The options she then pursued, ie the newsagency and the purchase of the two shops, had to be handled quite fast. She should not have left Australia in January 2000. She should have stayed to pursue her options for relocation.
Mr Gath addressed the recent decision by the Tribunal, Re Da Rui and Health Insurance Commission (supra), in which the Tribunal was constituted by the same Senior Member as is the case in this application. Mr Gath had the difficult task of communicating the misgivings of the Respondent in relation to the passage from Da Rui (supra) cited by Mr Burley at paragraph 68 above. Mr Gath explained that the Respondent would be concerned if there developed in the Tribunal a doctrine of "positive steps" that could assist a pharmacist who has had his or her approval number cancelled. It could be dangerous if such an approach were to develop within the pharmacy community. An applicant should not have a reasonable expectation of vindication in the Tribunal merely because they have engaged in activity. There has been a tendency to give too much de facto recognition to the regime for sale of approval numbers when that regime exists totally outside the legislation. It was submitted that the Tribunal should, at the very least, be extremely careful in recognising attempts to sell an approval number as appropriate positive steps.
Mr Gath said it is important to consider the public interest aspects. An approval number is a licence that allows an applicant to participate under a government scheme to provide pharmaceutical benefits to a specified community. For an applicant to attempt to close his or her business, or to attempt to hold an approval number in abeyance for later use, raises questions. If such applications are granted, does this downplay the public interest in favour of a private property interest?
In conclusion Mr Gath reminded the Tribunal that the Applicant had run her pharmacy business for ten years. Early in the piece she knew of the development plans affecting her premises. She sought to park her approval number. She actively pursued the option of moving into the development when it was ready. There is a local community in Canterbury which has an expectation that a pharmacy will be in operation from the Applicant's premises at 145 Canterbury Road, or within proximity to that address. The Applicant had the benefit of a sanctioned eight months period in which she was permitted to hold and not use her approval. The community was not being served in that period. Mr Gath referred to the leading case, W H Soul Pattinson & Co Ltd v Secretary, Department of Health and Family Services (1997) 155 ALR 419, a decision by Beaumont J. At page 445 the learned judge says:
"The first real question then is, whether there was a duty in the first respondent to act under s 98(3) in the circumstances of this case. It will be remembered that by s 98(3) of the Act it is provided.
'3. Where the Secretary is satisfied that an approved pharmacist is not carrying on business as a pharmacist at premises in respect of which the pharmacist is approved, the Secretary may, by notice in writing to the pharmacist, cancel the approval of the pharmacist under section 90.'
"It is true, as the first and second respondents submitted, that before acting under s 98(3), the first respondent was bound by the application of the rules of natural justice to afford the third respondents a reasonable opportunity to be heard. However, by any measure, the third respondents had been given that opportunity in 1996. It is also true that s 98(3) uses the words 'may cancel' (emphasis added [by Beaumont J]), in contrast to the phrase 'shall cancel' (emphasis added). Nevertheless, as the settled course of authority previously mentioned demonstrates, it does not follow that the use of the word 'may' is a conclusive indicator of the existence of a discretion rather than a duty to act, at least where the statutory conditions for the exercise of power are fulfilled.
"In my view, the observations of Windeyer J in Finance Facilities, above, are in point here. That is, I would construe s 98(3) of the Act to mean that once the first respondent [who is the Respondent in the instant Tribunal case] was satisfied that the third respondents were not carrying on business at the premises specified, the first respondent came under a duty to cancel that approval."
Applicant's response
Mr Burley responded to Mr Gath.
Ms Shaffer had taken advantage of the early information she had about the development project. She acted immediately. She formulated a plan of attack. It was not clear at the start of the process that the development time frame would blow out. The transition could have been smooth had the development progressed in a timely way.
Ms Shaffer had acted to pursue all options early in 2000. The cancellation in July 2000 was premature.
It was unfair to criticise the Applicant for pursuing her alternative business options overseas early in 2000. By that stage she had had to close 145 Canterbury Road and was effectively out of the pharmacy business.
It was sensible for the Applicant to retain solicitors to act for her while she was overseas. An application for approval was lodged on the Applicant's behalf (T21, T22). The solicitors detailed their broad authority in a letter to the Respondent dated 14 January 2000 (T24). The Applicant was in contact by e-mail. Even if there were no frantic activity in this period would frantic activity have been expected throughout the eight months? This may have been a "downtime" period in any event. This period was of no consequence in the overall chronology. The Applicant had sought early financial approval for the purchase option. The problem was the offer of inadequate finance in late May 2000 (Exhibit A1 paragraph 14).
It is true that the Applicant's strategy may not have been cohesive. This was because it had to be flexible as a result of the problems dictated by events.
