Flaherty v Secretary, Department of Health and Ageing [2010] FCA 63 (12 February 2010)

Last Updated: 15 February 2010

FEDERAL COURT OF AUSTRALIA

Flaherty v Secretary, Department of Health and Ageing [2010] FCA 63

Citation:		Flaherty v Secretary, Department of Health and Ageing [2010] FCA 63
Parties:		TIMOTHY JOHN FLAHERTY v THE SECRETARY, DEPARTMENT OF HEALTH AND AGEING, THE AUSTRALIAN COMMUNITY PHARMACY AUTHORITY and MARGARET HINDE
File number(s):		NSD 737 of 2009
Judge:		MOORE J
Date of judgment:		12 February 2010
Catchwords:		ADMINISTRATIVE LAW - whether the delegate's power to cancel the pharmacist's approval to supply pharmaceutical benefits under s 98(3) of the National Health Act 1953 (Cth) was exercised - nature of the statutory regime - whether there was procedural fairness – whether jurisdictional error – distinction between matter which might constitute irrelevant or relevant consideration and factual matters - relevance of s 33(3) of the Acts Interpretation Act 1901.
Legislation:		Acts Interpretation Act 1901 (Cth) ss 3(3), 33(3) Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 5, 6 Medicare Australia Act 1973 (Cth) ss 5(1)(d), 98 National Health Act 1953 (Cth) ss 84, 85, 90, 98(3), 99K, 99L, 100, 100AA Pharmacy Act 1964 (NSW) Medicare Australia (Functions of Chief Executive Officer) Direction 2005 s 20
Cases cited:		Laurence v Chief of Navy [2004] FCA 1535; (2004) 139 FCR 555 Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597 Re Refugee Review Tribunal; ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 Nicholson-Brown v Jennings [2007] FCA 634; (2007) 162 FCR 337 Semunigus v Minister for Immigration and Multicultural Affairs [2000] FCA 240; (2000) 96 FCR 533 Shaffer v Secretary, Department of Health and Aged Care [2002] FCA 1028; (2002) 124 FCR 234 Walsh v Department of Employment, Education, Training and Youth Affairs (1998) 51 ALD 690 White v Designated Manager of IP Australia (No 2) [2008] FCA 816; (2008) 171 FCR 15
Date of hearing:	23 November 2009
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	56
Counsel for the Applicant:	H Woods
Solicitor for the Applicant:	Michael Flaherty Solicitor
Counsel for the First and Second Respondents:	A Dillon
Solicitor for the First and Second Respondents:	Australian Government Solicitor
Counsel for the Third Respondent:	S C G Burley SC with J T G Gibson
Solicitor for the Third Respondent	The People's Solicitor

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 737 of 2009

BETWEEN:	TIMOTHY JOHN FLAHERTY Applicant
AND:	THE SECRETARY, DEPARTMENT OF HEALTH AND AGEING First Respondent THE AUSTRALIAN COMMUNITY PHARMACY AUTHORITY Second Respondent MARGARET HINDE Third Respondent

JUDGE:	MOORE J
DATE OF ORDER:	12 FEBRUARY 2010
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Subject to order 2, the application be dismissed.
2. The Court declares that the decision of the first respondent of 20 April 2009 cancelling the approval of the third respondent as an approved pharmacist is null and void.
3. The applicant is to pay the respondents' costs.
4. Orders 1 to 3 take effect at 4pm on 12 February 2010.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 737 of 2009

BETWEEN:	TIMOTHY JOHN FLAHERTY Applicant
AND:	THE SECRETARY, DEPARTMENT OF HEALTH AND AGEING First Respondent THE AUSTRALIAN COMMUNITY PHARMACY AUTHORITY Second Respondent MARGARET HINDE Third Respondent

JUDGE:	MOORE J
DATE:	12 FEBRUARY 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Introduction

1. Ordinarily, in order to effectively carry on business as a pharmacist in Australia, it is necessary to be an approved pharmacist under the National Health Act 1953 (Cth) ("NH Act"). Approval allows a pharmacist to supply and sell drugs under the Commonwealth pharmaceutical benefits scheme ("PBS"). Ms Margaret Hinde, the third respondent, has this approval in relation to premises in a country town, Aberdeen, in New South Wales. However she is presently serving a custodial sentence in a New South Wales prison. The applicant, Mr Timothy Flaherty, is a pharmacist who wishes to secure approval to act as an approved pharmacist at the same premises. He challenges in these proceedings a number of decisions and related conduct which, on their face, have had the result that Ms Hinde continues to have approval in relation to those premises.
2. This is an application under ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) to review several decisions nominally of the Secretary, Department of Health and Ageing ("the Secretary" or "the Department"), the first respondent, not to cancel Ms Hinde's approval to supply pharmaceutical benefits from premises at 1 Segenhoe Street, Aberdeen ("the Premises").

