Federal Court of Australia

Inas Karem Holdings Pty Ltd v Secretary, Department of Health and Aged Care [2024] FCA 352

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The applicant pay the respondent’s costs.

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

REASONS FOR JUDGMENT

KATZMANN J:

Introduction

1    Amongst many other things, the National Health Act 1953 (Cth) regulates the supply of pharmaceutical benefits. In that respect, for example, it prescribes the circumstances in which a person may receive pharmaceutical benefits, who may supply them, and the premises from which they can be supplied. Section 90 gives the Secretary of the responsible government department (currently the Department of Health and Aged Care) the power, upon application by a pharmacist for approval to supply pharmaceutical benefits at particular premises, to approve that pharmacist for that purpose. Where, however, 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, s 98(3) permits the Secretary, by notice in writing to the pharmacist, to cancel the approval.

2    In November 2011 the applicant was approved to supply pharmaceutical benefits at a Priceline Pharmacy from premises in Haymarket at the edge of the Sydney Central Business District. In February 2022, a delegate of the Secretary cancelled the approval (the cancellation decision). The applicant unsuccessfully applied to the Administrative Appeals Tribunal (the Tribunal) for a review of the cancellation decision. This is an appeal from the Tribunal’s decision. For the reasons that follow the appeal must be dismissed.

The relevant provisions of the National Health Act

3    Section 90 relevantly provides:

Approved pharmacists

(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.

…

(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.

…

(6)    For the purposes of this section, a reference to a pharmacist is taken to include a reference to a person who owns, or is about to own, a business for the supply of pharmaceutical benefits at particular premises.

4    Where a request is made by an approved pharmacist the cancellation of an approval made under s 90, the Secretary is obliged to cancel the approval (s 98(1)(a)). Otherwise, with one exception which is irrelevant for present purposes, the Secretary has a discretion to cancel the approval.

5    Section 98(3) provides:

If the Secretary is satisfied that:

(a)    an approved pharmacist is not carrying on business as a pharmacist at premises in respect of which 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.

6    For the purposes of s 98, an approved pharmacist who is not supplying pharmaceutical benefits in the course of carrying on the business is taken not to be carrying on business as a pharmacist (s 98(6)). Thus, in the case of an approved pharmacist to whom s 98(6) applies, a reference in s 98 to “an approved pharmacist carrying on business as a pharmacist at premises” is a reference to an approved pharmacist carrying on a business for the supply of pharmaceutical benefits at the premises (s 98(5)).

The facts and evidence

7    The applicant was incorporated in June 2008. Until 14 December 2015, and again after 18 March 2016, Mrs Karem was its sole director. On 18 July 2011 Mrs Karem applied for approval to supply premises situated at shops 18-19, Henry Deane Plaza in Lee Street, Sydney. On 3 November 2011 a delegate of the Chief Executive Officer, on behalf of the Secretary, approved Mrs Karem to supply pharmaceutical benefits at those premises with immediate effect. In the letter advising her that her application had been approved, the delegate wrote:

You should advise Medicare Australia if changes occur to the pharmacy or the approved pharmacist/s (a new application will be required) or you cease to carry on the business of a pharmacist at the approved premises. Failure to do so may result in the cancellation of your approval.

It is also important to note that if approval has been granted in accordance with the Pharmacy Location Rules, restrictions apply to subsequently relocating the approved premises. For further information about the restrictions that apply under each Rule, refer to the Pharmacy Location Rules Applicant's Handbook March 2009 which can be found on the Department of Health and Ageing website www.health.qov.au by using the term “ACPA” in the search function.

8    It is not entirely clear how the approval granted to Mrs Karem came to be held by the applicant. Neither party explained the process. The Tribunal stated that Mrs Karem transferred the ownership of the pharmacy business to the applicant in 2011 (at [15]). Its stated source is a paragraph in the applicant’s outline of submissions which was not included in the appeal book and not to any evidence. But there appears to have been no issue in the Tribunal that the applicant was the holder of the approval at all material times.

9    On 10 January 2022 a delegate of the Secretary wrote to the applicant inviting Mrs Karem to show cause as to why the Secretary should not make a decision to cancel the approval. The delegate explained that the currently available information suggested that the approved pharmacist was not carrying on business as a pharmacist at the approved premises and they were not accessible by the public for the purpose of receiving pharmaceutical benefits. She referred, amongst other things, to the absence of any pharmaceutical benefit claims supplied at or from the approved premises since September 2021 and the fact that the telephone number recorded for the pharmacy on the approval record was not answered. The letter was addressed to the applicant at the approved premises and sent by registered mail. The applicant did not respond.

