Bardsley-Smith v Penrith City Council - [2013] NSWCA 200 - NSWCA 2013 case summary — Zoe

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Bardsley-Smith v Penrith City Council

[2013] NSWCA 200

Court of Appeal (NSW)|2013-05-03|Before: McColl JA, Barrett JA

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Source facts

Court

Court of Appeal (NSW)

Decision date

2013-05-03

Before

McColl JA, Barrett JA

Catchwords

151 LGERA 400 Foodbarn Pty Ltd v Solicitor-General (1975) 32 LGRA 157 Hawkesbury City Council v Sammut [2002] NSWCA 18
110 CLR 529 Terry White Chemists Australia Fair v Secretary, Department of Health and Ageing [2009] FCAFC 74
178 FCR 161 Winn v Director General of National Parks and Wildlife [2001] NSWCA 17
130 LGERA 508 Woolworths Ltd v Campbells Cash & Carry Pty Ltd (1996) 92 LGERA 244 Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422

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Original judgment source is linked above.

Catchwords

151 LGERA 400 Foodbarn Pty Ltd v Solicitor-General (1975) 32 LGRA 157 Hawkesbury City Council v Sammut [2002] NSWCA 18110 CLR 529 Terry White Chemists Australia Fair v Secretary, Department of Health and Ageing [2009] FCAFC 74178 FCR 161 Winn v Director General of National Parks and Wildlife [2001] NSWCA 17130 LGERA 508 Woolworths Ltd v Campbells Cash & Carry Pty Ltd (1996) 92 LGERA 244 Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422

Judgment (22 paragraphs)

[1]

y Ltd v University of Sydney (1998) 98 LGERA 218 Parramatta City Council v Hale (1982) 47 LGRA 319 Shire of Perth v O'Keefe [1964] HCA 37; 110 CLR 529 Terry White Chemists Australia Fair v Secretary, Department of Health and Ageing [2009] FCAFC 74; 178 FCR 161 Winn v Director General of National Parks and Wildlife [2001] NSWCA 17; 130 LGERA 508 Woolworths Ltd v Campbells Cash & Carry Pty Ltd (1996) 92 LGERA 244 Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422; 61 NSWLR 707 Category: Principal judgment Parties: Janis Margaret Bardsley-Smith (First Appellant) Ian Patrick Stubbs (Second Appellant) Penrith City Council (First Respondent) Administration and Marketing Solutions Pty Limited (Second Respondent) Damien Michael Gance (Third Respondent) Representation: Counsel: J Robson SC with C R Ireland (Appellants) N M Eastman (Second and Third Respondents) Solicitors: McPhee Kelshaw Solicitors (Appellants) Gadens Lawyers (First Respondent) Rotstein Lockwood Reddy Lawyers (Second and Third Respondents) File Number(s): 2012/154959 Decision under appeal Citation: Bardsley-Smith & Anor v Penrith City Council [2012] NSWLEC 79 Date of Decision: 2012-04-18 00:00:00 Before: Sheahan J File Number(s): 40565 of 2009

[2]

Judgment 1McCOLL JA: I agree with Sackville AJA's reasons and the orders his Honour proposes. 2BARRETT JA: This appeal should be disposed of in the manner proposed by Sackville AJA. I agree with his Honour's reasons and have nothing to add. 3SACKVILLE AJA: The appellants have an interest in retail pharmacies in the Penrith area. They instituted Class 4 proceedings in the Land and Environment Court ("L&E Court") challenging the validity of a development consent ("Consent") granted by the first respondent ("the Council"). The Consent permitted the use of "Tenancy 230" (located within the "Penrith SupaCenta", Jamisontown) as a "Chemist Warehouse". The appellants also challenged the lawfulness of the continued use of Tenancy 230 ("the Premises") insofar as it involved the conduct of a retail pharmacy. 4The Consent was granted pursuant to the Penrith Local Environmental Plan 1996 (Industrial Land) ("1996 LEP"), now replaced by the Penrith Local Environmental Plan 2010 ("2010 LEP"). At the time the Consent was granted, the land on which the Centre was located was zoned "4(b) Special Industry Zone" under the 1996 LEP. 5The respondents to the proceedings in the L&E Court were:

the Council;
the second respondent ("AMS"), the applicant for the Consent; and
the third respondent ("Mr Gance"), the lessee of the Premises. The Council filed a submitting appearance in the L&E Court, as it did in this Court. 6The appellants sought the following declaratory relief in the L&E Court: 1. Consent DA 08/1288 ('the Consent') granted by the [Council] to [AMS] on 20 February 2009 was granted contrary to s 76B of the Environmental Planning and Assessment Act 1979 ('the Act'). 2. The Consent is void, invalid and of no force or effect. 3. The present use of the [Premises] is prohibited in the IN2 Light Industrial zone of the Penrith Local Environmental Plan 2010 (2010 LEP), being the use of the premises for the retail sale of pharmaceutical and related products. 4. The present use of the Premises is contrary to s 76B of the Act, being a use of land for a purpose which is prohibited in the IN2 Light Industrial zone, being the retail sale of pharmaceutical and related products. The appellants also sought injunctive relief, including an order restraining Mr Gance from continuing the present use of the Premises for the retail sale of pharmaceutical and related products, being a purpose prohibited in the IN2 Light Industrial Zone. 7Section 76B of the Environmental Planning and Assessment Act 1979 ("EPA Act") provides as follows: If an environmental planning instrument provides that: (a) specified development is prohibited on land to which the provision applies, or (b) development cannot be carried out on land with or without development consent, a person must not carry out the development on the land. 8Section 107(1) of the EPA Act states that nothing in an environmental planning instrument prevents the continuance of an existing use. The term "existing use" is defined by s 106 to mean, relevantly: the use of a building, work or land for a lawful purpose immediately before the coming into force of an environmental planning instrument which would ... have the effect of prohibiting that use. 9Section 123(1) of the EPA Act provides that a person may bring proceedings in the Court for an order to remedy or restrain a breach of the Act, whether or not any right of that person has been or may be infringed by or as a consequence of the breach. A breach of the EPA Act includes a breach of a consent, including a condition subject to which the consent is granted: s 122(b)(iii). 10In a judgment delivered some 15 months after the hearing, the primary Judge (Sheahan J) rejected the challenges to the validity of the Consent and to the continued use of the Premises as a retail pharmacy: Bardsley-Smith v Penrith City Council [2012] NSWLEC 79. The appellants appeal against that decision pursuant to s 58 of the Land and Environment Court Act 1979 ("LEC Act"). AMS and Mr Gance (to whom I refer as "the Respondents") seek to uphold the decision. 11An appeal to this Court under s 58 of the LEC Act is a full appeal, not limited to questions of law: Parramatta City Council v Hale (1982) 47 LGRA 319, at 338, per Moffitt P. Thus the Court has power to review findings of fact as well as determinations of law: ACR Trading Pty Ltd v Fat-Sel Pty Ltd (1987) 11 NSWLR 67, at 69 per Kirby P (with whom Samuels JA and Hunt AJA agreed). The issues before the primary judge and on appeal involve some factual questions, but they depend primarily on the construction of the 1996 LEP and of the Consent.

[3]

1996 LEP 12Clause 9 of the 1996 LEP sets out the development control table for each zone, including Zone 4(b) Special Industry Zone. Clause 9(1) states that the table indicates the objectives of each zone and also indicates: (b) the land uses for the purposes of which: (i) development may be carried out without development consent; and (ii) development may be carried out only with development consent; and (iii) development is prohibited. 13Clause 9(2)(a) provides as follows: (2) Except as otherwise provided by this plan, the council must not grant consent to development of land to which this plan applies unless the council: (a) is satisfied that the carrying out of such development is consistent with: (i) the aims of this plan, and (ii) the objectives of the zone within which the development is to be carried out. 14The objectives of Zone 4(b) include the following: (i) to encourage a diversity of industrial and other employment generating activities; and (ii) to promote development which observes responsible, and environmentally sound, management practices; and (iii) to promote development which makes efficient use of industrial land; and (iv) to permit development which serves the daily convenience needs of persons working within industrial areas; and ... (ix) to permit the retailing of bulky goods from shops having a gross floor area of not more than 1,000m². 15No use is permissible within Zone 4(b) without consent (item (b)(i)). Uses permitted only with development consent (item (b)(ii)) relevantly are as follows:

shops trading principally in bulky goods which shops: (a) have gross floor area of not more than 1,000 square metres, and (b) ...
and any land use other than those included in Item (b)(iii). 16The prohibited uses (item (b)(iii)) include the following: Shops (other than convenience stores, corner shops, fast food take-away restaurants, take-away food shops, shops trading principally in bulky goods included in paragraph (b)(ii) and shops trading principally in motor vehicle parts and accessories, including marine vessel parts and accessories). As the primary Judge observed (at [62]), unless a use was prohibited under item (b)(iii), the effect of item (b)(ii) was that the use was permissible with consent. 17The term "shop" is defined in the 1996 LEP to mean: a building or place used for the purpose of selling, exposing or offering for sale by retail goods, merchandise or materials but, in the development control table, does not include a building or place elsewhere specifically defined in this Schedule, or a building or place used for a land use elsewhere specifically defined in this Schedule. 18Other definitions referred to in argument in this Court include the following: "bulky goods" means large goods which are, in the opinion of the council, of such a size and shape as to necessitate: (a) a large area for handling, storage or display; and (b) easy and direct vehicular access so as to allow for their collection by customers, but does not include agricultural products, beverages, clothing, food, footwear, leisure goods, paper or stationery products, small electrical appliances, electronic goods or toys; "warehouse or distribution centre" means a building or place used mainly for storing or distribution of goods or materials pending their distribution to the retail trade but does not include the retail sale of any of the goods or materials from that building or place.