Background in summary

3. Ms Hinde was the first pharmacist to carry on business as a pharmacist in Aberdeen. She began dispensing drugs there under the Commonwealth pharmaceutical benefits scheme as an approved pharmacist in 2001. She relocated her pharmacy in 2003 to the Premises which she leased. Her right to practice as a pharmacist (a right existing under New South Wales law: the Pharmacy Act 1964 (NSW)) was suspended on 20 September 2007 because of her alcohol dependency. But Ms Hinde was allowed to manage the pharmacy and employ locum pharmacists to dispense prescriptions. On 15 October 2007, Ms Hinde was involved in a serious motor vehicle accident in which one person was killed and another badly injured. She suffered severe injuries, including trauma to her brain, spine, joints and bones. Her injuries required continuing treatment and further hospitalisation. Between 12 – 14 August 2009, she returned to hospital to have a plate removed from her left leg.
4. On 16 October 2007, the day after the accident, the Premises were badly damaged by fire (apparently deliberately lit) and all stock was destroyed. On 20 February 2008 the lessor, Mr David Nash, executed a notice of termination purporting to terminate the lease of the Premises. Mr Flaherty entered a lease of the Premises on 28 April 2009. In these proceedings it was suggested that the notice of termination of the lease with Ms Hinde dated 20 February 2008 was ineffective. There was a factual issue about whether it was ever served. However the parties accepted that whether the lease was terminated then or about that time and the status of the lease executed by Mr Flaherty were not issues I should be called on to decide.
5. Following the accident, Ms Hinde pleaded guilty to a number of serious offences relating to the accident. She had been driving under the influence of alcohol and the accident was her fault. She was charged and convicted of causing death and serious injury. On 3 April 2009 she was given a custodial sentence.
   

The practical operation of the statutory scheme in overview

6. The power to grant approvals in relation to pharmacists is conferred on the Secretary by s 90 of the NH Act. The essential approval is to supply pharmaceutical benefits from particular premises. Approval is required to establish a new pharmacy, to relocate an existing pharmacy, to change ownership, expand or contract an existing pharmacy or temporarily close a pharmacy. In some, but not all circumstances, an application for approval either must or can be referred to the second respondent, the Australian Community Pharmacy Authority ("the Authority"). It is an independent statutory authority established under s 99J of the NH Act. Its role is to consider certain types of applications for approval under s 90 of the NH Act to supply pharmaceutical benefits, and to make recommendations to the Secretary as to whether an application should be approved. The Authority must comply with the requirements of the National Health (Australian Community Pharmacy Authority Rules) Determination 2006, in making its recommendations.
7. Section 98 confers a power to cancel an approval though the exercise of this power does not involve the Authority. Subsection (3) confers, relevantly, a power to cancel if the approved pharmacist is not carrying on business as a pharmacist at the premises to which the approval relates. The Secretary's powers to grant and cancel pharmacists' approvals have been conferred on the Chief Executive Officer of Medicare Australia by s 20 of the Medicare Australia (Functions of Chief Executive Officer) Direction 2005 which was made under s 5(1)(d) of the Medicare Australia Act 1973 (Cth) (the MA Act). The Chief Executive Officer may under s 8AC of the MA Act delegate in writing to an employee all or any of the power or functions under the MA Act, including the powers under s 98.
8. From time to time circumstances may arise which might warrant the exercise of the power to cancel but instead of exercising it, a decision is made to deactivate the approval. Deactivation is not a concept embodied in this legislation. Medicare Australia has formulated guidelines ("the Guidelines") concerning when an approval might be deactivated rather than cancelled.
9. The NH Act addresses what are pharmaceutical benefits in ss 84 and 85 and, shortly described, they included drugs, forms of a drug, forms of a drug administered in a particular way or brands of drug in relation to which by operation of a determination or a declaration, benefits are provided by the Commonwealth. The pharmaceutical benefits may also cover special pharmaceutical products as provided for in ss 100 and 100AA.

Chronology of decisions concerning Ms Hinde's approval

10. Between 8 January 2008 and 17 August 2009 a number of decisions, described with no particular legal precision, relating to Ms Hinde's approval were made:
    • 8 January 2008: decision not to cancel and to deactivate the approval from 16 October 2007 to 31 March 2008.
    • 31 March 2008: decision not to cancel and to deactivate the approval to 31 July 2008.
    • 12 August 2008: decision not to cancel and deactivate the approval to 16 October 2008.
    • 20 April 2009: decision to cancel the approval.
    • 26 May 2009: decision to reinstate, not to cancel and to deactivate the approval to 10 July 2009.
    • 8 July 2009: decision not to cancel and to deactivate the approval to 17 August 2009.
    • 17 August 2009: decision not to cancel and to deactivate the approval.
11. Ultimately, the applicant only challenges, in these proceedings, what occurred on 26 May, 8 July and 17 August 2009. As noted in the preceding section, the description of a decision as a decision to deactivate an approval has currency amongst those involved in the process but is not, in terms, a process comprehended by the Act. It describes a decision not to cancel an approval in circumstances which might otherwise lead to its cancellation. The parties did not address the question of whether approving or granting a deactivation involved making a decision for the purposes of the ADJR Act and it was not an issue in the proceedings. Probably the better view is that a decision to deactivate an approval (and thus not cancel the approval) is a decision having regard to the width of the language in s 3(2) of the ADJR Act defining expansively, the expression "the making of a decision" and, in particular, the reference to "refusing to do any other act or thing" in part (g) of that subsection. At various points in these reasons I speak of a decision to deactivate or a decision not to cancel the approval but I do not intend the use of the word "decision" in this context to have any particular legal significance.