10    On 11 February 2022 the cancellation decision was made.

11    Mrs Karem claimed to have been unaware of the cancellation decision until the following month. As a result she lodged her application for review with the Tribunal after the prescribed time to do so had lapsed but on 7 September 2022 the Tribunal granted her an extension of time.

12    In a signed statement to the Tribunal made on 7 November 2022, which was admitted into evidence, Mrs Karem said that the pharmacy occupied the approved premises under “a month-to-month lease as the business was marketed for sale”. She indicated that attempts to secure a purchaser were unsuccessful. She said that the pharmacy continued to trade during “the COVID period” from April 2020 until August 2021 but she decided to temporarily close the pharmacy due to the dearth of “customer traffic” during “the second lockdown of July 2021” and staffing issues attributable directly or indirectly to the pandemic. Her stated intention was to reopen once the lockdowns were lifted and trading conditions returned to normal. She said that, since the closure, the landlord tried to commit “each party” to a lease but she was uncomfortable about that “due to the remnants of COVID-19 still about” and the fact that the Henry Deane Plaza was flagged for redevelopment. After the second lockdown was lifted in November 2021, however, the anticipated increase in foot traffic did not occur, so she decided to extend the temporary closure to the end of January 2022.

13    Mrs Karem said that she declined to enter into a new lease in January 2022 and in late February 2022 gave notice to the landlord to terminate the “monthly holdover” and removed all stock and fittings. She said that after she completed the handover of the premises to the landlord in March 2022 she began looking for alternative premises. She claimed that the cancellation decision made it difficult for her to find an alternative site but that she held an executed lease agreement for proposed premises in Surry Hills, not far from the approved premises. The lessee was Pharmacy 4 Less Pty Ltd, the sole director of which was one of her brothers-in-law. Clause 20.1 of the lease agreement provided that in the event that the lessee was unable to obtain approval as a pharmacist by 16 February 2023, the lessee had the right to terminate the agreement. Evidence was adduced on the appeal that the date of 16 February 2023 in cl 20.1 was extended to 31 March 2024.

14    The transcript of the Tribunal hearing is not before the Court. In its reasons, the Tribunal mentioned that Mrs Karem testified that the applicant planned to enter into a sub-lease with the lessor of the Surry Hills premises and that she believed that her brother-in-law had obtained the lessor’s permission for the sub-lease to her. An unexecuted copy of the sub-lease agreement was attached to Ms Karem’s statement. Evidently Mrs Karem told the Tribunal that Pharmacy 4 Less Pty Ltd was unable to obtain a new approval for the Surry Hills premises but that, if the applicant’s approval were reinstated, it would be able to apply to relocate the approval to enable it to operate the pharmacy business from the Surry Hills premises.

The Tribunal decision

15    After outlining the factual background to the application, referencing the evidence and the relevant sections of the National Health Act, the Tribunal identified the issues it was required to determine as:

(1)    whether the discretionary power in s 98(3) was enlivened at the time of the cancellation decision because either:

(a)    the applicant was not carrying on business as a pharmacist at premises in respect of which the pharmacist was approved; or

(b)    the premises were not accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the Tribunal, were reasonable; and

(2)    if so, whether that power should be exercised.

16    The Tribunal proceeded to summarise the evidence (at [14]–[34]) and then to address the two issues (at [35]–[50]).

17    The Tribunal found that the power to cancel the approval was enlivened at the time of the reviewable decision because the applicant was neither carrying on business as a pharmacist at the approved premises nor were the premises accessible by members of the public for the purpose of receiving pharmaceutical benefits at reasonable times (at [38]–[39]).

18    The Tribunal then proceeded to consider whether the discretion to cancel the approval should be exercised.

19    First, the Tribunal noted that the applicant wished the cancellation decision to be set aside to enable her to seek permission to relocate the approval to the Surry Hills premises (at [41]).

20    The Tribunal observed that the applicant had failed to inform the Secretary that it had ceased carrying on business as a pharmacist at the approved premises, did not contact the Secretary when it decided to temporarily close the pharmacy in August 2021 or in February 2022 when it gave notice to the landlord that it intended to terminate the lease, and took no active steps to locate alternative premises until July 2022 (at [42]).

21    The Tribunal then addressed the applicant’s argument. That was the contention made in its Statement of Facts, Issues and Contentions (SFIC) that, if the Secretary had been aware of its circumstances, it would have deactivated the approval rather than cancelling it (at [43] ff). More particularly, the applicant contended that the circumstances which led to the temporary and then permanent closure of the pharmacy and the attempt to relocate it within a kilometre were “completely suitable circumstances” for the Secretary to follow “its usual deactivation policy” and refrain from cancelling the approval so as to give her the opportunity to relocate the approval and thereby limit its financial damage and maintain the public’s access to “PBS items” (at [46]).