[5]

The Premises 21The "SupaCenta" houses what the primary Judge described as "'bulky goods' type retail operations", such as furniture and appliance outlets. The SupaCenta site occupies 6.4 hectares, while the building itself at the date of the trial comprised 27,561m² of floor space in a single storey. 22The proprietor of the SupaCenta is Pipven Pty Ltd ("Pipven"). Pipven leased the Premises to Mr Gance for a term of three years commencing on 21 September 2009. The lease provided for the lessee to have successive options to renew. Fit-out of the Premises apparently took place before the formal commencement of the lease. 23The permitted use of the Premises under the lease was: Retail sale of all generally accepted pharmacy products and services, including the sale of cosmetics, photographic services and products and opthalmological services. Warehouse and distribution services to be carried out from the premises in addition to the above. Trading as 'Chemist Warehouse'. 24The Premises occupy an area within the SupaCenta of about 600m² in a reverse L-shaped configuration. A plan accompanying the development application ("DA") shows the configuration and the proposed fit-out of the Premises. The plan is reproduced below. 25The primary Judge described the physical features of the Premises and the uses to which the Premises were put after the Consent was granted. Before setting out that description, some background is necessary.

Mr Gance, the lessee of the Premises, was a registered pharmacist. He described himself as the "commercial manager" of a network or group of pharmacies trading under the names "My Chemist" and "Chemist Warehouse". In his evidence, Mr Gance said that the "My Chemist" format was "a traditional retail chemist open to the public", while the "Chemist Warehouse" brand operated in a "discount format which also include[d] a dispensary for the distribution of restricted pharmaceutical products".
Mr Gance operated the pharmacy business on the Premises under the name "Chemist Warehouse Distribution Centre Penrith" ("CWDCP"). Since Mr Gance resided in Victoria, he was not involved in the day-to-day operations of the business.
AMS provided administrative, purchasing and marketing services to the group of pharmacies. The group comprised 174 "Chemist Warehouse" and "My Chemist" pharmacies, of which 33 operated in New South Wales and the ACT. Ms Pannia, to whose evidence the primary Judge referred, was the State Manager of AMS.
The intellectual property rights in the business names "My Chemist" and "Chemist Warehouse" were held by Mr Jack Gance (an uncle of Mr Gance) and Mr Verrocchi. Mr Jack Gance and Mr Verrocchi granted a licence to Mr Gance to use the "Chemist Warehouse" name and trade mark for the purposes of the business conducted on the Premises.
The "My Chemist" and "Chemist Warehouse" group, according to the primary Judge (at [21]) operated "somewhat in 'affiliation' with" East Yarra Friendly Society Pty Ltd ("EYFS") and its principal, Mr Verrocchi.
EYFS and Mr Verrocchi trading as "My Chemist Health & Beauty Distribution" ("MCHBD") entered into a Supply and Distribution Agreement with Mr Gance trading as CWDCP ("Distribution Agreement") on or about 9 December 2009. Under the Distribution Agreement, CWDCP warehoused and stored MCHBD's goods for distribution to other stores in the group. CWDCP was to receive a fee of two cents per item distributed. The Distribution Agreement provided that title in the "goods" remained with MCHBD, although risk in the goods making up an order passed to CWDCP upon delivery of the goods to the "Delivery Point".
The DA identified one of the uses of the Premises as an "ePharmacy", whereby the full range of products ordinarily sold through pharmacies could be purchased via the internet or by mail order. The ePharmacy in practice operated in this way.
The ePharmacy business was owned by a company, ePharmacy Group Pty Ltd. The principals of the company included members of the Gance family, but not Mr Gance himself.
On 18 September 2009 ePharmacy Group Pty Ltd and CWDCP entered into a Fulfilment and Distribution Agreement ("Fulfilment Agreement"). Under the Fulfilment Agreement CWDCP as the "Distributor" agreed to distribute the goods and products displayed on the ePharmacy website to customers ordering goods from the website. CWCDP agreed that it would fulfil all orders from the "Distributor's Stock". The term "Distributor's Stock" was defined to mean any stock of "Website Goods" (those displayed on the ePharmacy Website) owned by CWDCP that CWDCP had in its power, possession or control, independent of the Distributor's obligations under the Fulfilment Agreement. Title in Website Goods ordered by a customer was to remain with CWDCP until title passed to the customer. CWDCP was to receive remuneration for the supply and delivery of the Website Goods calculated at 10 per cent of the value of the order plus certain expenses. 26The primary Judge, who had a view of the Premises (to which he referred as "Tenancy 230"), described its physical features and uses as follows: [40] The pedestrian public gains access to Tenancy 230 from within the SupaCenta building, entering it through a doorway signed "Chemist Warehouse - Discount Chemist - Distribution Centre - Direct to the Public". Tenancy 230 occupies approximately 600m² (variously 593-613m²), and presents - and the [appellants] argue, operates - as a large, discount "chemist shop", with a large storage area at the rear. ... [41] The physical premises of Tenancy 230, seen as a whole, can be divided into four separate areas, one of which relevantly sub-divides into two sections: (1) Entry from the public domain brings one into an open, densely stocked, shelved area, which, although presenting as a retail pharmacy, is seen by [Mr Gance] as his "warehouse", and is so described on the floor plans. In that area, so-called OTC [over-the-counter] items are not only displayed for sale, but stored for distribution. (2) To the rear of that shelved, so-called "warehouse" area, in public view from the shelved area, but not publicly accessible, is what looks like a traditional pharmaceutical counter/dispensary area, where "pharmacists only" products are stored, largely owned by Gance. (3) Directly behind the rear wall of that dispensary area, in the rear portion of Tenancy 230, there is a table of computer screens for ePharmacy purposes, and for recording distribution of restricted products to other Chemist Warehouse/My Chemist stores in NSW/ACT, and a parcel packing area. ... (4) Behind that computer/packing area is a large warehouse area, closed to the public. It is the respondents' case that this rear area of the premises is used for: (i) the warehousing, storage, packing and distribution of items ordered via "ePharmacy", (ii) the storage and distribution of pharmaceutical products to associated pharmacies, and to nursing homes, and (iii) ... the storage and distribution of pharmaceutical samples provided to medical practitioners and other health care professionals. (4A) Some of area (4) is enclosed with a substantial steel fence, or "cage". Access to the "caged" area is restricted by a coded lock. Goods restricted under the NSW Poisons and Therapeutic Goods Act 1966 ..., largely owned by Verrocchi/EYFS, are stored in the caged area. Outside the cage, drug samples, and non-restricted items (e.g. fragrances, baby care items, etc) are stored, the latter for eventual display and sale in the retail area out the front, and to fill "ePharmacy" orders. Pannia described the use of the caged area as follows (par 16): (a) Restricted pharmaceutical products are stocked; (b) Other non-restricted pharmaceutical products are stocked; (c) ePharmacy orders are processed; (d) ePharmacy orders are fulfilled by staff (the goods the subject of the orders are not boxed or packaged by the staff in the caged area. They are only loaded onto trolleys); (e) When live contracts for Samples Plus / Market Reach or nursing homes distribution exist, these orders are also processed and fulfilled from the caged area; (f) Restricted pharmaceutical products are stocked for, and picked and packed for distribution to, the Group's stores in NSW and in the ACT. (4B) The rest of the rear warehouse area (4) comprises a storage area for pallets etc, a staff amenity area, a parking spot for a forklift, an area for the keeping of larger items, including items such as wheelchairs, and a large roller door. All goods delivered to the premises come to that rear door. [42] Outside the SupaCenta building, beyond that rear loading dock/receiving area, and to its north, is a large open-air carpark. Although the external rear wall of Tenancy 230 presents from the outside as a blank façade with a large roller door, external signage visible from the carpark advertises prescriptions available at a discount up to 50%, "distribution centre direct to the public", and the like.