The decision-making process in context

12. The following represents findings of fact though little of what follows appears to be controversial. By letter dated 8 January 2008, a delegate of the Chief Executive Officer of Medicare Australia, Ms Karen Carey, granted a request of Ms Hinde to deactivate her approval for the period 16 October 2007 to 31 March 2008. This was in response to a letter from Ms Hinde of 3 January 2008 requesting deactivation for that period. She identified two circumstances as the basis for her request. The first was that she had suffered severe injuries in the motor vehicle accident on 15 October 2007 which required prolonged hospitalisation and a period of recuperation. The second was that the Premises had been severely damaged by fire on 16 October 2007 and repairs were not due to begin until January 2008. It is clear from the delegate's letter that she accepted these circumstances justified deactivation and said that they "fall within the relevant considerations outlined in section 5 of the Guidelines." The delegate indicated that any further request for the deactivation beyond 31 March 2008 should be made before that date.
13. By letter dated 24 March 2008, Ms Hinde requested a further period of deactivation (from 31 March 2008 to 31 July 2008). She identified two circumstances supporting the request. The first was ongoing treatment for her injuries. The second were delays in the repair to the Premises and problems with the landlord's insurance company. By letter dated 31 March 2008 another delegate, Ms Julie Martinez, granted the request to deactivate the approval for the period 31 March 2008 to 31 July 2008. Again, the delegate indicated she was satisfied that the matters raised by Ms Hinde fell "within the relevant considerations outlined in section 5 of the Guidelines". Again the delegate indicated that any fresh application for further deactivation had to be made before 1 August 2008.
14. A further period of deactivation until 16 October 2008 was requested by Ms Hinde by letter dated 3 August 2008. The reasons given were that she required further surgery and the shop renovations were not complete. Ms Hinde indicated she was trying to employ a locum pharmacist. By letter dated 12 August 2008, another delegate, Mr Chris Watt, granted the request for the period 31 July 2008 to 16 October 2008. However the letter noted that the deactivation period would expire on 17 October 2008 and the delegate said, "Unless exceptional circumstances prevail no further extension will be considered after 16 October 2008".
15. Events from this time were a little less straightforward. At the end of October 2008, Ms Hinde was detained in custody. Her bail had been revoked. In the latter part of November 2008, a representative of Medicare Australia sought to speak with solicitors who may have been acting for Ms Hinde. By the end of November 2008, Medicare Australia was contemplating writing to Ms Hinde effectively asking her to show cause why her approval should not be cancelled. In early December 2008 steps were taken to find an address to which a letter could be sent to Ms Hinde while she was in custody. In an e-mail to Ms Martinez of 1 December 2008 (Ms Martinez was the delegate who made the decision to cancel the approval on 20 April 2009), a Medicare Australia employee, Ms Morrison, set out some of the difficulties in contacting a person held in a correctional centre and the difficulty in finding them. She referred to a discussion she had had with Mr Shaw from the firm The People's Solicitor in which this difficulty had been discussed. The e-mail noted that Ms Hinde had to initiate a phone call and then only to a person nominated on her list of contacts. The e-mail also noted that Ms Hinde was then at the Malabar remand centre. It went on to note that Ms Hinde might be moved to a different centre at any time and it was advisable to call the New South Wales Corrections National Office to confirm her current location and obtain an updated postal address.
16. Such a show cause letter was sent on or about 3 December 2008 by Mr Watt. The letter noted that the Guidelines indicated that deactivation beyond six months would only be considered in exceptional circumstances and that Ms Hinde's approval had been deactivated for over 12 months. The letter also noted that the closure of the pharmacy was not temporary and that "I would not be ensuring the efficient distribution of pharmaceutical benefits within the community if I were to allow you further time for your pharmacy to remain closed and unable to supply pharmaceutical benefits". The letter noted that Ms Hinde might not be able to reply within the usual 28 day period and, accordingly, could provide a response in writing no later than Friday 30 January 2008. In context, this was obviously a reference to 30 January 2009. The letter went on to say that if a response had not been received by then, a decision on whether to cancel the approval would be made on 13 February 2009 on information then available. Fairly clearly, at this stage, almost 2 months was being afforded to Ms Hinde to respond given what was perceived within Medicare Australia to be a real risk that there may be some delay in her receiving the letter and responding.
    