22    The Tribunal rejected the applicant’s argument.

23    First, the Tribunal explained that the term “deactivate” does not appear in the National Health Act but is “an administrative concept” (at [43]). The Tribunal went on to refer to non-binding guidelines published by the Department in relation to “deactivation of an approved pharmacist” (at [44]). I interpolate that the guidelines state that the concept is intended to describe situations in which the Secretary or his or her delegate decides not to cancel an approval under s 98(3) despite the fact that the statutory precondition for cancellation has been satisfied. The Tribunal observed (at [44]) that:

The Deactivation Guidelines state that an approved pharmacist who needs to close their pharmacy temporarily must first request deactivation, in writing, before ceasing supply of pharmaceutical benefits. Closure of a pharmacy without first seeking deactivation may result in the cancellation of the pharmacist’s approval to supply pharmaceutical benefits at those premises. The Deactivation Guidelines state that a request to deactivate must be made in writing and emailed to pbsapprovedsuppliers@health.gov.au, clearly articulating the reasons for the closure and seeking deactivation and, if required, supporting documents. The application must also include the period of time for which the applicant is seeking deactivation.

24    The Tribunal noted that the applicant did not make a request for deactivation either before or after it ceased carrying on business as an approved pharmacist at the approved premises (at [45]). The Tribunal acknowledged the applicant’s submission that it was unaware of its ability to do so and its claim that its failure to do so was “quite excusable” in view of the “unprecedented” circumstances surrounding the closure of the pharmacy (at [45]). It went on to say:

[47]    Despite the second lock-down lifting in November 2021, the Applicant did not resume trade at the approved premises. It did not inform the Department in February 2022 that it had given notice to the landlord that it wished to terminate the month-to-month lease. It did not notify the Department in March 2022 that it had completed a handover of the approved premises back to the landlord. This is despite the fact that until 23 March the Applicant wrongly believed that it still held an active approval in relation to the premises.

[48]    On the basis of the evidence before it, the Tribunal finds that the circumstances warrant the exercise of the discretion to cancel the Applicant’s approval. If the discretion to cancel the approval is not exercised, the effect would be to reinstate the Applicant’s approval with respect to the approved premises. However, the Applicant no longer has an entitlement to occupy the approved premises as it has terminated its monthly tenancy and has not entered into a new lease agreement with the landlord. The outcome therefore would be to continue to deny the public the service of the supply of pharmaceutical benefits items in the location of the approved premises, which it has been denied for a period well in excess 12 months.

[49]    It is open to the Applicant to make an application for an approval as a pharmacist under section 90 of the Act with respect to the Surry Hills premises should it wish to operate a pharmacy business from this location.

The appeal

25    Appeals from the Tribunal are confined to questions of law: Administrative Appeals Tribunal Act 1975 (Cth), s 44. The applicant alleges that the Tribunal erred in law in several respects and seeks orders setting aside the Tribunal’s decision. In addition it seeks an order that the Secretary’s decision to cancel the approval be set aside. In the alternative, it asks that its application be remitted to a differently constituted Tribunal for a new hearing. It is difficult to see how it would be within the power of the Court to set aside the Secretary’s decision and no attempt was made to persuade the Court that such a course was open. If the appeal were allowed, the appropriate course would be to remit the matter to the Tribunal to hear and determine the review application according to law.

26    Six grounds were pleaded. One, ground 4, was not pressed. The remaining grounds were that the Tribunal erred in law by:

(1)    failing to provide reasons or adequate reasons for its exercise of discretion to cancel the applicant s approval, contrary to s 43 of the AAT Act (ground 1);

(2)    failing (or constructively failing) to exercise the discretion conferred by s 98(3) (ground 2);

(3)    assuming that matters which enlivened the discretion were determinative of the exercise of the discretion (ground 3);

(4)    failing to consider the applicant’s claims, arguments and evidence (ground 5); and

(5)    failing to consider any matters against (or claimed to be against) cancellation (ground 6).

27    With the exception of ground 1, the applicant’s written submissions did not directly address any of the grounds or distinguish between them.

28    In substance or effect, the applicant’s argument was that, while the Tribunal correctly identified both the question it was required to answer and the applicant’s case, it did not in fact consider whether it should refrain from exercising the discretion to cancel the approval, at least by reference to the matters raised by the applicant, and, if it did, its reasons were manifestly inadequate. The applicant submitted that there was “some superficial consideration” of the deactivation policy and guideline but that the Tribunal reached no conclusion on the question or its relevance.