Mr Burley widened the discussion on the Re Da Rui decision (supra) and public policy considerations. The Tribunal in Re Da Rui (supra) did not suggest that the taking of positive steps to get back into, or to remain in, business was decisive. It was seen as an important consideration to be borne in mind by a decision-maker. There is a public interest in maintaining a pharmacy in a locality. However, consideration of the Pharmacy Guild of Australia papers (eg Exhibit R2, Third Community Pharmacy Agreement between The Commonwealth of Australia and the Pharmacy Guild of Australia (2000)) shows that the scheme of the Act reflects an arrangement reached between the Pharmacy Guild and the Commonwealth. In return for the provision of pharmacy services a pharmacist is accorded the right to dispense benefits governed by Ministerial Determinations. These cover the movement of pharmacies from one location to another and help to ensure the viability of pharmacies. The Ministerial Determination recognises and condones the transfer of approval numbers between premises and from one pharmacist to another. Although the community in Canterbury has a right to a pharmacy in the area no evident expectation arose. There was no expectation dashed by the suspension of the Applicant's approval number. The Applicant could relocate within Canterbury and still meet the needs of the Canterbury community.
As regards the Soul Pattinson case (supra) Mr Burley disagreed that Beaumont J decided that "may" meant "must" in that case. There is a discretion. The Respondent exercised a discretion for eight months and did not cancel the approval number.
Mr Gath and Mr Burley then argued about the correct messages to be derived from the Soul Pattinson case (supra). Mr Gath reiterated that the statement at page 445 is clear (see quote in paragraph 82 above). He submitted that s 98(3) imposes a prima facie duty to cancel an approval number if pharmaceutical benefits are not being dispensed. He said that highly persuasive reasons would be needed not to do so. The decision-maker should ask the question, "Is there something about this case so significant that I should not perform my normal duty?"
Mr Burley suggested that Beaumont J's comments should be read in the context of the Soul Pattinson case (supra). The case was not really about s 98(3) of the Act. Rather, it was about the manner of performance of a statutory duty as considered in an action under the Administrative Decisions (Judicial Review) Act 1977 ("the ADJR Act"). The issues were compulsion to make a decision and what was a reasonable time to have elapsed before a decision-maker should act.
The Tribunal invited the representatives to make submissions on the appropriate form of an order if the Applicant should succeed in this application for review. There was a consensus that the structure of the order in the Re Da Rui case (supra) was appropriate.
Findings on material questions of fact with reference to the evidence and other matters in support of those findingsThe Tribunal finds that the Applicant became an approved pharmacist under s 90(1) of the Act with effect from 14 May 1990 (T7). This was in connection with nominated premises at 145 Canterbury Road.
The decision under review was the decision on 5 July 2000 to cancel the Applicant's approval number (T3). The decision took effect from close of business on 5 July 2000. The decision was taken by a delegate of the Respondent in the exercise of powers under s 98(3) of the Act. In the present case all the legal requirements set out in s 98(3) appear to have been met:
Ms Shaffer was an approved pharmacist in July 2000.
Ms Shaffer was not carrying on business as a pharmacist in July 2000.
Ms Shaffer was not carrying on that business at premises that had been approved.
The Secretary, through a delegate located in the HIC, gave written notice to Ms Shaffer cancelling her approval on 5 July 2000.
The only issue is whether the Secretary's discretion, exercised against Ms Shaffer in this case, should have been so exercised. Was the decision to cancel Ms Shaffer's approval number the correct or preferable decision?
As was noted in the Da Rui case (supra) the indicators that can assist the Respondent to make a decision consist of the Act itself, the Ministerial Determinations and the internal guidelines issued by the HIC (Exhibit R5). There is also the leading case, the Soul Pattinson case (supra). The Soul Pattinson case was not extensively analysed in the Re Da Rui decision (supra). The Tribunal considers that the case needs to be addressed closely because of Mr Gath's use of the case in his arguments.
The facts in W H Soul Pattinson v Secretary, Department of Health and Family Services (supra) were as follows. The third respondents were Strathfield Plaza Amcal Chemist ("SPAC"). They ran a pharmacy business in Shop 15, Strathfield Plaza in Sydney. They also own two other pharmacies in Strathfield near the plaza. On 13 August 1996 the plaza's managing agents wrote to SPAC. SPAC's lease was due to expire on 9 October 1996. The managing agents offered SPAC a lease of Shops 15 and 16 in the plaza. On 26 August 1996 SPAC responded in writing and rejected that offer but said they were keen to renew a lease of Shop 15 only.
On 27 August 1996 the owners told SPAC that they wanted vacant possession of Shop 15 on 9 October 1996. On 9 October 1996 SPAC vacated the premises.
On 29 August 1996 the owners agreed with the applicant on a grant of a lease of Shops 15 and 16 to the applicant.