17. A responsive letter dated 28 January 2009 was received by Mr Watt on 30 January 2009. It was from solicitors stating they were acting for Ms Hinde and simply asserted they were instructed to inform him that "Ms Hinde is planning to reopen a new pharmaceutical business in due course" and intended to keep his office informed. The letter was written by Mr Liu of the firm The People's Solicitors. It appears from a Medicare Australia file note that earlier, on 17 December 2008, a decision was made by Ms Martinez to "extend deactivation to 30/1/09".
18. It is not absolutely clear from the evidence what happened within Medicare Australia during February and March 2009 concerning Ms Hinde's approval though it appears there may have been one or two decisions to extend the deactivation. However things came to a head in April 2009. A decision to cancel Ms Hinde's approval was made under s 98(3) of the NH Act. The conclusion to make the decision was reached at some time between 15 and 20 April 2009. A letter was written by a delegate, Ms Martinez, to Ms Hinde dated 20 April 2009 informing her of the decision. The decision was made when the letter was written: see Semunigus v Minister for Immigration and Multicultural Affairs [2000] FCA 240; (2000) 96 FCR 533 at [71] – [73] and [101]. The stated reasons in the letter were that Ms Hinde was not carrying on business as a pharmacist and not supplying pharmaceutical benefits at the premises in respect of which she was approved. Internal e-mail correspondence put the reasons as being the pharmacy had not been trading since October 2007, numerous attempts to issue show cause letters had failed, Ms Hinde had been deregistered by the NSW Pharmacy Board, there had been several applications for a new rural approval in the Aberdeen area (some had not been successful and one was then on foot) and pharmaceutical benefits were not being supplied to the community.
19. Before proceeding further with events as they unfolded, a number of matters need to be mentioned which occurred before this decision to cancel was taken. On 13 March 2009, Ms Martinez wrote to Mr Liu, referring to his letter of 28 January 2009. In that letter, Ms Martinez asked for information on a number of matters which, in substance, were particulars of the steps being taken by Ms Hinde to reopen the pharmacy at the Premises. The letter indicated that in the event that Ms Hinde did not provide the relevant information by 10 April 2009 a decision may be made on whether to cancel Ms Hinde's approval. It should be noted that this was allowing less than a month for Mr Liu to obtain instructions from Ms Hinde which, in at least the ordinary course, would require her to be furnished with a copy of a letter. On 1 April 2009 a licensed business agent (operating from what appears to be a commercial emanation of the Pharmacy Guild - the professional association of pharmacists) wrote to Medicare Australia informing it that a pharmacist, Ms Caroline Sevil, had made an offer to Ms Hinde to purchase the "approval number" and "transfer the pharmacy ownership to her". Attached to the letter to Medicare Australia was a letter of 31 March 2009 from the agent to Ms Hinde containing the offer. The proposed purchase price was $320,000. That letter was addressed to Ms Hinde at the Silverwater Correctional Centre. It should have been apparent to Ms Martinez that there would probably be some delays in attending to the consideration of the offer given the knowledge she acquired in December 2008 about the difficulties communicating with a person in a correctional institution. In fact, the letter was not received by Ms Hinde until 24 April 2009. She had, at that time, been moved to Emu Plains Correctional Centre. Ms Martinez wrote to the agent on 2 April 2009 alluding to the possible purchase but noting Medicare Australia was only able to act on Ms Hinde's requests in relation to the approval.
20. Returning to events after the cancellation decision, Mr Liu rang Medicare Australia on 29 April 2009 and said that Ms Hinde had never received the letter of 13 March 2009 and, I infer, said neither he nor Ms Hinde received the letter of 20 April 2009. He also said that he had a power of attorney for Ms Hinde. The same day, 29 April 2009, the agent acting for Ms Sevil spoke to Medicare Australia informing it that she would be sending in an application for a change of ownership and relocation to a shop next door (to the Premises). That application was received that day. Also on 29 April 2009, Mr Liu wrote to Ms Martinez informing her that he had not been able to get instructions to respond to the Medicare Australia letter of 13 March 2009 until the previous day. That is, he had not been able to get instructions until 28 April 2009. He repeated what he had said on the phone earlier that day, namely that Ms Hinde never received the letter of 13 March 2009. He also noted that Ms Hinde had been unable to determine her future intentions until 3 April 2009 when she had been sentenced to a custodial sentence which, he noted, prevented her considering any reopening of her pharmacy. He also noted that he had received instructions the previous day to accept the offer from Ms Sevil. It appears that after Mr Liu sent this letter, he sent a second letter enclosing an application for approval for change of ownership of the pharmacy.
21. On 30 April 2009, Mr Liu wrote to Ms Martinez requesting that his client be given due process and, in particular, she be given the opportunity to present an "appropriate case in reply" and indicating that unless this procedure was followed, he "would regard our client as not being afforded procedural fairness".
22. On 7 May 2009, Mr Liu wrote to Ms Martinez informing her that Ms Hinde had, on that day, informed him that on 5 May 2009 she had received the letter of 20 April 2009. He explained that the letter had arrived late for reasons concerning where Ms Hinde was then housed in the New South Wales prison system. He also explained that deeds for sale had been exchanged on 29 April 2009 and requested the "return of Ms Hinde's approval number to deactivated status from cancel status" to facilitate the sale and noting, in effect, that that would fulfil the needs of the Aberdeen community.
23. At this point, Mr Flaherty commenced a dialogue with Medicare Australia about the approval and the Premises. It received, on 8 May 2009, an application from him for approval to supply pharmaceuticals from the Premises. On 21 May 2009, he wrote, through his solicitors, to Medicare Australia informing it that searches had indicated that the pharmacist (Ms Hinde) at the Premises had not been a registered pharmacist for more than 18 months and that he was now the lessee of the Premises. Confirmation was sought that Ms Hinde's approval had been cancelled and, if not, an indication of the status of the approval and when it would be cancelled.
24. In the meantime, Medicare Australia sought legal advice (on 12 May 2009) about whether there had been denial of procedural fairness in relation to the decision to cancel Ms Hinde's approval. That advice was given on 26 May 2009. It was to the effect that Ms Hinde had been given procedural fairness before 31 March 2009 but that it was arguable she had not been for the period 31 March 2009 to the date of cancellation on 20 April 2009. The view that there may have been a denial of procedural fairness was founded on two propositions. The first was that the delegate, knowing that there was a possibility that the pharmacy might be sold, did not seek confirmation as to whether Ms Hinde would agree to the sale and did not investigate why there had been no response to the show cause letter. These steps were not taken in circumstances where the delegate was aware of Ms Hinde's personal situation and the complexities associated with contacting her. The advice was that arguably this possible failure to afford procedural fairness constituted jurisdictional error. The advice went on to indicate that even if the revocation of the approval had been valid, it was still appropriate for the delegate to review the matter and remake the decision. The advice concluded that the delegate should review the matter taking into account all facts and evidence then known and review the decision made on 20 April 2009 to cancel the approval and then either remake the decision or confirm the decision made on 20 April 2009.
25. On 26 May 2009 Ms Martinez made a decision reinstating Ms Hinde's approval and deactivating it. In a note of what, I infer, was a discussion Ms Martinez had with at least one other person within Medicare Australia on 26 May 2009, the decision was made by her because she was satisfied procedural fairness may not have been afforded to Ms Hinde. At that time, Ms Martinez was contemplating deactivation until 5 June 2009 "to preserve Ms Hinde's rights in relation to the approval and the pending change of ownership". She informed Mr Liu of her decision by letter dated 2 June 2009 when she then indicated the deactivation would be until 10 July 2009. The clear import of the letter was that Mr Liu and a Mr Maloney (who Ms Martinez understood were joint attorneys for Ms Hinde under a general power of attorney) would prosecute the sale to Ms Sevil which had earlier been brought to Medicare Australia's attention.
26. Thereafter events were influenced by the fact that Mr Flaherty was, or at least asserted he was, the lessee of the Premises. On 23 June 2009, Ms Sevil spoke to Medicare Australia and indicated that she still intended to purchase the pharmacy though was then aware that someone else had a lease on the premises. She indicated she was contemplating relocating the pharmacy approval number. She was told that Medicare Australia had not been informed of her intention to relocate the approval. She was advised that certain formalities needed to be attended to promptly in order to progress the application for change of ownership. Ms Sevil appears to have indicated that she would attend to them. The contents of this conversation were relayed to Ms Martinez by e-mail.
27. The following day, 24 June 2009, Medicare Australia wrote to Ms Sevil indicating what steps she should take to progress the matter indicating that she should provide Medicare Australia with evidence of her right to occupy the Premises. The letter indicated that she should send Medicare Australia the original change of ownership application (the letter noted that only a faxed version had been received which was almost illegible) and that these various matters needed to be attended to by no later than 1 July 2009. On 25 June 2009 Mr Liu wrote indicating "a special change of circumstances has arose (sic) that affects Ms Hindes sale of the pharmacy". He referred to the fact that another pharmacist had taken what he described as a "standby" lease in relation to the Premises. Doubtless this was a reference to Mr Flaherty. Mr Liu said that other premises suitable for a pharmacy were the subject of an application for approval by another pharmacist. He described this process as "blocking out" available premises. He sought an extension of time of the deactivation from 10 July 2009 for a further two months until 10 September 2009.
28. In late June 2009 there was correspondence concerning Ms Sevil's application for change of ownership which, on 3 July 2009, was refused. It was refused on the basis that she could not supply pharmaceuticals from the Premises.
29. In the result, on 8 July 2009, Ms Hinde was granted a further extension of the deactivation for 38 days to 17 August 2009. She was informed of this in a letter of 7 July 2009 to Mr Liu. The letter made it clear that the 38 day extension would provide Ms Sevil with two opportunities to lodge an application for relocation of the approval which could be considered by the Authority either on 28 August 2008 or 25 September 2009. The letter indicated that Ms Hinde's approval would be cancelled without further notice if, by 17 August 2009, Ms Sevil had not lodged a complete application to relocate the approval. The letter also indicated that if the application was made and failed, Ms Hinde's approval would be cancelled without further notice. Ms Sevil lodged such an application on 17 August 2009.
30. A further decision to extend the deactivation of Ms Hinde's approval was made on or about 18 August 2009.