Consideration

Did Tribunal fail (actually or constructively) to exercise the discretion conferred by s 98(3) (ground 2)? Did the Tribunal fail to consider the applicant’s claims, arguments and evidence (grounds 5 and 6)?

29    Ground 2 is difficult to understand. The discretion conferred by s 98(3) is a discretion to cancel the approval. The Tribunal exercised that discretion. In the terms in which it is pleaded, ground 2 must be dismissed.

30    The applicant’s primary submission was that the Tribunal did not give any consideration to whether the cancellation decision should be set aside in order to allow the applicant to relocate the approval to the Surry Hills premises.

31    The applicant submitted that the Tribunal made no finding as to whether the applicant should be given the opportunity to seek permission to relocate the approval to the Surry Hills premises and therefore “the only available conclusion” is that the Tribunal did not consider the issue. It claimed that the only consideration of this matter was to state that it was open to the applicant to make a new application under s 90 for approval with respect to those premises. It insisted that no consideration was given to whether relocation of the approval to those premises was a reason not to cancel the approval.

32    I cannot accept this submission. While it may not be explicit, it is clearly implicit from the Tribunal’s reasons that it was not persuaded that the applicant’s proposal to relocate the premises to Surry Hills was a sufficient reason not to exercise the discretion to cancel the approval.

33    The applicant’s argument appeared at [21]–[26] of the applicant’s SFIC. As I mentioned earlier, the transcript of the Tribunal hearing was not put before the Court. I assume, therefore, that the oral argument did not depart from what was put in the SFIC. There, the applicant stated that it did not have an opportunity to respond to the notice of intention because it was unaware that it had been posted (at [21]). The applicant asserted that had it been aware of the notice it would have provided a response which the Secretary would have taken into account (at [23]) and so would not have cancelled the approval but would have followed its deactivation policy (at [24]). The Tribunal referred to this assertion more than once in its reasons. The applicant contended (at [25]) that “the [Secretary] would have considered, among other matters”:

a)    The unprecedented effects of COVID and lockdowns, particularly in the Sydney CBD;

b)    The importance to the Applicant of maintaining the PBS approval and the ability to operate an approved pharmacy, including significant financial interests;

c)    The Applicant's intention to reopen the Business, either at the approved premises or suitable alternative premises within 1km, as soon as all relevant circumstances would permit;

d)    The Applicant was actively investigating alternative premises; and

e)    The public interest in preserving PBS approvals generally and, in particular, following an unprecedented pandemic.

34    The applicant went on to say (at [26]):

The Applicant contends that the circumstances which led to the temporary closure of the Business, followed by the ultimate closure and attempt to relocate within 1 km are completely suitable circumstances for the Respondent to follow its usual “deactivation” policy and refrain from cancelling the PBS approval so as to afford the Applicant an opportunity to relocate the PBS approval, thus limiting the financial damage to the Applicant and maintaining the public’s adequate access to PBS items.

35    The applicant submitted that the Tribunal did not in fact consider any of the matters it mentioned in [25] of its submissions.

36    I cannot accept this submission either.

37    Generally speaking, it is not necessary that an administrative decision maker refer to every contention advanced by an applicant: Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 236 FCR 593 at [46] (French, Sackville and Hely JJ). In Applicant WAEE at [47], the Full Court also observed that

The inference that the Tribunal has failed to consider an issue may be drawn from its failure to expressly deal with that issue in its reasons. But that is an inference not too readily to be drawn where the reasons are otherwise comprehensive and the issue has at least been identified at some point. It may be that it is unnecessary to make a finding on a particular matter because it is subsumed in findings of greater generality or because there is a factual premise upon which a contention rests which has been rejected. Where however there is an issue raised by the evidence advanced on behalf of an applicant and contentions made by the applicant and that issue, if resolved one way, would be dispositive of the Tribunal’s review of the delegate’s decision, a failure to deal with it in the published reasons may raise a strong inference that it has been overlooked.

38    Here, it is clear that the Tribunal was alive to the effects of the pandemic and the lockdowns in the Sydney CBD and that it took them into account. That is apparent from [47] of its reasons. It is also clear that the Tribunal understood that the applicant was asking the Tribunal not to cancel the approval so that it could re-establish its business in Surry Hills. The Tribunal made that plain at [41] of its reasons. It is apparent from what it said in the ensuing paragraphs, however, that the Tribunal did not consider that these matters weighed in the applicant’s favour. It referred expressly to the contention at [26] of the applicant’s SFIC, which was in substance a summary of that which appeared in [25] of that document, and rejected it (at [46]–[48]).