[6]

Purpose of the Development Application 27In 2008, the "My Chemist" and "Chemist Warehouse" group operated a warehouse and distribution centre at Smithfield. The Smithfield centre did not distribute pharmaceutical products subject to restrictions under the Poisons and Therapeutic Goods Act 1966 ("Poisons Act"). Nor did the group (or any person or entity within the group) hold an approval under the National Health Act 1953 (Cth) ("NH Act") to supply "pharmaceutical benefits" from the Smithfield centre. ("Pharmaceutical benefits" are, in effect, prescription drugs or medicines available to members of the public under the Pharmaceutical Benefits Scheme ("PBS"): see NH Act, s 84). So-called "ethical products" were distributed to group stores in New South Wales and the ACT either directly by a pharmaceutical supplier or by the group's distribution centres located in Victoria and Queensland. 28Mr Gance gave evidence as to the purpose of establishing the distribution centre on the Premises. He said that the purpose "generally" was: a. To have a multi-faceted centre in New South Wales similar to the centres that exist in Victoria and in Queensland; b. To provide a distribution centre for ethical products (being generally Schedule 4, Schedule 5 and Schedule 8 products [under the Poisons Act]) which have come off patent (commonly referred to as 'generics') and consequently are able to be sold to the public at significantly lower prices than those brand products still under patent; c. To provide a distribution centre for brand ethical products [that is, products subject to a subsisting patent] as we do in other States and Territories in Australia; d. To have an operative centre, warehousing and distribution point in New South Wales for the ePharmacy on-line business which is affiliated with the Group; ... f. To provide a base for the operation of distribution of goods to nursing homes; ... h. To provide a base for the operation of distribution of goods under the My Home Health scheme.

[7]

The Development Application 29On 12 December 2008, AMS lodged the DA with the Council seeking consent for the "Tenancy fit-out and use" of the Premises. The "description of proposal" in the DA did not identify the proposed use of the Premises. However, the DA was accompanied by a Statement of Environmental Effects ("SEE") which was said to have been prepared on behalf of "My Chemist". 30The SEE described the proposed development as follows: The proposed development involves the fit out and use of the subject tenancy for a Chemist Warehouse and Bulky Goods Distribution outlet. The proposed fit out includes the installation of a dispatching and packing area (approximately 331sqm with a volume of 1,059 cubic metres), a pallet storage area, a staff kitchen, dispensary, and warehouse area incorporating shelving units (approx 262sqm with a volume of 838 cubic metres), all as shown on the plan set accompanying this application. The use of the tenancy comprises several interrelated elements which are briefly described as follows. Elements of use Description Epharmacy One of Australia's largest internet pharmacy operators. Currently distribution is carried out from Townsville and Virginia but increased demands mean an additional distribution centre is required in NSW. The Penrith Distribution Centre shall become a key distribution point and responsible for fulfilment of internet orders for a large proportion of NSW. The internet service offers a full range of products ordinarily sold through pharmacies and requires larger floor areas and large uninterrupted clear spanning areas to be feasible and efficient. All products that can be purchased via the internet/mail order must be available for picking, packing and distribution from the Centre (approximately 50,000 lines). Blue Cross Blue Cross Healthcare services is a subsidiary of Catholic Health Care Services. It is a not for profit organisation for aged care and community services. Using advanced robot picking and packing technology, patients' medications are dispensed and packed into a highly organised and easy to administer system. The distribution centre in Penrith will be responsible for the fulfilment of medications and other supplies for Blue Cross in the southern states. Samples Plus Samples Plus is an ordering system for "samples" offered to qualified medical practitioners and other health care professionals. Home Medication Review H.M.R. is the process of reviewing the medication of patients where patients are required to take high levels or numbers of prescription or pharmacy medication. The service is available to all patients/customers both in the general public or in nursing homes i.e. Blue Cross. The services will be conducted within an office environment at the Penrith Distribution Centre. My Home Health Storage, display, testing & sale of wheel chairs, walkers and other large items and ancillary smaller items such as bed pans. It offers other specialist equipment not ordinarily available from traditional pharmacies due to size constraints of a normal pharmacy. Retail pharmacy Pharmacy selling usual over-the-counter drugs and dispensing prescriptions. In order for premises to be a Licensed Pharmacy Premises by the National Health Act and enable all of the above uses to be licensed and operational, members of the public must also have access to the pharmacy, giving rise to an ancillary retail component within the site. Failure to have this ancillary component would result in a breach of the regulations.

[8]

(Emphasis added.) The area of approximately 262m² referred to in the SEE as a "warehouse area" is the area on which CWDCP in fact conducts the retail pharmacy (the dispensary is in a separate section of the Premises). 31It was common ground that the reference to the "National Health Act" in the "Retail Pharmacy" box was to s 90 of the NH Act. Section 90(1) of the NH Act empowers the Secretary to approve a pharmacist for the purpose of supplying "pharmaceutical benefits" at particular premises. Section 90(3D) provides as follows: (3D) The Secretary must not grant approval under this section to a pharmacist in respect of particular premises if the Secretary is satisfied that on or after the day the approval would otherwise be granted: (a) the pharmacist would be unable to supply pharmaceutical benefits at the premises; or (b) the premises would not be accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the Secretary, are reasonable. Thus the Secretary cannot grant an approval under s 90(1) of the NH Act in respect of any premises unless the premises are accessible by members of the public for the purpose of receiving "pharmaceutical benefits". 32The statement in the "Retail Pharmacy" box that the public had to have access to the pharmacy on the premises to "enable all of the above uses to be licensed and operational" was wrong. It was only the PBS element of the ePharmacy business that could not be conducted unless members of the public had access to the pharmacy. To the extent that the ePharmacy business supplied non-PBS items, s 90(3D) of the NH Act had no application. Moreover, the only access to the public required by s 90(3D) of the NH Act was for the purpose of receiving pharmaceutical benefits. 33The SEE asserted that the proposed use was permissible under Zone 4(b) because the overall use could be characterised as a "shop trading principally in bulky goods" (item (b)(ii)), (see [15] above). The SEE stated that the goods available from the Premises were of different sizes, ranging from individual bulky items, such as wheelchairs, to bottles of pills. The smaller items, so it was argued, did not "in [themselves] disrupt the categorisation of the overall use as dealing in bulky goods". 34The SEE added the following comment: The direct pharmaceutical sales from the premises are a direct result of the legislative requirements governing pharmacies. Approval to operate the overall use of the premises must be obtained from the Australian Community Pharmacy Authority, Medicare and the Pharmacy Board of New South Wales. In order to conduct the principal distribution services operating from the premises, the premises must be a Licensed Pharmacy Premises approved under the National Health Act. Such approval cannot be obtained unless members of the public have access to the pharmacy and retail component and the goods available from the pharmacy should not be restricted by any municipal planning restrictions. (Emphasis added.) 35These comments were also potentially misleading. If the expression "principal distribution services" was intended to refer to the ePharmacy, it was misleading since it was only the PBS component of that business which required approval under the NH Act. And, as I have noted, the only relevant requirement was that the public have access to the Premises to receive PBS items. If the expression was intended to refer to a business involving the wholesale distribution of pharmaceutical products other than PBS items, the NH Act imposed no requirement that the public have access to the Premises (although other regulatory requirements would apply to the business). Moreover, if the concluding words of the paragraph ("the goods available from the pharmacy should not be restricted by any municipal planning restrictions") were intended to convey that the NH Act overrides State planning laws, the statement was inaccurate: NH Act, s 90(4); Terry White Chemists Australia Fair v Secretary, Department of Health and Ageing [2009] FCAFC 74; 178 FCR 161, at [20].

[9]