Legislative provisions and the documents creating the statutory scheme for the grant and cancellation of approvals

31. Approval is granted to a pharmacist for the supply of pharmaceutical benefits at particular premises. Section 90 of the NH Act provides:

(1) Subject to this section, the Secretary may, upon application by a pharmacist for approval to supply pharmaceutical benefits at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at those premises.
(2) ...
(3) Subject to this section, where an approved pharmacist desires to supply pharmaceutical benefits at premises other than premises in respect of which approval has been granted, the Secretary may on application by the approved pharmacist, grant approval in respect of those other premises.

"Pharmacy" is defined in this section as "a business in the course of the carrying on of which pharmaceutical benefits are supplied."

32. An approval granted under s 90 can be cancelled under s 98(3) which provides:

(3) If the Secretary is satisfied that:
(a) an approved pharmacist is not carrying on business as a pharmacist at premises in respect of which the pharmacist is approved; or
(b) the premises are not accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the Secretary, are reasonable;
then the Secretary may (at his or her discretion), by notice in writing to the pharmacist, cancel the approval of the pharmacist under section 90.

33. The expression "(at his or her discretion)" was added in 2003. The Explanatory Memorandum for the Health and Ageing Legislation Amendment Bill 2003, said of the amendment introducing that expression:

Section 98 of the National Health Act 1953 provides the Secretary with the power to cancel approvals to supply pharmaceutical benefits given to pharmacist and medical practitioners under sections 90 and 92 respectively. Section 98AA provides the Minister with a similar power in regard to approvals to supply pharmaceutical benefits given to hospital authorities under section 94.

It is proposed to amend sections 98 and 98AA by inserting after the word "may", the words "(at his or her discretion)" in the following relevant subsections:

subsection 98(2), (3) and (3A); and
subsection 98AA(2) and (3).

The proposed amendments will put beyond doubt that the decision-maker has the discretion whether or not to cancel the relevant approvals.

For example, the Secretary might decide not to cancel an approval where an approved pharmacist has ceased to trade temporarily through illness or other unanticipated circumstances. If the discretion where not available the Secretary would be obliged to cancel the approval in such circumstances and there would be a requirement for the pharmacist to reapply for a new approval, which may not be appropriate in all cases.