On 21 October 1996 SPAC wrote to the managing agents alerting them to the fact that the approval number for a pharmacy in Strathfield Plaza was held, albeit in a suspended state, by SPAC.
On 28 October 1996 the Authority issued a suspension of SPAC's approval for 30 days. A further suspension expiring on 14 December 1996 was issued on 2 December 1996. On 16 December 1996 a further suspension to 23 December 1996 appears to have been issued. On 23 December 1996 a further suspension to 9 January 1997 seems to have been given.
On 11 November 1996 the applicant applied to the HIC for approval to relocate to the plaza another pharmaceutical benefits approval number attaching to Hunter Street Sydney.
On 27 November 1996 the applicant's representative wrote to the second respondent, the Authority. She communicated that the applicant was applying for an approval to relocate from Hunter Street to Shops 15 and 16 in the plaza. The letter addressed all the relevant criteria. She conceded that another approval (SPAC's) was in force already in respect of the plaza premises. She pointed out that SPAC had ceased trading and seemed to have made no effort to relocate or sell their approval number. She submitted that SPAC's approval should be cancelled under s 98(3) of the Act. She wrote, "the approval should be cancelled as we believe that Mr Brown [of the SPAC] is merely trying to thwart a pharmacist with a legal right to occupy the premises from gaining approval to carry on business from Shops 15 and 16 Strathfield Plaza." A similar letter was sent at the same time to the HIC.
On 6 December 1996 solicitors for the applicant wrote to the Authority reinforcing the earlier arguments put on behalf of the applicant.
On 3 January 1997 the applicant applied to the HIC to relocate to the plaza.
On 6 January 1997 SPAC applied to the HIC to relocate their approval from the plaza to the Meriton premises in Strathfield. The HIC referred this to the Authority as required by s 90(3B) of the Act.
On 7 January 1997 the applicant's solicitors and SPAC's solicitors agreed that the Authority should not make a decision on 9 January 1997, as the Authority had said it intended to do. The Authority also had before it SPAC's application for relocation and that had not yet been considered by the Authority.
On 28 February 1997 the applicant's representative swore an affidavit stressing the urgency of the application for approval in respect of the plaza. She mentioned that on 27 December 1996 she had dropped the idea of transferring the Hunter Street approval in favour of seeking a transfer of an approval attached to premises in Blacktown. This was because the owner of the Blacktown premises had given the applicant notice to quit those premises. It was necessary to relocate the Blacktown approval in order to avoid the risk that the applicant would lose that approval number which was valued at $80,000.
On 10 December 1996 the applicant had lodged an application to the Federal Court seeking relief under s 7(1) of the ADJR Act. The application was for judicial review of the alleged failure of the respondent to decide under s 98 of the Act whether to cancel an approval to dispense pharmaceutical benefits granted under s 90 of the Act to SPAC in respect of Shop 15 in the plaza. The applicant succeeded in its action. The orders issued by Beaumont J on 10 April 1997 included that the HIC was to make the relevant decision (presumably the relocation of the Blacktown approval number) regarding the plaza premises within a reasonable time which was set at 28 days. The HIC was to make the decision whether or not to cancel SPAC's approval under s 98 on or before 9 May 1997.
Beaumont J in his decision held at page 445 that once the HIC was satisfied that SPAC were not carrying on business at the premises specified the HIC came under a duty to cancel that approval. That conclusion masks several considerations addressed by the learned judge. He held that the verb "may" in s 98(3) of the Act is not used to indicate an open discretion. Rather it is used in a way described by Windeyer J in the High Court in Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106, 135 where he endorsed the following comments:
"'… the word "may" is not used to give a discretion, but to confer a power upon the court and judges: and that the exercise of such power depends, not upon the discretion of the court or judge, but upon the proof of the particular case out of which such power arises.'
"I consider that to be directly applicable to the present case. If the Commissioner, having considered the matter, is satisfied of facts out of which the power to allow a rebate arises, he cannot nevertheless refuse to allow it."
Thus, the meaning of "may" in s 98(3) is that the Secretary is empowered to cancel an approval where a business is not being conducted on the approved premises.
The other consideration adverted to by Beaumont J at page 445 of the decision is that the duty to cancel is affected by the fact that "the first respondent [HIC] was bound by the application of the rules of natural justice to afford the third respondents [SPAC] a reasonable opportunity to be heard." In the Soul Pattinson case (supra) His Honour said that, "by any measure, the third respondents had been given that opportunity in 1996" (page 445).
This interpretation of s 98(3) is a rather important indicator as to the proper exercise of the "discretion" in the subsection and it is perhaps unfortunate that the Tribunal did not analyse it in any depth in Re Da Rui (supra). Indeed, at face value it would seem that the Tribunal is bound by the Federal Court precedent to affirm a decision to cancel an approval in circumstances where pharmaceutical benefits are no longer being dispensed from the "particular premises" (as the premises are termed in s 90 of the Act), provided that natural justice and procedural requirements have been met, as they have here.