39    I conclude that neither ground 2 nor ground 5 is made out. Ground 6 adds nothing. It is not incumbent on the Tribunal to consider arguments that were not put before it. Otherwise it is just another way of putting ground 5. It follows that ground 6 is not made out either.

Were the Tribunal’s reasons inadequate (ground 1)?

40    Section 43(2B) of the AAT Act provides:

Where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.

41    A failure to give reasons for decision which satisfy the terms of s 43(2B) of the AAT Act is an error of law. So, too, is a failure on the part of the Tribunal to disclose its path of reasoning in sufficient detail to enable a court to discern whether it has made an error of law. See, for example, Karabolovska v Comcare [2019] FCA 2153; 81 AAR 116; 169 ALD 117 at [40], [95] (Perry J). The obligation to provide reasons “demands the furnishing of reasons which make intelligible the true basis of the decision”: ARM Constructions Pty Ltd v Deputy Commissioner of Taxation (1986) 10 FCR 197 at 204 (Burchett J).

42    The applicant submitted that the Tribunal’s reasons on whether the discretion should be exercised were confined to a single paragraph ([48]) and, in effect, amounted to no reasons at all. The applicant submitted that the “purported” reasons do not enable it to understand why it lost because “there is nothing” in that paragraph “which grapples with the case that was run before the Tribunal”.

43    I reject the submission.

44    It is trite that the reasons of an administrative decision maker must be read as a whole and considered fairly (Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 291 (Kirby J). The Tribunal’s reasoning process was not confined to [48]. It began at [41] and continued until [49].

45    The Tribunal addressed the substantive argument that was put to it, namely, that the discretion to cancel the applicant’s approval should not be exercised because it satisfied the deactivation guidelines. The Tribunal found that, contrary to the terms of the guidelines, to which it referred at [44] of its reasons, the applicant did not request deactivation before ceasing supply of pharmaceutical benefits (at [45]). In other words, it did not satisfy the deactivation guidelines.

46    The Tribunal also took into account the applicant’s failure to inform the Secretary that it had ceased to carry on business as a pharmacist at the approved premises; its failure to contact the Secretary when it decided to temporarily close the approved premises (at [42]); its failure to resume trading at the approved premises even after the second lockdown was lifted in November 2021; and its unexplained delay in informing the Department that it had given notice to the landlord that it wanted to terminate the lease on the Haymarket premises and its completion of the handover (at [47]). In addition, the Tribunal considered whether it was in the public interest not to cancel the approval in circumstances where the applicant no longer occupied the premises for which the approval had been granted (at [48]). Finally, the Tribunal observed that the applicant could apply for approval to operate as a pharmacist from the Surry Hills premises (at [49]).

47    All of these matters had a logical bearing on the question at hand. None of them was irrelevant to the exercise of the discretion. That is particularly so in circumstances where Ms Karem was informed in 2011 that she needed to inform Medicare Australia if she were to cease carrying on the business of a pharmacist at the approved premises; that “[f]ailure to do so may result in the cancellation of your approval”; and that the deactivation guidelines provided that “closure of a pharmacy without first seeking deactivation might result in … cancellation”. The weight to be accorded to them was a matter for the Tribunal. The matters the Tribunal found persuasive were all raised by the Secretary’s SFIC.

48    No doubt the Tribunal’s reasons could have been more detailed. They could also have been more clearly expressed. But they do not disclose an error of law.

49    Ground 1 is not made out.

Did the Tribunal assume that matters which enlivened the discretion were determinative of the exercise of the discretion (ground 3)?

50    Ground 3 is not made out either.

51    The proposition underlying this submission was drawn from Shaffer v Secretary, Department of Health and Aged Care (2002) 124 FCR 234. In that case, Whitlam J held (at [23]) that “the decision-maker’s satisfaction that a pharmacist is not carrying on business enlivens the discretion but does not dictate the outcome of its exercise”. His Honour concluded that in WH Soul Pattinson & Co Ltd v Secretary, Department of Health and Family Services (1997) 74 FCR 339 at 370 Beaumont J, unassisted by any reference to the legislative history, was plainly wrong to conclude that “may” in s 90(3) means “must”.

52    In the present case, however, the Tribunal made no such error. It plainly understood that it was not bound to cancel the approval but that it had a discretion to do so. The fact that in one paragraph of its reasons for considering that the discretion should be exercised the Tribunal referred to matters which enlivened the discretion does not establish that they were the only matters to which the Tribunal had regard. It is evident from the foregoing discussion that they were not.

Conclusion

53    The applicant has failed to establish any of the grounds of appeal. Consequently, the appeal must be dismissed. Costs should follow the event.

Associate:

Dated:    10 April 2024