34. As noted earlier, Medicare Australia has promulgated Guidelines to assist approved pharmacists who may wish to temporarily "deactivate" an approval to supply pharmaceutical benefits under s 90 of the NH Act. These Guidelines have no legislative foundation. As a matter of internal administration, if deactivation is agreed to, an approved pharmacist who may have ceased carrying on business as a pharmacist at the premises in respect of which the pharmacist is approved, is not at immediate risk of having the approval cancelled. The Guidelines indicate that in certain circumstances the delegate will consider an application to deactivate an approval. First, where there is no proposed change in the location of the pharmacy or the approved pharmacist, secondly, where there is a proposed change in the approved pharmacist and no proposed change in the location of the pharmacy and thirdly, where there is a proposed change in the location of the pharmacy irrespective of whether there is also a proposed change in the approved pharmacist. The Guidelines identify considerations which will be taken into account in each of these circumstances. The Guidelines indicate the period of deactivation cannot be extended for more than six months unless exceptional circumstances exist.
35. The functions of the Authority are set out in s 99K of the NH Act and include the consideration of applications under s 90 of the NH Act and the making of a recommendation to the Secretary as to whether approval should be granted. The Act requires the Authority to comply with the relevant Rules determined by the Minister pursuant to s 99L of the NH Act.
36. The current rules are the National Health (Australian Community Pharmacy Authority Rules) Determination 2006 which have been amended several times since being made in 2006. The Rules provide for various kinds of applications and direct that the Authority, in identified circumstances, must recommend that the applicant be approved and, in other circumstances, must recommend that the applicant not be approved. An application for a new pharmacy (rural) can be made by reference to Item 114, Schedule 1, Part 2 of the Rules, such as made by Mr Flaherty on 8 May 2009, with the result that a new pharmacy can be established if the proposed premises are in a rural locality and are at least 10 km, by the shortest route, from the nearest approved premises. An application which involves the cancellation of an existing approval under Schedule 3, such as that made by Ms Sevil on 17 August 2009, can be made under Schedule 1, Part 1 item 105 for a short distance relocation of more than 1 km.
37. In addition to the Rules, the Commonwealth Government and the Pharmacy Guild of Australia have entered into a number of agreements concerning pharmacy approvals which have the objectives of maintaining a stable and viable community pharmacy sector. The aim of the Fourth Community Pharmacy Agreement, signed on 16 November 2005, was to ensure that pharmacy services would be provided to people living in rural and regional Australia and where there is a community in need. New location arrangements were introduced by this agreement and commenced on 1 July 2006. The Minister has also been provided with a discretionary power to approve pharmacies in unique circumstances where the location rules would deprive a community of access to pharmacy services.
38. It is convenient, in this section, to refer to a relevant legislative provision of general application unrelated to the NH Act. Section 33(3) of the Acts Interpretation Act 1901 (Cth) provides:

Where an Act confers a power to make, grant or issue any instrument (including rules, regulations or by-laws) the power shall, unless the contrary intention appears, be construed as including an power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

Revisiting on 26 May 2009 the 20 April 2009 cancellation decision – procedural fairness