Mr Burley, for the Applicant, sought to confine the Soul Pattinson (supra) principle to its facts. It is true that there are significant points of distinction between that case and this. Those points of distinction include:
SPAC were not apparently doing a great deal to obtain secure tenure of alternative premises. SPAC located the Meriton development in Strathfield and considered it a possible alternative location for the pharmacy business. However, it was never clear that SPAC had any security of tenure there. At the same time SPAC was indicating that its preference would be to return to Shop 15 in the plaza. In the instant case the Applicant had arguably done a great deal to secure alternative premises and had ultimately found some at 181 Canterbury Road.
There was another pharmacist, who was an approved pharmacist in respect of other particular premises, who had applied to relocate to the premises in the plaza and appeared to have a lease in its favour over Shops 15 and 16 in the plaza. In the instant case there is no other approved pharmacist interested in taking over premises tied up in one way or another by the Applicant.
The focus of the action in Soul Pattinson (supra) was the duty (or otherwise) of the HIC to cancel an approval in respect of particular premises, not the question of extending a suspension of an approval.
There is some force in these arguments and they could potentially justify the Tribunal in distinguishing the instant case from the Soul Pattinson case (supra). This may be so in part because of the HIC's practice of permitting limited term suspensions, sanctioned in Exhibit R5, the HIC's internal guidelines, Deactivation of Pharmacist Approvals Made Under s 90 of The National Health Act 1993. In that regard Mr Burley had submitted that not even the HIC applied in practice the principle propounded above by Beaumont J.
The Tribunal must confess to being somewhat surprised by His Honour's interpretation of s 98(3) because the Tribunal found convincing the arguments of the HIC in Soul Pattinson (supra) at page 441 where in written submissions the HIC said:
"2. Section 98(3) manifestly confers a discretion. It uses the term 'may', which is a strong prima facie indication of a discretion, rather than a duty: see Finance Facilities Pty Ltd v FCT (1971) 127 CLR 106 at 134 per Windeyer J.
"3. The use of the term 'may' in s 98(3) is in sharp contrast to the use of the mandatory 'shall' in s 98(1) and (4). Those two subsections require the exercise of the power which each confers. The intervening subsections, s 98(2), (3) and (3A), by contrast use the discretionary 'may'."
Mr Gath advanced the proposition that the appropriate way to read Beaumont J's remarks is to say that there is a prima facie duty on the Respondent (or a delegate in the HIC) to cancel an approval where the pharmacy business is no longer being carried on in the particular premises unless there are highly persuasive reasons not to do so. The decision-maker should ask, "Is there something about this case so significant that I should not perform my normal duty?"
This is an attractive proposition but even that proposition is less liberal than the administrative policy in Exhibit R5. The central elements of this policy are:
Suspension of an approval may be contemplated, and cancellation averted, where arrangements are in train to allow an approval to be transferred to another location and the Authority has approved the transfer.
Alternatively, suspension may be contemplated where the holder of the approval can demonstrate that the closure is temporary and the premises will reopen within a reasonably short time frame (not more than six months).
Suspension will not be entertained as an option where the decision to close the premises is linked to the continuing viability of the site.
Circumstances that may warrant the favourable exercise of the discretion to suspend rather than cancel an approval are:
where the holder wishes to relocate the approval to new premises;
where there has been a change of ownership at the premises;
where the holder is obliged to close the pharmacy in order to take leave of absence; and
where the premises are closed to allow a redevelopment to the premises themselves or the surrounding commercial areas.
Beaumont J understood that the duty to cancel might not be exercised immediately the Respondent becomes aware of the cessation of business at the particular premises. He says that it is necessary to apply the rules of natural justice and give the approved pharmacist an opportunity to be heard. There is no doubt a need to allow also for the ordinary bureaucratic checks and paper work that must precede the making of a decision as important as a decision to cancel an approval. However, beyond these causes of delay, there should, according to Beaumont J, be no other delays incurred in making the decision to cancel.
The Tribunal has considered other possible mechanisms for reading down His Honour's comments. One possibility was to confine what His Honour said so that it requires only that the Respondent must make a decision, which could be to suspend rather than cancel. This appears unviable given Beaumont J's description of the respondent's duty at page 445 in Soul Pattinson (supra) as "a duty to cancel that approval".
Another is to confine His Honour's comments to the situation in Soul Pattinson where there is another approved pharmacist waiting to take over the vacated premises. That adds a sense of urgency to the situation that is lacking in a case like Ms Shaffer's. The objection to this version of His Honour's position is that he appeared to be defining the proper interpretation of s 98(3) for all purposes. Moreover, the proper definition of that provision was essential to the decision in the case. It was not mere obiter dicta.