Correspondence with the Council 36In January and February 2009, the Council and AMS (through its representative) exchanged views on whether the DA was compatible with the LEP. The Council expressed its concerns in a letter of 5 February 2009: The application, in its current form, does not adequately demonstrate that the overall categorisation is in fact a 'shop trading principally in bulky goods', 'business premises', or a 'warehouse or distribution centre'. The complexity of the nature of activities occurring on the site makes it difficult to define the use in its entirety to any one particular definition contained within [the LEP]. Council's view is that the proposal could be considered an innominate use, in so far as it does not comply with a single definition. In this instance the proposal would become permissible if it was not listed in the zoning table for the 4(b) Special Industry Zone as 'prohibited'. At present Council is unconvinced that a significant component of the proposal is not captured by the definition of a 'shop', which is listed as a prohibited use. If the combined scale (in terms of floor area) of the 'front of house' activities and chemist were to be reduced significantly, Council may consider these components to become ancillary and incidental to those activities conducted in the 'back of house' areas. The entirety of the proposal would then not be identified as prohibited, and therefore become permissible. (Emphasis added.) 37In its response, AMS drew attention to a decision of the Victorian Civil and Administrative Tribunal ("VCAT") which approved a development application for a Chemist Warehouse distribution centre in Maidstone, Victoria. The VCAT's decision was said to be directly relevant to the DA in that the Victorian case related to the same business operation and the local planning laws had "essentially the same effect" as the 1996 LEP. AMS pressed its case as follows: We note your view that the proposal could be considered an innominate use. Despite our view that significant elements of the overall use may be defined as "business premises," our SEE took the approach that certain elements also may have alternative (permissible) categorisations. Based on our earlier acknowledgement of the difficulty in describing the totality of the uses on the basis of the LEP definitions and the operational "entanglement" of the different elements, we believe Council's consideration of the use as innominate may well be valid and appropriate. We do not believe it necessary to form a conclusive view on this point. Regardless of whether Council forms the opinion that the use is wholly or partly for bulky goods retailing, "business premises" or an innominate use, it will be a permitted use within the zone. We believe, as appears to be acknowledged in your letter, that the only point in contention is whether the retail element forms a separate prohibited use of a "shop." A reduction in the scale of the front of house activities, as suggested in your letter, cannot be viably achieved because it would involve having 2 separate stock areas, a small one in front and a larger one at back, with duplicated stock and functions, being operationally complex and inefficient. However, for the reasons outlined in our previous submissions and based on the directly applicable circumstances and the compelling reasoning in the recent VCAT decision, we consider this to be unnecessary because its size is not determinative of its ancillary role within the overall use of the premises. 38An undated Development Assessment Report prepared within the Council considered whether the proposed development involved use of the Premises as a "shop" and thus was prohibited under the 1996 LEP. The Report reasoned as follows: The key component of the definition [of "shop"] relates to the term 'by retail'. To categorise the use in its entirety as a shop, then the primary use would involve the sale of goods by retail. The applicant has provided a weight of evidence to suggest that the sale of goods by retail is an ancillary component of the use. This information includes: The front of house area, which incorporates the ancillary retail sale of goods, is inseparable from the operation of the warehouse/distribution activity which relies on all of its stock, of which a significant portion is sourced from the front part of the premises. A meeting with the applicant outlined that upon receiving an online order staff will obtain products from the shelving of the front of house area. In effect this front of house area is an extension of the warehouse/distribution activity that occurs in the back of house areas. It is required to service orders (generated offsite) for a small number of goods. Council's suggestion to reduce the size of this area was deemed inefficient as it would duplicate the operations in two areas. Some 80% of the business turnover is derived from the warehousing and distribution operations. Staffing levels will be slanted towards the warehousing and distribution operation, in the order of 3:1. Based on this information it is considered that the sale of goods by retail is not the primary use of the proposal and as such the proposal does not satisfy the definition of a shop. It is considered that the scale of the retail component is ancillary and incidental to the primary use of the premises as a distribution centre, and is inseparable from this primary use. The incorporation of a retail pharmacy is required to enable the premises to operate and be licensed in accordance with the National Health Act. Without this aspect the proposal cannot distribute any pharmaceutical goods/materials, as it [is] in breach of the National Health Act. This pharmacy component is also considered ancillary to the primary use of the site as a distribution centre. Based on the discussion above, the proposal is deemed an innominate use and is permissible by virtue of the fact it is not captured by any of the definitions identified as a prohibited use in the 4(b) Special Industry Zone. (Emphasis added.) 39The Report recommended that the DA be approved subject to specified conditions. On 20 February 2009, the Council's delegate approved the recommendation.

[12]

Validity of the Consent 43The primary Judge identified (at [261]) the critical issue to be "how the Council characterised the use of the [P]remises when granting the [C]onsent". His Honour pointed out that a threshold difficulty in construing a consent is often to determine what documents, if any, are "incorporated" into the consent. However, in his Honour's view: condition 1 is quite clear on the question of incorporation, and the SEE and plans are, by that condition, incorporated in the consent, to the extent they are not clearly excluded by either markings on the plans, or any of the conditions. 44The primary Judge accepted the appellants' submission that if the Council purported to grant consent to a prohibited development, it would have committed a jurisdictional error and the Consent would be invalid. His Honour said (at [267]) that his task was to undertake an objective analysis of the purposes of the application, and its components, at a level of generality. 45The primary Judge observed (at [268]) that stock was being offered for sale by retail in the public area of the Premises and was also being stored in that area "for group distribution". He continued as follows (at [269]-[275]): 269 Such co-mingling of both goods and purposes was clearly foreshadowed to Council in the DA documents as the proponent's intention for the operation. While the SEE asserted that the proposed use was a "shop trading principally in bulky goods", it referred to the "usual range of pharmaceuticals and cosmetics", putting the Council on notice of commerce beyond PBS products. The City Plan letter of 20 January 2009 ... expanded on this aspect of the application. 270 Accordingly, when considering the application and deciding to grant conditional consent, Council was aware that an ancillary retail facility was included in the proposal. The National Health Act requirement for "public access" is mandatory, and obviously means there must inevitably be some elements of "shop" incorporated in the proposed warehouse/distribution project, for the ePharmacy component, and for any on-site sales of such products. If there is to be a pharmaceutical warehouse/distribution facility, an ancillary retail function must be accepted. 271 There is some inaccuracy in the assertion in the SEE table of "elements of use" ... where it says, in respect of the "retail pharmacy'' element, that such a pharmacy must be "an ancillary retail component within the site", inferring that, to satisfy the licensing requirements of the National Health Act, it must be a traditional full-service "chemist shop". 272 On the other hand, the community has come to expect that providers of pharmaceutical benefits to customers invariably offer for sale, as well, a wide variety of the other goods, of the range and type seen in CWDCP during the Court's inspection. 273 The LEPs envisage that "shops" are more broadly based enterprises than some "hole in the wall" access point for PBS products, and they proscribe them as independent uses in the relevant zone(s). The necessary public access is achieved by providing public access not only to PBS products, but to a full range of goods usually available to the public, including PBS stocks, in a traditional chemist shop conducting retail sales. The DA documents clearly proposed some such element of retail sales, beyond PBS products, in the proposed use for which consent was sought. 274 In its assessment of the DA, Council accepted the propositions put by City Plan on behalf of AMS, to the effect that a full "retail component" was required for a licensed pharmacy operation, and that such a "shop" use would be incidental or ancillary to the primary use as a distribution centre, and Council then approved the DA on that basis - emphasising the limitation by imposing the relevant condition. 275 While a full-service traditional retail pharmacy is clearly not required by the National Health Act, such a pharmacy certainly ensures compliance with the "public access" requirement, and s 90(4) states that any approval under s 90(1), requiring such public access, does not obviate the need for the project to comply simultaneously with state planning laws. The mere presence of some retail elements does not make the proposal, as a whole, one for a "shop". 46His Honour said (at [276]) that he was troubled by two matters:

AMS had not substantiated why a fully stocked shop was required for the proposed integrated pharmaceutical warehouse to be properly licensed; and
the goods freely available in the pharmacy went beyond what might be seen as incidental to the provision of PBS products. The challenge, as his Honour saw it (at [278]), was to settle on whether one can really "draw a line" on what is acceptable as incidental or ancillary to the provision of public access to pharmaceutical benefits, and, if so, where such a line should be drawn. 47The primary judge dealt with the challenge in this way (at [280]-[285]): 280 A patient/customer needing a prescription medication included in the PBS, and the necessary equipment to administer it, might also equally need a freely available painkiller, a vitamin supplement, or the like, to deal with the medical problem being treated. Is that person required by any law to go also to another shop (pharmacy or otherwise) to obtain all that he/she needs? 281 There is nothing before the Court to show that such a limitation is required, or was intended, by any pharmacy legislation. Hence, the Court must examine the implications of the planning regime for the limitation of the "access" component of the project. That task involves characterisation, according to the principles outlined above. 282 In the SupaCenta context, I venture to suggest that, for example, a retailer of "bulky" electrical goods, such as major household appliances, would be expected to carry and sell, not only facultative non-bulky products like batteries, power boards, extension cords, and the like, but also, probably at the check-out or cash register, general magazines, confectionery items, bottled water etc. ... 285 I am satisfied that the "troubling" aspects I mentioned above do not invalidate the characterisation exercise carried out by the Council, with which the Court agrees. In the end analysis it does not matter where a line is drawn regarding products, the retail use will be ancillary, and inextricably bound, to the warehouse/distribution use. (Emphasis in original.) 48For these reasons, the primary Judge concluded (at [286]) that the Council had not committed a jurisdictional error in granting the Consent.