39. The applicant challenges the decisions of 26 May 2009 on a number of grounds. It is convenient to consider first the question of whether the delegate could exercise on 26 May 2009 the cancellation power conferred by s 98(3) and decide not to cancel Ms Hinde's approval. The applicant submits the delegate could not. If this is correct then it would appear that all subsequent decisions challenged by the applicant could not have been made because there was no extant approval which could be "deactivated". The respondents submit that the delegate could make the decision on 26 May 2009 not to cancel Ms Hinde's approval.
40. The applicant's position has an initial attraction. If a statute confers a power to grant a right or benefit and a power to cancel the right or benefit then it would seem curious that the power to cancel could be exercised, initially to cancel and subsequently not to cancel. Ultimately, of course, this question must be decided by reference to the legislation in question. In the present case the respondents support the exercise of the cancellation power on 26 May 2009 on two bases. The first is that the decision of 20 April 2009 did not involve the exercise of the cancellation power because Ms Hinde was denied procedural fairness. Accordingly, and notwithstanding appearances to the contrary, no decision to cancel was made on 20 April 2009 and the power to cancel remained exercisable thereafter. The second basis involves the Acts Interpretation Act 1901 (Cth).
41. Was Ms Hinde denied procedural fairness? She had solicitors acting for her when Mr Liu wrote the letter of 28 January 2009. In those circumstances it was reasonable for Ms Martinez to write the letter of 13 March 2009 addressed to Mr Liu putting Ms Hinde on notice that her approval might be cancelled and inviting her to provide certain information before 10 April 2009. Apart from certain matters of detail which I mention in a moment, it could scarcely be said that Ms Hinde would have been denied procedural fairness because the opportunity to provide information and argue against the cancellation was offered to her through her solicitor.
42. I should add that there are, in evidence, some internal Medicare Australia e-mails which indicate that a view was held within that organisation (a view communicated to Ms Martinez by email on 14 April 2009) that by mid-April 2009, Ms Hinde's solicitors were no longer acting for her. I do not accept, on the evidence, that this was so. In her affidavit in these proceedings, Ms Hinde does not say that at any relevant time between January 2009 (when she gave instructions to Mr Liu to respond to the letter of 3 December 2008) and 20 April 2009 did she withdraw her instructions from Mr Liu in relation to dealing with Medicare Australia about the possible cancellation of her approval. Indeed it appears that at least on 13 March 2009 she was continuing to deal with Mr Liu as this was when, on her evidence, she provided him (and Mr Maloney) with a power of attorney which was exercised on 29 April 2009 in executing a deed for the sale of the "ownership of the pharmacy and the approval number" by Ms Hinde to Ms Sevil. In any event, if it was the fact that Mr Liu at some stage before 20 April 2009 ceased to act, he could readily have informed Ms Martinez that this was so. This did not happen.
43. It seems to me that the real procedural vice evident in the events leading to the cancellation decision of 20 April 2009, was that Medicare Australia was put on notice (and Ms Martinez in particular in an e-mail of 14 April 2009) that Ms Hinde was being invited to sell the pharmacy for a significant sum ($320,000) which was a material change in the position that had been put by Mr Liu in his letter of 28 January 2009 when he had indicated that Ms Hinde was planning to reopen a new pharmaceutical business. Ms Martinez's decision of 20 April 2009 was based on the conclusion that Ms Hinde was not carrying on business as a pharmacist and not supplying pharmaceutical benefits at the Premises. In her letter of 20 April 2009 she adverted to the fact that there had been no response to her letter of 13 March 2009 seeking additional information. That March 2009 letter invited information and a response on the assumption that the relevant question was whether Ms Hinde would carry on business as a pharmacist at the Premises.
44. However it would have been clear to Ms Martinez immediately before she made her decision of 20 April 2009, that the assumption on which she had sought comment and on which she was about to make her decision was likely to be wrong. That is, Ms Hinde would not be dealing with her predicament by endeavouring to resurrect the pharmacy business herself. There are, in evidence, copies of newspaper reports of Ms Hinde's sentencing with a fax notation suggesting that they were in the possession of Medicare Australia by 16 April 2009. From this I infer that it is more probable than not that Ms Martinez knew, on 20 April 2009, that Ms Hinde would remain in a correctional centre for the following three years.
45. The procedural vice was that no steps were taken to ascertain from Ms Hinde or her lawyers or both what the true position was. In other words the decision maker, Ms Martinez, failed to invite Ms Hinde either herself or through her solicitors to comment on or provide information about the true state of affairs then, in substantial part, known to the decision maker before the decision was made. This occurred in circumstances where Ms Hinde was in custody, a fact known by Ms Martinez (her letter of 20 April 2009 was addressed to Ms Hinde in a correctional institution) and that any communication with her either by the intending purchaser (such as the letter actually sent on 30 March 2009 by the agent acting for Ms Sevil and copied to Ms Martinez under cover of the letter dated 1 April 2009) or her lawyers or both was likely to be fraught as it was likely it would take some time before any considered response would be forthcoming. In my opinion, Ms Hinde was not afforded procedural fairness before the cancellation decision was made on 20 April 2009.
46. The question that then arises is what is the legal effect of this failure. It seems to me that this failure can appropriately be described as constituting jurisdictional error: Re Refugee Review Tribunal; ex parte Aala [2000] HCA 57; (2000) 204 CLR 82, with the consequence that the decision to cancel made on 20 April 2009 was of no legal effect. If so, it was open to the delegate to consider exercising the power to cancel on 26 May 2009 and decide not to cancel Ms Hinde's approval. This approach is consistent with the observations of Gleeson CJ and Gaudron and Gummow JJ (McHugh J agreeing at [63]) in Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597 at [5] and [52]–[53] respectively. It is an approach which was recently adopted by Gordon J in White v Designated Manager of IP Australia (No 2) (2008) FCR 15 at [66]-[67].
    
47. Given this conclusion, it is probably unnecessary to consider the alternative basis on which the power to decide not to cancel exercised on 26 May 2009 is said to have arisen, namely by operation of s 33(3) of the Acts Interpretation Act which would require, as I understood the submission, the provision conferring power to cancel an approval as also conferring a power exercisable from time to time to rescind or revoke the cancellation. Having regard to the nature of the power and the statutory scheme requiring, in some circumstances, a procedure to be followed leading to a recommendation by the Authority before an approval is given, I would have thought that the NH Act evinced an intention that the cancellation power, once exercised, could not be exercised again to rescind or revoke the cancellation with the practical and legal consequence of creating an approval. In addition, I doubt that the power conferred by s 98(3) of the NH Act is a power of the type addressed by s 33(3) to "make, grant or issue any instrument" even though notice of the cancellation must be given in writing. It is simply a decision which must be evidenced in writing: Laurence v Chief of Navy [2004] FCA 1535; (2004) 139 FCR 555. The subsection concerns a power to cancel an approval and not a power to make, grant or issue any instrument: Nicholson-Brown v Jennings [2007] FCA 634; (2007) 162 FCR 337 at [27].