The Tribunal has expressed its reservations about the interpretation of s 98(3) adopted by Beaumont J yet it is the Tribunal's view that, as Federal Court authority, it should usually be regarded as binding on the Tribunal.
If Beaumont J's interpretation is binding that brings about a rather different analysis from that pursued by the Tribunal in Da Rui (supra). The inquiry in that case was whether the discretion thought there to exist in s 98(3) of the Act was exercised in the most correct and preferable way. The Tribunal has reconsidered the Soul Pattinson case (supra) and has decided to distinguish this case from the case in Soul Pattinson (supra). The Tribunal would confine Beaumont J's comments to the situation where there is a competing pharmacist pressing to supply pharmaceutical benefits in the particular premises not being operated at the time by the approved pharmacist. The Tribunal also distinguishes this case from the Soul Pattinson case because there is no action on foot to compel the decision-maker to make a decision cancelling the current approval.
Thus, in the normal run of cases, where the issue is whether the approval number of a particular pharmacist who is not trading should be cancelled, the Tribunal decides that the better view of the meaning of s 98(3) of the Act is that there is a broad discretion available.
If this conclusion is correct in law it suggests that the HIC guidelines are viable and the Ministerial Determination is not ultra vires. Both documents are based on the assumption that there is a discretion in s 98(3). Mr Gath's proposed test, where the decision-maker asks "Is there something about this case so significant that I should not perform my normal duty?", would be available.
In the Da Rui decision (supra), in paragraphs 86 and 87, the Respondent argued that great weight should be given to the obligation on an approved pharmacist to supply pharmaceutical benefits. The Tribunal endorsed this submission in paragraph 105 of Da Rui (supra). The Tribunal said:
"86. In Soul Pattinson (supra) counsel for the current Applicant recognised the priority to be accorded to supply of pharmaceutical benefits. Mr Gath expanded on this to explain the underpinnings of Part VII of the Act.
Section 84 of the Act defines 'approved pharmacist' as a person for the time being approved, or deemed to be approved, under s 90. 'Approved supplier' is defined as an approved pharmacist, approved medical practitioner or an approved hospital authority. The term used in the Act to describe in the aggregate individuals who are eligible for approval under the Act is 'approved supplier'. The emphasis is on the concept of supply of benefits.
The title of Division 2 of Part VII is 'Supply of Pharmaceutical Benefits'. This is the division of the Act containing, amongst other things, ss 90 and 98.
Section 90(3AA) of the Act provides a mechanism whereby a party can gain an approval for a change in arrangements without having to apply to the ACPA. This is where the pharmacy will continue to operate at the same premises and the ownership must change because of death, sale or change in the constitution of the partnership that owned the pharmacy. The supply and incidence of supply of pharmaceutical benefits will be unaffected so the process can be treated concessionally.
Section 90(3AB) of the Act defines 'pharmacy' as a business in the course of the carrying on of which pharmaceutical benefits are supplied. Again, the emphasis is on supply of benefits.
The concept of the actual supply of pharmaceutical benefits 'is not a threshold through which one passes once on the way to being approved. It is an overarching and continuing and fundamental element of the arrangements that govern approval under the Act.' (Mr Gath, transcript, 96.) This was accepted by Beaumont J in the Soul Pattinson case (supra) in his decision and the resultant orders.
The priority accorded actual supply of benefits must significantly influence the way the discretion in s 98(3) is exercised.
"87. Counsel referred also to s 95 of the Act. That section provides for suspension or revocation of approval by the Minister. This can occur only after a formal process. Section 98 by comparison imposes no such requirements. The way is, under the Act, much clearer and more straightforward for the Secretary in cancelling an approval. …
"105. The Tribunal has concluded that it should give considerable weight to the arguments put by the Respondent in this matter. As was said above, the legislation is of prime importance in indicating the policy that should be administered. The Respondent successfully argued that the legislation places a premium on ensuring that pharmaceutical benefits are actually supplied once a pharmacist has been approved to supply those benefits from a particular premises."
The Tribunal finds that the test suggested by Mr Gath may be available. The Tribunal goes further and explicitly adopts that test as consistent with the policy as reflected in the Act. The Tribunal will now consider how it operates in Ms Shaffer's situation. What factors might be so significant that the duty to cancel should have been displaced? In the Tribunal's view the factors would be beyond the control of the pharmacist and would have to go a considerable way to explaining why an approved pharmacist should not have been required to supply pharmaceutical benefits for an extended period.