[13]

Lawfulness of Use 49The primary Judge observed (at [287]) that the lawfulness of the use of the Premises depended on the "actual operation". His Honour noted (at [290]) that the appellants relied on a number of elements of use of the Premises, as follows: 1. Distribution of the EYFS/Verrocchi goods. 2. Samples Plus/Market Reach. 3. Home medication review. 4. My Home Health. 5. Retail pharmacy comprising the following components: (a) Dispensing of medicines listed on PBS; (b) Dispensing of medicines not listed on PBS; (c) Sale of items scheduled under the [Poisons Act] and not listed on PBS; (d) Sale of OTC [over-the-counter] goods, including fragrances, toiletries and general "grocery type" supplies; (e) Sale of generic health products such as vitamin supplements, etc. 6. ePharmacy involving the sale of goods from the front of the store, in addition to PBS listed medicines which must be dispensed by a qualified pharmacist. 7. Sale of items to nursing home patients (proposed, but not presently undertaken through Penrith). 50The primary Judge put item 1 on the list to one side, on the ground that it involved no retail element (at [292]). In reaching this conclusion, his Honour appears to have taken into account the terms of the Distribution Agreement (see at [25] above. His Honour also noted (at [293]) that although the ePharmacy involved sales to customers placing orders, CWDCP did not effect the sale. Its role was limited to the distribution for a fee of goods sold through ePharmacy (at [46]). 51The primary Judge continued as follows (at [294]-[297]): 294 Off-the-shelf, OTC, and disability aid sales, in or through the front of the premises, are clearly "retail" in character, but the "Samples Plus" and Market Reach operations are clearly not, and not all services provided to nursing homes will necessarily involve retail... 295 At the end of the analysis of the CWDCP business, I find myself accepting the respondents' description of the present use as six "co-mingled" activities: (a) Distribution for ePharmacy. (b) Distribution for nursing homes. (c) Distribution for 'Samples Plus'. (d) Distribution of both ethical and OTC products for and within the group. (e) Sales of ethical products. (f) Sales of OTC products. 296 The respondents are correct to invoke the Macquarie Hospital example [Macquarie International Health Clinic Pty Ltd v University of Sydney (1998) 98 LGERA 218], rather than O'Donnell [Baulkham Hills Shire Council v O'Donnell (1990) 69 LGRA 404]. The evidence suggests that much (if not most) of the stock shelved in the front section of the premises currently supplies the ePharmacy element, among others, and, on the other hand, stock for the distribution tasks is stored throughout the whole premises... 297 Having upheld the consent for Tenancy 230 as valid, because it is a multi-faceted single use, of which such "shop" aspects are both minor and genuinely ancillary, on the one hand, and required by the National Health Act, on the other, as well as being "inextricably bound' to the overall use of the premises, I am satisfied by the evidence before the Court that the use is being carried out in accordance with that consent, and I can find no breach of the law. 52Since the primary Judge found the use of which the appellants complained to be ancillary to the primary warehouse and distribution centre use, he concluded that the use complied with the limitation imposed by Condition 4 (at [299]). 53His Honour rejected the appellants' attack on the validity of Condition 4, finding (at [311]) that it was for a planning purpose, was reasonably and fairly related to the development and was reasonable in the circumstances. 54Accordingly, the primary Judge dismissed the appellants' summons and ordered them to pay the Respondents' costs (at [313]-[314]).

[14]

The Appellants 55The appellants identified the first question on the appeal to be whether the Consent approved the use of the Premises, or part thereof, for the purposes of a "shop". If so, the Consent was for a prohibited use. On this basis, the Council committed a jurisdictional error in purporting to grant the Consent. The Consent was therefore invalid. 56Mr Robson SC, who appeared with Mr Ireland for the appellants, submitted that the primary Judge overstated the requirements of the NH Act governing the supply of PBS medicines to the public. His Honour had mistakenly assumed that s 90(3D) of the NH Act required the pharmaceutical warehouse distribution project to involve "some elements of [a] shop". According to Mr Robson, this mistake had diverted his Honour from the task of characterising the proposed use under the Consent. 57Mr Robson submitted that the Consent, properly construed, authorised use of the front part of the Premises as a shop. Even if the effect of Condition 4 was to require the retail Pharmacy to be "ancillary" to the use of the Premises as a distribution centre, the former was still an independent use prohibited under the 1996 LEP. In reality, so Mr Robson argued, the design was for a large chemist shop occupying over 262m². It was not to the point that the relevant use could also be characterised as an innominate use, such as "co-mingled" sales and distribution of particular products. The proper characterisation of the Consent was that it permitted part of the Premises to be used as a shop and thus purported to permit a use prohibited under the 1996 LEP. 58The second question was whether the continuing use of part of the Premises as a retail pharmacy was for the purposes of a "shop" and therefore prohibited by both the 1996 LEP and the 2010 LEP. Mr Robson submitted that the primary Judge's finding that the actual use as a pharmacy was "co-mingled" with other uses rested on an inaccurate assessment of the evidence. In particular, his Honour had misapprehended the nature and extent of the activities conducted from the open retail section of the Premises. On a proper assessment of those activities, use of the Premises as a retail outlet was in truth "a dominant activity" and independent of any other uses. 59A third and derivative question arose if, contrary to the appellants' position, that Consent was valid. That question was whether the present use of the Premises was in breach of the Consent and therefore not capable of qualifying for existing use rights under ss 106 and 107 of the EPA Act. The appellants submitted that the present use of the Premises as a retail pharmacy constituted a substantial departure from the terms of the Consent. 60The Respondents therefore were in breach of ss 76A(1)(b) and 122(b)(iii) of the EPA Act, with the consequence that use as a retail pharmacy was not protected as an "existing use" of the Premises. Since the 2010 LEP prohibited use as a retail pharmacy, in the absence of existing use rights, use for that purpose was unlawful.

[17]

Construction of the Consent 65It will be recalled that the primary Judge concluded that the effect of Condition 1 is to incorporate in the Consent both the plans submitted by AMS and the information contained in the SEE accompanying the DA (see at [43] above). The task, as his Honour saw it, was therefore to construe the Consent to determine the purpose or purposes for which the Premises were to be used, taking into account the information in the plans and the SEE. 66In taking that approach, his Honour was correct. The general principle is that documents accompanying a development application are not to be taken as incorporated into the consent unless the incorporation is express or by necessary implication: Hubertus Schuetzenverein Liverpool Rifle Club Ltd v Commonwealth (1994) 51 FCR 213, at 222, per Wilcox J, approved in Woolworths Ltd v Campbells Cash & Carry Pty Ltd (1996) 92 LGERA 244, at 249, per Sheller JA; at 251-252, per Cole JA; see also Winn v Director General of National Parks and Wildlife [2001] NSWCA 17; 130 LGERA 508, at [2]-[3], per Spigelman CJ; at [198]-[199], per Stein JA. The principle reflects the nature of a development consent, which enures for the benefit of subsequent occupiers and owners of the land and thus has an "in rem" quality: Woolworths Ltd v Pallas Newco, at [64]; Winn, at [4]. It would create obvious difficulties if subsequent owners or occupiers had to search a series of documents to ascertain the terms or proper construction of a development consent: Auburn Municipal Council v Szabo (1971) 67 LGRA 427, at 433-434, per Hope J; Woolworths v Campbells Cash and Carry, at 249. 67A mere reference in a consent to another document, such as the development application, will not usually be sufficient to incorporate that document into the consent: Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103, at [45], per Meagher JA; at [157]-[158], per Ward JA; Alcoa Australia Rolled Products Pty Ltd v Weston Aluminium Pty Ltd [2006] NSWCA 273; 148 LGERA 439, at [39], per Basten JA (with whom Spigelman CJ and McColl JA agreed). But if the development consent expressly incorporates another document or part of it, the terms of that document will be incorporated into the consent: Auburn Municipal Council v Szabo, at 434. 68Condition 1 to the Consent states that the development must be implemented substantially in accordance with:

the stamped approved plans;
the application form; and
any supporting information received with the application. Condition 1 makes this requirement subject to the other conditions set out in the Consent. 69In accordance with the authorities to which I have referred, the plans, the application form and the supporting information received with the application can be taken into account in construing the Consent, provided that they are not inconsistent with the Consent itself. But it is not permissible to go further. In particular, it is not permissible to undertake the task of characterisation by reference to the correspondence between AMS's representative and the Council, nor to the Council's internal deliberations leading to the grant of the Consent. 70The Respondents submitted that the purpose of the development was the "distribution of pharmaceutical goods and related health care products". They also submitted that the Consent permitted use of the Premises as a retail pharmacy stocking a full range of pharmaceutical products, but that use for this purpose is properly regarded as subordinate to the principal purpose of the approved use. In support of these submissions, Mr Eastman referred at length to the Council officer's report examining the DA, apparently in order to demonstrate that the Council was prepared to accept this characterisation of the proposed development. For the reasons I have already given, it is not permissible to construe the Consent by reference to the views of Council officers expressed in internal memoranda. Documents of this nature were not incorporated into the Consent either expressly or by implication. 71The primary Judge concluded that the Consent permitted use of the Premises for a "full-service traditional retail pharmacy" (at [275]). His Honour appears to have been influenced by his view (at [272]) that "the community has come to expect that providers of pharmaceutical benefits to customers invariably offer for sale, as well, a wide variety of other goods". His Honour also referred more than once to documents other than those identified in Condition 1 to the Consent (at [269], [274]). It is not entirely clear whether he took into account all the documents to which he referred in construing the Consent. If he did so, he was in error. 72The construction of the Consent is not, with respect to the primary Judge, to be determined by assessing the expectations of retail customers of pharmacies. Nor is it to be determined by the difficulty in deciding where a line should be drawn between the extremes of a "'hole in the wall' set up" and a "pharmaceutical supermarket" (at [279]). The question of construction is to be resolved by reference to the terms of the Consent, taking into account the documents incorporated into the Consent. 73The Consent is expressed to be for "Tenancy Fitout and Use for 'Chemist Warehouse' Shop 230 Pattys Place". Neither the Consent nor the 1996 LEP defines the expression "Chemist Warehouse" (perhaps not surprisingly, since that was the business name of the proposed undertaking). However, the 1996 LEP defines "warehouse or distribution centre" to exclude the retail sale of any goods from the building in which the centre operates. 74If the Consent said nothing further about the permitted use of the Premises, it is possible that the expression "Chemist Warehouse" might be construed as incorporating the definition of "warehouse" in the 1996 LEP: Woolworths v Campbells Cash and Carry, at 245, per Sheller JA. On this construction, the Consent would not authorise the sale by retail of any goods stored at the Premises. It would follow that the Consent could not be construed as permitting use of the Premises for the purposes of a shop. But that would be because the Consent, properly construed, would not permit any sales by retail on the Premises. 75The Consent cannot be construed by reference to a single phrase; it must be read as a whole, including the conditions. Condition 4 of the Consent expressly contemplates that the Premises may be used for retail sales, provided that such sales "are ancillary to the primary use of the [P]remises as a distribution centre". It follows that, notwithstanding the definition of "distribution centre" in the 1996 LEP (which excludes use for the purpose of retail sales), Condition 4 contemplates that the Premises will be used for the purpose of at least some retail sales. 76The appellants did not persist on appeal with their challenge to the validity of Condition 4. Given that Condition 4 is valid, it gives rise to a question of construction. What kinds of retail sales in the Premises are "ancillary" to the primary use contemplated by the Consent? Does the Consent, insofar as it permits retail sales purport to authorise the Premises to be used for the purpose of a "shop" as defined in the 1996 LEP? 77The application form submitted to the Council on behalf of AMS says nothing about the Premises being used for the retail sale of pharmaceutical products. The plans accompanying the DA give no indication that the Premises are to be used for the retail sale of a full range of pharmaceutical products. 78The proposed floor plan submitted with the application (reproduced at [24] above) describes the area on which the retail pharmacy is currently conducted as a "warehouse area" comprising 261.7m². The plan shows a "dispensary" containing "pill units". It appears from the plan that the dispensary is to be located behind a counter, indicating that members of the public are not to have direct access to the dispensary. The plan indicates that the dispensary is to operate in the familiar manner, with a customer presenting a prescription at the counter, to be filled by a pharmacist or under a pharmacist's supervision. 79The only other indication of retail activity in the plans submitted with the DA is the notation on two plans referring to a "shopfront elevation". However, the plans do not indicate any proposed use for retail purposes other than the "dispensary". Nor do they suggest that the front part of the Premises (the area in fact used as a retail pharmacy) is to be used for any purpose other than as a warehouse. 80The SEE accompanying the DA contains a more detailed analysis of the proposed development. The proposal is said to involve the fit out and use of the Premises for a "Chemist Warehouse and Bulky Goods Distribution outlet". The description of the fit out identifies the following elements:
a dispatching and packing area of 331m²;
a pallet storage area;
a kitchen;
a dispensary; and
a warehouse area incorporating shelving units of approximately 262m². This description does not refer to a retail pharmacy, except insofar as a "dispensary" implies that the supply of PBS items and perhaps other medicines will take place on the Premises. 81The chart incorporated in the SEE (see at [30] above) elaborates on the proposed use of the Premises. Of the identified uses, three contemplate sales to consumers:
The ePharmacy is to offer a full range of pharmaceutical products (approximately 50,000 lines), but these are to be distributed to customers who place orders via the internet or by mail order. "Picking, packing and distribution" of the products will take place on the Premises. There is nothing to indicate that the ePharmacy is to supply members of the public wishing to purchase pharmaceutical products in person.
"My Home Health" is to store, display, test and sell wheelchairs, walkers and other large items as well as "ancillary smaller items such as bed pans". The SEE characterises this activity as that of a shop trading principally in bulky goods, suggesting that retail sales are contemplated. But the description of the contemplated use does not refer to the sale of a full range of pharmaceutical products or indeed of any pharmaceutical products.
The retail pharmacy is to sell the "usual over-the-counter drugs" and is to dispense PBS items. The SEE explains that this activity is necessary in order to comply with the NH Act ("direct pharmaceutical sales from the [P]remises are a direct result of the legislative requirements governing pharmacies"). 82The information contained in the SEE contemplates that the Premises will be used as a retail pharmacy, but only in a very limited sense. The use as a retail pharmacy is to be limited to the sale of OTC drugs and dispensing PBS items. It is apparent that the reason for this limitation is that s 90(3D) of the NH Act makes the approval of the ePharmacy by the Secretary contingent on the Premises being accessible to members of the public for the purpose of receiving pharmaceutical benefits. Despite several misleading statements in the SEE, the NH Act does not make approval of the ePharmacy contingent on the Premises also being used for a retail pharmacy providing a full range of pharmaceutical items to the public. 83The SEE does not put forward a case that the integrated nature of the distribution centre requires that the Premises incorporate a pharmacy stocking a full range of pharmaceutical products. The absence of any such case may have been because AMS's principal contention was the now abandoned argument that the DA was for the permitted use of a "shop trading principally in bulky goods". Whatever the reason, the SEE explicitly states that the proposed direct retail sale of pharmaceutical items is a result of the legislative requirements and that for "overall pharmaceutical distribution use to legally operate from the site, a degree of direct retailing must be available". 84There is no justification for reading Condition 4 as authorising retail sales of pharmaceutical products from the Premises other than those products specifically identified in the SEE. The SEE is at pains to make clear that the use of the Premises as a retail pharmacy is to be limited to the sale of OTC drugs and PBS items. The plans accompanying the DA reinforce this conclusion, since the only part of the Premises designated for the supply of pharmaceutical products to members of the public is the "dispensary". 85The primary Judge took a different view, in part because the Council had been "put on notice" that the retail outlet on the Premises would have the "usual range of pharmaceuticals and cosmetics" (at [269]). The latter expression does not appear in the SEE. The chart showing the six elements of the proposed development (see [30] above) states that the internet service provided by the ePharmacy is to offer "a full range of products ordinarily sold through pharmacies". The Council was put on notice that the ePharmacy would stock a full range of pharmaceutical products. It was not put on notice that the retail pharmacy would stock a similar range of products. 86If it is relevant, the "My Home Health" component of the proposed development was to store and display various larger items and specialised equipment not ordinarily available from traditional pharmacies. 87Contrary to the appellants' submissions, the primary Judge did not misconstrue or misunderstand s 90(3D) of the NH Act. However, he erred in his construction of the Consent. The Consent should be construed as permitting the use of the Premises as a retail pharmacy only for the supply to members of the public of PBS items and OTC drugs.

[18]

Does the Consent Permit Use as a Shop? 88The next question is whether the Consent, construed in this way, permits the Premises to be used for a prohibited purpose under the 1996 LEP, namely a "shop". As the primary Judge pointed out (at [230]) in planning law use must be for a purpose: Abret Pty Ltd v Wingecarribee Shire Council [2011] NSWCA 107; 180 LGERA 343, at [51], per Beazley JA (with whom Campbell JA and Handley AJA agreed). Different uses can serve a single purpose: Abret, at [52]. 89In determining whether a development consent permits the use of land for a purpose prohibited under a planning scheme, it is necessary to characterise the purpose of the proposed development. The general principle is that stated by Kitto J in Shire of Perth v O'Keefe [1964] HCA 37; 110 CLR 529, at 534-535: The application of the by-law in a particular case has therefore not to be approached through a meticulous examination of the details of processes or activities, or through a precise cataloguing of individual items of goods dealt in, but by asking what, according to ordinary terminology, is the appropriate designation of the purpose being served by the use of the premises at the material date. See also Woolworths v Pallas Newco, at [98]; Abret, at [52]. 90If a part of land is used for a purpose which is subordinate to the purpose of the use of another part of the land, it is legitimate to disregard the former and to find the dominant purpose is that for which the whole is being used: Foodbarn Pty Ltd v Solicitor-General (1975) 32 LGRA 157, at 161, per Glass JA; Abret, at [54]. The same principle applies when the dominant and servient purposes both relate to the whole of the land. An example of the application of the principle is Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400, where the use of part of the land for a carpark and access ways was held to be for the dominant purpose of operating a large supermarket which was conducted on another part of the land. Since use of the land for the purpose of a supermarket was prohibited, so was the use of that part of the land used as a carpark and access roads. 91If an ePharmacy is to be conducted on the Premises in the manner contemplated by the SEE, Commonwealth law mandates that the Premises also be used to supply PBS items to members of the public. Use of the Premises as a retail pharmacy, limited in this way, is therefore essential if the Premises are to be used as an ePharmacy. In other words, it is impossible to conduct an ePharmacy lawfully unless there is also a retail pharmacy on the Premises supplying members of the public with PBS items. This is a very clear case of purposes being "inextricably bound up" with each other and incapable of severance: Macquarie International Health Clinic v University of Sydney, at 223, per Stein JA (with whom Mason P and Meagher JA agreed). 92It is not in dispute that the use of the Premises as an ePharmacy is a use for the purpose of a "distribution centre" identified in Condition 4 of the Consent. The SEE makes it clear that the ePharmacy is "to offer a full range of products ordinarily sold through pharmacies". In these circumstances, use as a retail pharmacy confined to supplying PBS items is clearly subordinate to the primary use of the Premises as a distribution centre. 93The SEE contemplates that the retail pharmacy will also supply OTC drugs. The supply of such drugs is closely related to the supply of pharmaceutical benefits. Members of the public needing prescription medicines will often also require OTC drugs for precisely the same medical condition. The inclusion of OTC drugs in the range of products to be supplied by the retail pharmacy in my opinion does not alter its character as a use subordinate to the primary purpose for which the Consent permits the Premises to be used. 94It follows that the Consent, insofar as it authorises the Premises to be used as a retail pharmacy selling a limited range of products, does not purport to grant development consent for a purpose prohibited under the 1996 LEP. The challenge to the validity of the Consent therefore fails.