Other challenges to 26 May 2006 decision and decisions of 8 July and 17 August 2009

48. The other bases on which the applicant challenges the decision of 26 May 2009 can conveniently be dealt with together. The applicant accepts that, with minor exceptions, the challenge to the later decisions of 8 July and 17 August 2009 proceed on the same footing. Thus, and subject to those exceptions, if the challenge to the decision of 26 May 2009 fails, so too does the challenge to the two later decisions. The applicant contends that the delegate failed to take into account relevant considerations, took into account irrelevant considerations, exercised a discretion without regard to the merits of the particular case and the exercise of power was so unreasonable that no reasonable person could have so exercised the power.
49. As I understood the submission, the relevant considerations not taken into account included that Ms Hinde was suspended from registration as a pharmacist, was not carrying on business as a pharmacist at the Premises, the Premises (at which Ms Hinde's approval operated) were not accessible to the members of the public for the purposes of receiving pharmaceutical benefits, Ms Hinde did not have any right to occupy the Premises, the decision not to cancel (the decision to grant deactivation) followed a period of deactivation which exceeded, by a considerable period, the period identified in the Guidelines and that Mr Flaherty had applied for approval to supply pharmaceuticals from the Premises. Irrelevant matters taken into account included the proposed application to transfer the approval of Ms Hinde to Ms Sevil (an application incapable of approval). This was also said to be the improper purpose namely to assist Ms Hinde to arrange for a transfer of ownership of the approval and/or relocation of the approval. These various matters also pointed to the delegate's exercise of the discretion without regard to the merits of the particular case and also revealed the unreasonableness of the decision in the relevant legal sense.
50. The short answer, in my opinion, to these various contentions is that the power to cancel is, in terms, unconstrained though obviously must be exercised in a way which accords with the NH Act's scope, objects and purposes. The power has been described, correctly, as a discretion enlivened when an approved pharmacist is not carrying on business at the premises to which the approval relates: Shaffer v Secretary, Department of Health and Aged Care [2002] FCA 1028; (2002) 124 FCR 234 at [23], a proposition now made abundantly clear by the later addition of the expression "(at his or her discretion)" to s 98(3). Plainly the section itself contemplates that the possible exercise of the power to cancel arises, relevantly, in circumstances where an approved pharmacist is not carrying on business as a pharmacist at premises to which the approval relates. That is the starting point. There may be a myriad of reasons why that is so.
51. What the decision maker must do is evaluate whether, in the circumstances, the approval should be cancelled or not. I do not doubt that the decision maker must bear in mind that the purpose of the legislative scheme as it concerns pharmacists which involves this process of approval, has as its overarching purpose to ensure that members of any particular community in Australia have access to pharmaceutical benefits through a pharmacist operating in that community though probably subject to issues of practicability. This matter (whether pharmaceutical benefits will continue to be available to a given community) is almost certainly a relevant consideration implied, but not expressed, in the NH Act which the decision maker would be bound to take into account when considering whether to cancel an approval. But the applicant's case is not advanced on the basis that the delegate in this case failed to take this into account at least at that level of generality.
52. But beyond that consideration, it seems to me that a delegate is entitled to evaluate the mix of facts arising in any given situation as the delegate sees fit. To take an extreme but not fanciful example, all or virtually all housing in a community might be destroyed by bushfire (as happened in Victoria in February 2009). Also destroyed might be the premises from which an approved pharmacist was then carrying on business and supplying pharmaceutical benefits. A delegate might decide not to cancel the approval even though the rebuilding of housing had priority and premises from which the pharmacist might again carry on business might not, as a matter of priority, be rebuilt immediately or indeed for some years. However, if the delegate was satisfied that the approved pharmacist (or someone to whom he or she proposed to sell his business in due course because the pharmacist was not prepared to return to the community) was committed to supplying pharmaceutical benefits again in that community as soon as practicable, a decision to cancel the approval might not be made. I give this example without descending into the legal question of whether there were, relevantly, "premises" for the purposes of the NH Act in the interregnum.
53. It seems to me that the decision made on 26 May 2009 was not infected by error in the various ways contended. Firstly, it is by no means clear from the evidence that the decision maker did not take into account the various matters said to be relevant. In any event, Ms Martinez was not bound to take them into account. A distinction needs to be drawn between matters which might constitute irrelevant or relevant considerations for the purposes of the ADJR Act and factual matters which are what, in substance, are identified by the applicant in its case: see, for example, the discussion by RD Nicholson J in Walsh v Department of Employment, Education, Training and Youth Affairs (1998) 51 ALD 690 at 693-694. The matters the applicant identifies are not matters which, by necessary implication, the NH Act requires a delegate to take into account or, by necessary implication, are matters which a delegate is prevented from taking into account.
54. While the immediate purpose of the decision maker (not to cancel) in this case was fairly clearly to facilitate the sale of the business and the transfer of the approval to Ms Sevil, that states the purpose too narrowly. Consistent with the NH Act, that sale and transfer if consummated would have achieved the purpose of the supply of pharmaceutical benefits from the Premises (or, later, at other premises) by Ms Sevil to the Aberdeen community which was a purpose entirely consistent with the NH Act. It is true that by 26 May 2009, Mr Flaherty was asserting a right to occupy the Premises and the failure of the initial application to transfer the approval by Ms Sevil for this reason is relied on as an additional consideration the delegate failed to take into account in the decision not to cancel made later in 2009. However on 26 May 2009 and at all times thereafter (and in particular on 8 July and 17 August 2009) there was material before the delegate which indicated that by one means or another Ms Sevil intended to put herself in a position of being able to supply pharmaceutical benefits in Aberdeen in conjunction with Ms Hinde relinquishing her right to do so. In those circumstances, the delegate was entitled to do as she did, namely refrain from exercising the power to cancel.
55. The decisions taken on 26 May, 8 July and 17 August 2009 not to cancel Ms Hinde's approval did not involve the delegate taking into account irrelevant considerations or failing to take into account relevant considerations, and were not taken for an improper purpose nor were the decisions unreasonable in any relevant legal sense.
56. I propose to dismiss the application with costs though, subject to the submissions of the parties, it may be appropriate to make a declaration that the decision to cancel of 20 April 2009 was a nullity.
    

I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Associate:

Dated: 12 February 2010