Factor 1. The Applicant was enthusiastic from the first about the redevelopment proposal. She was proactive in supporting it and demonstrating her genuine interest in securing a foothold in the new development. She sent out letters about the project to nearby property owners in April 1997. She convened a meeting involving the Council and the nearby owners on 25 January 1999. She obtained timely information from the Council such as the letters about progress in T12 and T16. In T18 she enclosed advice to the HIC that she was the approved pharmacist selected by the entrepreneurs to establish in the new development. Her oral evidence was that ideally she would want still to move into the new development when it is ready for occupation.
Factor 2. The Applicant kept in contact with the HIC about the development and her plans. This is more than desirable because of part of paragraph 4 of the guidelines in Exhibit R5. Paragraph 4 says:
"If an approved pharmacist intends to cease trading in the lead up to an application to transfer that approval to another site, it is essential that, before ceasing to trade, the pharmacist contact the HIC Approvals Clerk in their State and provides in writing details outlining the circumstances which will prevent the pharmacy from trading.
"Failure to provide such advice may result in cancellation of the relevant approval irrespective of the private commercial arrangements which may have been separately entered into by relevant parties."
Factor 3: The delayed completion of the development was beyond the control of the Applicant. As at 19 December 1997 the Applicant believed that the redevelopment would be finished between late in 1998 and the middle of 1999 (T11). By 26 May 1998 the completion date was estimated as the end of 1998 (T14). By 19 January 1999 the completion date was estimated as the end of 1999 (T16). By 11 January 2000 the completion date was estimated as early in 2001 (T19). To the best of the knowledge of the Tribunal the project is still incomplete two years after the projected date of completion.
Factor 4: The Applicant had fairly severe security problems in the particular premises. At T14 these are explained in full. In 1996 the shop was robbed. The Applicant was assaulted and she received a fractured skull. She required reconstructive surgery to her face. In 1997 there were three more robberies. A knife was produced in the last of these.
Factor 5: The Applicant had attempted to relocate and to sell her approval number. The chronology in this respect shows the following:
1 November 1999: Shop closure, 145 Canterbury Road (T16).
14 January 2000: Proposed temporary relocation to 197 (actually 193) Canterbury Road to operate in a newsagency (T21, T22, T25).
5 March 2000: Decision not to transfer to the newsagency. Instead she would buy shops 18 and 19 at 193 Canterbury Road (Exhibit A1 paragraph 16). Copy of lease provided on 4 May 2000 (T38).
2 June 2000: Decision not to buy shops. Instead sale of the approval number was proposed (Exhibit A1 paragraph 13, T44).
30 June 2000: Papers relevant to sale of approval number not provided as required by the Authority (T3).
31 October 2000: Lease signed for three years for 181 Canterbury Road (Exhibit A1 paragraph 24).
Factor 6: Ms Mihulka, a health industry consultant, unbeknownst to the Applicant, failed to provide papers to the Authority by 30 June 2000, as the Authority had requested (Exhibit A1 paragraph 22).
Would any of these factors, singly or in combination, amount to something so significant as to neutralise a duty to cancel an approval number? The Tribunal would rule out factor 5 as of significance. The major reason is that the Applicant appears to have done little if anything to look for ways of staying open for business until after her original premises closed on 1 November 1999. Certainly, after that date she was able to locate three potential premises in Canterbury Road into which she might move her business. Before she was given notice to quit, apparently on 14 September 1999 (T16), she had not looked for alternative premises (Exhibit A1 paragraph 9). As late as 4 January 2000 the Applicant wrote to say that there were no alternative premises to be found (T18). Given that the Applicant had been aware as early as 19 December 1997 (T11), if not earlier, of the requirement that she would have to vacate 145 Canterbury Road, she left the search for alternative premises somewhat late. This almost guaranteed a period of non-provision of pharmaceutical benefits. At the same time she had begun seeking approval to park her approval number as early as December 1997 (T11). Once she began to search in earnest it was not long before options presented themselves to the extent that she had a proposal ready on 14 January 2000 (T25). The Tribunal also notes Mr Gath's submissions about the untimely nature of Ms Shaffer's trip overseas from January to March 2000.
Consideration of factor 1 does not advance the Applicant far. Although she was and is keen about the redevelopment and has worked to further its progress, this has not resulted in facilitating the resumption of provision of pharmaceutical benefits from any particular premises. It may have that effect at a later date, but that is indeterminate. It became clear to the Applicant early in the process that there would be a delay before the development was completed. This became even clearer as the completion date was put further back. There was nothing in this factor to prevent the Applicant looking to relocate pending the completion of the development.
The fact that the Applicant kept the HIC informed (factor 2) indicates that she did no more than good sense required if she was not to find her approval summarily cancelled. Any prudent pharmacist would do at least this. Again, informing the HIC of developments did not absolve the pharmacist from looking for alternative accommodation.