[19]

In Breach of the Consent? 95The present use of the Premises as a large scale retail pharmacy goes well beyond the use permitted by the Consent. For the reasons I have given, the Consent, properly construed, permits the Premises to be used for the purpose of a retail pharmacy, but only if the pharmacy is limited to supplying PBS items and OTC drugs to members of the public. There is no dispute that the retail pharmacy conducted on the Premises sells very large quantities of a wide range of products ordinarily sold through pharmacies, not limited to PBS items and OTC drugs. Use of the premises as a large scale retail pharmacy does not comply with the terms of the Consent. 96If the use of the Premises for the purpose of a large scale retail pharmacy was not authorised by the Consent, it was not an "existing use" as defined in s 106 of the EPA Act (see at [8] above) immediately before the 2010 LEP came into effect. There is no suggestion that use of the Premises for the purpose of a large scale retail pharmacy is a permitted use under the 2010 LEP. It would seem to follow that use for this purpose is unlawful regardless of whether the use can be characterised as for the prohibited purpose of a shop. 97But there is a procedural difficulty in the appellants' path if they are to rely on this argument. Mr Robson acknowledged that the appellants made no submission to the primary Judge that the present use of the Premises is unlawful simply because it is not in conformity with the Consent. The point is adverted to in the notice of appeal, but only obliquely. 98Mr Robson at first appeared to accept that as the argument had not been put to the primary Judge, it was not open on the appeal. Indeed, he expressly stated that the only issue for this Court is whether the present use of the Premises as a retail pharmacy is for the prohibited purpose of a shop. Later, however, Mr Robson seemed to resile from this concession and to revive as a "fall back position" the argument that the present use is unlawful because it is in breach of the Consent. Nonetheless, he did not develop the argument any further than in the appellants' written submissions. 99If it were necessary to decide the case on the basis that the present use as a large scale retail pharmacy is in breach of the Consent and thus could not constitute a protected "existing use", I would be prepared to do so. The Respondents have not suggested that if the argument had been advanced at trial they would or could have adduced further evidence relevant to the issue. 100However, for the reasons that follow, the appellants are entitled to succeed on their principal contention, namely that the use of the Premises as a large scale retail pharmacy is for the purpose of a shop and thus is prohibited under both the 1996 LEP and the 2010 LEP. It is therefore not necessary to decide the appeal on a ground not advanced at the trial.

[20]

For a Prohibited Purpose? 101Mr Gance has conducted the retail pharmacy in the section of the Premises open to the public. This area comprises approximately 262m² or roughly 43 per cent of the total floor space of the Premises. At all material times, the retail pharmacy carried a full range of products ordinarily found in a pharmacy and which were available for purchase by any member of the public who came to the Premises. Customers were encouraged to buy the products on display or that were available from the dispensary. 102The scale of the retail pharmacy is demonstrated by its sales. According to Mr Gance, the CWDCP generated $435,000 "worth of business" per month. Despite some imprecision in Mr Gance's terminology, this figure shows clearly that the retail pharmacy at the date of the trial sold a very large quantity of pharmaceutical and related (or perhaps not so related) products directly to members of the public. 103Mr Gance said in one of his affidavits that the "relative value" of the various businesses conducted on the Premises was as follows:

ePharmacy - 7 per cent
CWDCP - 33 per cent
distribution of products to the group's stores - 60 per cent Thus the retail pharmacy generated about one third of the revenue derived from the three businesses conducted on the Premises. (Mr Gance gave slightly different percentages in a subsequent affidavit, perhaps reflecting changes that had occurred in the intervening period. Different figures again were given by Mr Leyshon, a research analyst and town planner. Despite some debate in argument, I do not think that anything turns on the differences in the figures.) 104If there were any doubt about the retail character of the pharmacy it is dispelled by the photographs that were in evidence. They show that the entrance to the open area accessed via the SupaCentre featured signs identifying the business as a "DISCOUNT CHEMIST" and as a "DISTRIBUTION CENTRE DIRECT TO THE PUBLIC". Other signs offered discounts not only on "prescriptions", but also on "fragrances", of which a large selection was evidently on display. The Respondents did not adduce any evidence to negate the inference, readily available from the set up of the retail pharmacy, that PBS items and OTC drugs accounted for only a small proportion of its sales. 105In determining whether the Premises were used for the prohibited purpose of a "shop", other matters are relevant. There is no dispute for present purposes that use of the Premises as an ePharmacy and as a centre for the wholesale distribution of pharmaceutical products could together be characterised as use for the purpose of a distribution centre. However, each of the three businesses conducted on the Premises - the retail pharmacy, the ePharmacy and the wholesale distribution of pharmaceutical products - was conducted by a separate entity: The ePharmacy was conducted by ePharmacy Group Pty Ltd. CWDCP played a role in the ePharmacy by distributing products to offsite customers for a fee, but did so on behalf of ePharmacy Group Pty Ltd. CWDCP retained title in the products distributed by the ePharmacy until delivery to the customers, but it appropriated the products to the ePharmacy's business. MCHBD conducted the wholesale distribution centre for pharmaceutical products. CWDCP provided warehouse and storage facilities and dispatched goods to offsite customers for a fee on behalf of MCHBD. CWDCP conducted the retail pharmacy. There is no evidence that the principals of either ePharmacy Group Pty Ltd or MCHBD played a significant role in the management of the retail pharmacy. 106As has been explained, use of the Premises as an ePharmacy required members of the public to have access to the Premises for the purpose of receiving PBS items: NH Act, s 90(3D). Use of the Premises as a wholesale distribution centre did not create any comparable legal obligation. Thus there was no legal requirement for the retail pharmacy to supply members of the public with any products other than PBS items. 107Mr Eastman placed considerable emphasis on the primary Judge's finding (at [296]) that: [t]he evidence suggests that much (if not most) of the stock shelved in the front section of the premises currently supplies the ePharmacy element, among others, and, on the other hand, stock for the distribution tasks is stored throughout the whole premises. 108The evidentiary basis for this finding is not clear. Mr Gance in his cross-examination agreed that the goods owned by MCHBD were kept "discrete from [his] goods" (that is, goods owned by CWDCP). Earlier in his evidence, Mr Gance said that MCHBD's goods were "transacted, sold from the distribution centre at the rear". This evidence was consistent with that of Ms Pannia. She said that two of the staff members who worked at the rear of the Premises regularly entered the front area of the Premises to pick and pack pharmaceutical products in order to fulfil the ePharmacy orders. The products particularly selected in this way were non-restricted pharmaceutical products, such as Schedule 2 drugs. She made no mention of staff members selecting pharmaceutical products from the open retail area to fill orders placed with the wholesale distribution centre by My Chemist/Chemist Warehouse stores. 109Mr Gance in his cross-examination insisted that there were occasions when an order placed by a Chemist Warehouse store could be met only by selecting the product from stock kept in the open retail area of the Premises. He said that products transferred to the distribution centre in this way were charged at cost to the centre by CWDCP. Mr Gance's explanation for not mentioning this link between the retail pharmacy and the distribution centre in his affidavits was that this process yielded no profit to CWDCP. 110The primary Judge's findings suggest that stock for the wholesale distribution centre was stored in the open retail area as a matter of course. The evidence does not support such a conclusion. MCHBD stored all its stock separately in the rear section of the Premises. From time to time MCHBD requested CWDCP to transfer stock from the retail pharmacy to enable the former to meet particular requirements of My Chemist/Chemist Warehouse stores, but only when those requirements could not be met from other sources. Mr Gance did not give precise information as to how often stock was transferred in this way. Nor did he estimate the value of the stock so transferred. 111Both Mr Gance and Ms Pannia gave evidence that stock was "often" taken from the open pharmacy area to fulfil orders placed by customers with the ePharmacy. The precise extent to which this occurred and the value of stock appropriated to the ePharmacy business does not appear to have been addressed in the evidence. 112Mr Gance described the use of the Premises variously as a "multi-faceted centre", an "integrated multi-faceted centre" and a "fully integrated distribution centre". He also described the multiple uses of the Premises as "co-mingled". It was this description that the primary Judge adopted when concluding (at [295]) that the activities conducted on the Premises were "co-mingled" (see at [51] above). 113If the somewhat self serving descriptions adopted by Mr Gance are put to one side, the position can be summarised as follows. The retail pharmacy was conducted in a large, separate section of the Premises comprising about 43 per cent of the total floor space. The retail pharmacy generated about $5 million in sales per annum and thus can fairly be described as a large scale operation. Each of the three main uses of the Premises - a retail pharmacy, an ePharmacy and a wholesale distribution centre for pharmaceutical products - was carried on by a separate entity. There was some interaction among these three businesses, but they were not conducted as a single, integrated unit. 114The ePharmacy was permitted to take stock from the retail pharmacy on a regular basis to fill orders placed with the ePharmacy by its offsite customers. CWDCP retained title to all pharmaceutical products delivered to offsite customers of the ePharmacy until title passed to the customer. It is a fair inference from the evidence that stock transferred in this way constituted a significant proportion of the value of the pharmaceutical products sold by the ePharmacy, although the proportion was probably less than one half. However, having regard to the relatively modest volume of sales by the ePharmacy, the products transferred to it by CWDCP constituted only a small proportion of the stock it carried or sold to its retail customers. 115CWDCP also transferred stock from time to time to enable MCHBD to meet particular orders placed by My Chemist/Chemist Warehouse outlets. This occurred when MCHBD had insufficient stock to satisfy the particular orders. But products owned by CWDCP were stored in a separate part of the Premises from that used to store products owned by MCHBD. The evidence does not support a finding that stock was transferred from CWDCP to MCHBD on anything other than an occasional or intermittent basis. 116I have referred to the authorities dealing with the characterisation of the purpose for which land is or may be used. In Abret (at [62]) Beazley JA pointed out that a use may be within the definition of a permitted use yet still be a use for a proscribed purpose. In other words, uses of the land may be for overlapping purposes: Hawkesbury City Council v Sammut [2002] NSWCA 18; 119 LGERA 171, at [23], per Mason P (with whom Powell JA and Young CJ in Eq agreed). Subject to the terms of the planning instrument, whether one of the uses is for a prohibited purpose depends on whether that use can be characterised as subservient or subordinate to the other (permissible) use. 117In Abret, the question was whether a development proposal was for the prohibited purpose of a residential flat building. It was held (at [57]) that even if the development proposal as a whole was for seniors housing and thus for an innominate use permissible with consent, part of the development was for the purpose of a residential flat building and was therefore prohibited. In the present case, it is difficult to see how the large scale retail pharmacy conducted on an area not much less than half the total floor space of the Premises can be characterised as being for the permitted purpose of a distribution centre. But even if it could be so characterised, as Abret demonstrates, that does not determine whether the actual use as a retail pharmacy is for the prohibited purpose of a shop. 118On the evidence, the Premises are used for at least two different purposes. One purpose is as a distribution centre, including the ePharmacy. The second purpose is as a "shop" as that term is defined both in the 1996 LEP and the 2010 LEP. The Premises are and have been a building or place used for the purpose of selling, exposing or offering for sale by retail goods, merchandise or materials (1996 LEP). The Premises are and have also been used as: retail premises that sell ... personal care products ... or other items of general merchandise (2010 LEP). For the reasons that have been given, the use of the Premises as a retail pharmacy cannot be characterised as subordinate or subservient to use as a distribution centre. Use as a retail pharmacy is for an independent purpose - that is, the large scale retailing of pharmaceutical and related products. This use is for the purpose of a "shop" as that term is defined in both the 1996 LEP and the 2010 LEP and is therefore unlawful. 119The position would be different if the retail pharmacy supplied only PBS items and OTC drugs to members of the public. There may be an issue, not addressed in argument, as to whether such a limited retail activity is within the definition of a "shop" in the 2010 LEP. But even if it is, the limited use would have been subordinate to use of the Premises for the purpose of a distribution centre authorised by the Consent granted under the 1996 LEP. In these circumstances, the Premises would have been used for the single purpose of a distribution centre at the time the 2010 LEP came into force. That would have been a protected existing use and could have continued lawfully after the 2010 LEP came into force. 120The present case is different from Macquarie Health Clinic v University of Sydney. In that case, the trial Judge made a finding of fact that the proposed use of a hospital to be erected partly on land zoned as "education" should be characterised as use for the purpose of a teaching hospital (see at 221). The trial Judge also found that a teaching hospital, by its very nature, performs both clinical and educational functions and that these functions were "inextricably bound up" (at 222). The Court of Appeal found that it was open to the trial Judge to conclude that the two purposes were inextricably linked and could not be severed. In the present case, although there is a connection between use for the purpose of a distribution centre and use for the purpose of a retail pharmacy, they are not inextricably linked. The distribution centre and the retail pharmacy are capable of operating independently of each other and to a considerable extent they do so. 121The primary Judge placed some reliance on several VCAT decisions relating to similar developments in Victoria. Each of these decisions involved different planning schemes, different premises and different evidence. They are of little assistance in the resolution of the appeal. 122No submission was made to the primary Judge or to this Court that the use of the Premises as a retail pharmacy was any different at the date the 2010 LEP came into force than its use at the date of the trial. Since that use was for the prohibited purpose of a "shop" under the 1996 LEP, it was not use for a lawful purpose immediately before the coming into force of the 2010 LEP. It was therefore not an "existing use" as defined in s 106 of the EPA Act and continuation of the use as a retail pharmacy was not protected by s 107(1). 123Use of the Premises as a retail pharmacy is not a use permitted without consent under the 2010 LEP. In any event, use of the Premises as a large scale retail pharmacy is prohibited under the 2010 LEP. It follows that the current use of the Premises as a retail pharmacy is in breach of the EPA Act.

[21]

Orders 124The appellants in their further amended summons sought declaratory and injunctive relief both on the basis that the Consent was void insofar as it permits use as a retail pharmacy and that the present use is prohibited under the 2010 LEP. Curiously enough, the notice of appeal only seeks orders on the basis that the Consent is void. It was pointed out in argument that the grounds identified in the notice of appeal do not embrace all the arguments advanced on behalf of the appellants. 125If the appellants are to obtain orders restraining the Respondents from using the Premises for unlawful purposes, they will need to file an amended notice of appeal seeking appropriate relief. Furthermore, any injunction will need to reflect the fact that use of the Premises as a retail pharmacy is permissible under the Consent, provided the pharmacy's activities are limited to supplying members of the public with PBS items and OTC drugs. 126It is also necessary to deal with a defence pleaded by the Respondents but not addressed by the primary Judge. The Respondents pleaded that the Court should exercise its discretion against granting the appellants the relief they sought. The primary Judge did not deal with this defence because he rejected the appellants' challenges and therefore no question of a discretionary bar to the grant of relief arose. The Respondents submitted that the proceedings should be remitted to the L&E Court to deal with the pleaded defence. In the end, the appellants did not dispute that this course is appropriate should the appeal be upheld on the ground that the current use as a large scale retail pharmacy contravenes the EPA Act. 127My present view is that unless the Respondents' discretionary defence succeeds, the appellants are entitled to an injunction restraining the Respondents from using the Premises as a retail pharmacy except to the extent that the pharmacy is used to supply members of the public with "pharmaceutical benefits" and OTC drugs. There appears to be no difficulty in defining the former expression since it is defined in s 84 of the NH Act. However, in order for the injunction to be framed with sufficient specificity, it will be necessary for the expression "OTC drugs" to be carefully defined. I therefore propose that the parties be given an opportunity to agree on the terms of an appropriate injunction. If they cannot, each should file a draft order supported by brief written submissions not exceeding three pages in length. 128The orders I propose are as follows:

Appeal allowed.
Set aside Orders 1 and 2 made by the primary Judge on 18 April 2012.
Direct the appellants to file an amended notice of appeal within seven days.
Direct the parties to file within 14 days an agreed draft of the proposed injunction referred to at [127] of this judgment.
In the absence of agreement, the appellants file within 14 days a draft of the injunction they propose, together with submissions in support not exceeding three pages in length.
The Respondents file within a further seven days a draft of the injunction they propose, together with submissions in support not exceeding three pages in length.
Subject to the parties' compliance with Orders 3 - 6 above and to any further order of this Court, the matter be remitted to the Land and Environment Court to deal with paragraph 4(h) of the Amended Points of Defence and otherwise the matter to be dealt with in conformity with this judgment.
The Respondents pay the appellants' costs of the appeal.
The costs of the proceedings in the Land and Environment Court be determined by that Court.
The Respondents, if otherwise qualified, have a certificate under the Suitors' Fund Act 1951.

Bardsley-Smith v Penrith City Council

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