Factor 3 involves a consideration outside the control of the Applicant, that is the delays in finalising the development. This consideration can, however, be dealt with in the same was as factor 5. It has become increasingly clear that access to the new development will be delayed. The Applicant could, and should, have done much more earlier in the process to search for alternative premises.
The Tribunal would make similar comments about factor 4. The Tribunal is conscious that security issues are matters of importance in the delivery of pharmaceutical benefits. This factor involves two facets. One is that the established premises at 145 Canterbury Road were not sufficiently secure. This would be a solid reason for looking for alternatives sooner rather than later. The other is that, in choosing new premises, the Applicant would want to ensure that security was a priority. This might involve again an early search for alternative premises. Factor 4 does not seem to the Tribunal to ground an argument for setting aside the decision to cancel the approval.
Factor 6 was at least unfortunate. The Applicant might have expected that a health industry consultant would either have submitted the papers within time, or that she would have been able to secure an extension of time. It was perhaps entirely reasonable for the Applicant to engage the services of Ms Mihulka. However, the Applicant did not appear to do all she might have done to keep in close contact with Ms Mihulka to ensure that her interests were being best served. She merely phoned and left messages that went unanswered. Her case would have been stronger if she had phoned until successfully reaching Ms Mihulka. It is not enough to effectively delegate her personal responsibilities for the provision of pharmaceutical benefits to a consultant. It is also noteworthy that Ms Mihulka was approached quite late in the process.
At this stage in the argument the Tribunal is prepared to find that the decision under review should not be disturbed. The Tribunal considers that this result follows regardless of whether the test is the harsher test proposed by Mr Gath or a less stringent test where the Tribunal must make the correct or preferable decision in reviewing the exercise of a statutory discretion of a standard variety. Essentially, the Tribunal sees the Applicant's failure to pursue alternatives prior to the closure of her premises (as discussed in paragraph 122 above) as a major problem for her in the exercise of this discretion regardless of the test.
The Applicant put an argument that the policy underpinning the Act is not simply the primary importance of the supply of benefits. Mr Burley argued that it is necessary to consider the interrelation between the agreements that have occurred between 1990 and 2000 involving the Commonwealth of Australia and the Pharmacy Guild of Australia, of which the 2000 agreement (Exhibit R2) is one. Deputy President Forrest explained the connection in several cases. One of these was Re Farmakis Australian Community Pharmacy Authority and others (AAT 10863, 11 April 1996) where the Deputy President wrote:
"6. The Community Services and Health Legislation Amendment Act 1990 ('the1990 Act') was designed to give legislative effect to the agreement dated 6 December 1990 made between the then Minister the Honourable Peter Staples and the Pharmacy Guild of Australia ('the Guild'). The aim of the agreement was to produce structural reform by encouraging restructuring or rationalisation of the retail pharmacy industry through constraints and incentives and to provide a more efficient structure for distribution of pharmaceuticals within a framework of community pharmacies. These included restrictions on the commencement of new pharmacies and the provision of financial incentives for the closure, amalgamation or transfer of existing pharmacies. The restructuring was designed to reduce the cost to the Commonwealth in providing pharmaceutical benefits while maintaining an acceptable level of community service.
"7. The agreement recognised that community pharmacies were oversupplied and the Pharmacy Restructuring Authority ('PRA') was established under the 1990 Act to administer the restructuring of community pharmacies. The rules under which the Authority operated had their origin in the 1990 Act.
"8. On 24 April 1994, a new agreement, ('the 1995 Agreement') to remain in force until 30 June 2000 was signed between the then Minister, the Honourable Carmen Lawrence and the Guild. The PRA was replaced by the Authority in accordance with the National Health Amendment Act 1995 ('the 1995 Act') which gave effect to the 1995 Agreement.
"9. The general objectives of the 1995 Agreement (second part) are relevantly: . to maintain the benefits of restructuring and continue to enhance the development of an effective, efficient and well-distributed community pharmacy service in Australia; and . not to provide for an increase in the number of approved pharmacies but rather to encourage the relocation of existing pharmacies.
"10. Approval of pharmacists for the purpose of supplying pharmaceutical benefits at or from particular premises is dealt with in s. 90 of the Act. Section 90(3A) requires that the application be referred to the Authority. A function of the Authority is to make recommendations under s. 90 whether a pharmacist should be approved to provide pharmaceutical benefits in respect of particular premises. An approval under s. 90(1) may be granted by the Secretary only if recommended by the Authority. In the event of a positive recommendation by the Authority the Secretary has a discretion to refuse to grant an approval: s. 90(3B).
"11. The functions of the Authority are set out in s. 99K. Sub-section 2 provides that in making a recommendation under (inter alia) s. 90, 'the Authority must comply with the relevant rules determined by the Minister under section 99L'. From time to time determinations have been made containing the rules. In Smoker v Pharmacy Restructuring Authority and others (1994) 53 FCR 287 a Full Court of the Federal Court rejected a challenge to the validity of the rules. The court held the rules were binding on the Authority and circumscribed the discretion which the Authority has.
"12. The relevant determination made under s. 99L(1), is for the present purposes No. PB 6 of 1995 which was made by the Minister on 2 May 1995. It was common ground that within PB6 of 1995, Rules 5, 6 and 8 were not applicable to this application. …"
If Deputy President Forrest were presiding in this application he would address Exhibit R2 and in Part 2, "The Community Pharmacy Network", he would find in the Preamble the following recitals:
"21.1. Significant reforms to the structure and efficiency of the community pharmacy network have been achieved through the two Community Pharmacy Agreements between the Commonwealth and the Guild. The parties recognise the need to build on these benefits by taking into account in this Agreement the intention of the Competition Policy Review of Pharmacy.
"21.2 Revision of the criteria related to new pharmacy approvals and pharmacy relocation is also consistent with the desire to achieve simplicity and transparency in the administrative arrangements underpinning this Part of this Agreement.
"21.3. The content of the Agreement relating to pharmacy relocations and new pharmacy approvals encompasses the following changes:
a) a significant reduction in the number of criteria that have to be satisfied to demonstrate that there is a 'definite community need' for new pharmacies to be opened, particularly in growing outer metropolitan areas;
b) the creation of a special category of new rural pharmacy approvals, supported by rural pharmacy incentive and maintenance programs, to promote improved access to pharmaceutical services in areas currently under serviced;
c) significant relaxation of the rules relating to that special category of new approvals in rural locations by removing the need for applicants to satisfy any community need;
d) amendment of the rules relating to pharmacy relocations to enhance competition consistent with the maintenance of a viable and well distributed community pharmacy network;
e) clarification of the definition of a large shopping centre to simplify ACPA's administration of pharmacy relocations to shopping centres;
f) reduction in the number of exclusions from the retail shop definition to enable applicants to more easily achieve the threshold number of shops required to obtain approval to relocate to a shopping centre;
g) simplification of the distance measurement process both for applicants and the ACPA by measuring distance in a straight line from door to door rather than by public access routes (except in the case of pharmacies in rural locations); and
h) simplification of the rules for short distance pharmacy relocations by removal of the complex rules relating to pharmacy relocations between 1 and 2 km from their present site."
Mr Burley referred to the Community Pharmacy Agreement process to show that, underlying the Act, there is a complex of relations between the Commonwealth and the pharmacy profession relating to the supply of pharmaceutical benefits. The situation is not as straightforward as the suggestion that the Act is largely about the importance of the supply of pharmaceutical benefits. Perusal of the Act alongside Exhibit R2 and the Ministerial Determinations in Exhibits R3 and R4 show that the Commonwealth and the profession have agreed to measures designed to ensure, amongst other things:
access for all Australians to a community pharmacy in the local community;
a stable and predictable environment for community pharmacy;
a co-operative approach between the Pharmacy Guild and the Government; and
that the community pharmacy network is effective and efficient.
Since 1990 there has been a considerable rationalisation of pharmacies and the location, or relocation, of a pharmacy is a sensitive issue. The Ministerial Determinations, the Pharmacy Agreements and the Act all play a part. It is notable that the Third Community Pharmacy Agreement, and the Ministerial Determinations, recognise and permit a trade in approval numbers. The Act makes no direct reference to this well-established practical activity. Mr Burley said that the Act should be read and interpreted as part of the total package.
The Tribunal sees some merit in Mr Burley's submission. At base the submission is that the Tribunal is to consider the interests of an approved pharmacist who wishes to cease trading for a period or who wishes to sell an approval number.
The Tribunal is quite prepared to give weight to the position of the pharmacist in this matter. However, a balance has still to be struck by a decision-maker in exercising the discretion. Applying the balance here the Tribunal has concluded that the tentative conclusion it reached in paragraph 128 above should not be disturbed. The Tribunal has concluded that the merits of the Applicant's case are insufficient to displace the importance that should be accorded to the actual supply of pharmaceutical benefits.
ConclusionThe Tribunal has decided that the decision of the Respondent to cancel the Applicant's approval number was the most appropriate decision in this case.
DecisionThe Tribunal affirms the decision under review.
I certify that the 136 preceding paragraphs are a true copy of the reasons for the decision herein of Michael Sassella, Senior Member
Signed: .....................................................................................
AssociateDate of Hearing 11 April 2001
Date of Decision 21 May 2001
Counsel for the Applicant Stephen Burley
Representative for the Applicant W G McNally and Co
Counsel for the Respondent Shaun GathSolicitor for the Respondent HIC Legal Services Unit
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