Consideration
49 The 2011 Rules are subordinate legislation and their construction must have regard to the terms and purpose of the National Health Act from which they derive (see Master Education Services Pty Limited v Ketchell [2008] HCA 38; 236 CLR 101 at [19]). In Walkerden, Mortimer J made a number of observations about the approach to construing the 2011 Rules in the context of s 90, 99K and 99L of the National Health Act, which are referred to below and which the Court respectfully adopts.
50 After setting out the relevant parts of ss 90 and 99K of the National Health Act, in Walkerden at [12], Mortimer J observed that much of the substantive content governing the approval and non-approval of applications to supply pharmaceutical benefits from particular premises is left by the legislative scheme to be done in the 2011 Rules. Her Honour found that what is apparent from the terms of s 90 is that the scheme is "location-based". In saying that, Mortimer J relied on comments made in a slightly different context by Jessup J in Yu v Minister for Health (No 2) [2013] FCA 367; 216 FCR 188 at [10] where his Honour said:
… approvals under s 90 or s 90A are not given as benefits or emoluments to particular pharmacists. Rather, the scheme of the [National Health Act], relevantly, is to ensure that the community is provided with convenient access to pharmacies, conducted by appropriately qualified professionals, for the purpose of obtaining drugs and medicinal preparations which are beneficial in the treatment of sickness or disease but which may, at the same time, be harmful if not properly prescribed and dispensed.
51 In Walkerden at [13], Mortimer J then observed that, in accordance with the content of the legislative scheme, as filled out by the 2011 Rules, it is the appropriateness of a new pharmacy in the particular location which is the focus of the decision-making process. While the location of other pharmacies is given consideration, it is the community's need for adequate and sustainable access to pharmaceutical benefits which is the focus against which new applications are to be assessed according to criteria designed to advance that objective. Her Honour found that the terms of s 90(3D) of the National Health Act and the Community Pharmacy Agreements (the latter will be discussed later in these reasons) support that view.
52 In Walkerden at [50], Mortimer J observed that there is nothing in the rule-making power under s 99L of the National Health Act which indicates any general or specific purpose which should attach to the making of determinations (such as the 2011 Rules) under that power nor do the 2011 Rules themselves contain a statement of purposes.
53 At [59] of Walkerden, Mortimer J observed that there is a danger where constructional choices are made by reference to extrinsic material (such as the Explanatory Statement to the 2011 Rules and the Urbis Report referred to in it) rather than to the legislative provision itself. Her Honour noted that in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27 at [47] (Hayne, Heydon, Crennan and Kiefel JJ) the High Court said (footnotes omitted):
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
54 At [60] of Walkerden, Mortimer J found that a surer guide to the construction of the 2011 Rules was to look at the "fifth Community Pharmacy Agreement". The Community Pharmacy Agreements formed part of the settlement of a long-running policy dispute between the Federal Government and the Pharmacy Guild of Australia about remuneration for pharmacists dispensing prescriptions under the PBS and the restructuring of the pharmaceutical industry in Australia: see Smoker v Pharmacy Restructuring Authority [1994] FCA 859; 53 FCR 287 at 293-294 and 300-301 (Hill J); Pharmacy Restructuring Authority v Chatfield K.N. [1993] FCA 495; 43 FCR 418 at 429, 433 (French J). A description of some of the litigation which led, eventually, to the Agreements can be found in Commonwealth v Crowe [1992] FCA 873; 39 FCR 435 (Neaves, Gummow and French JJ). The first of these Agreements was signed in December 1990, and there were consequential amendments to the National Health Act, including the introduction of s 99L, so that effect could be given to the terms of the Agreement whereby, among other matters, "Location Rules" for pharmacies would be promulgated.
55 At [61] of Walkerden, Mortimer J noted that the 2011 Rules resulted from the conclusion of the fifth Community Pharmacy Agreement and her Honour set out the text of clause 1.2 of the Agreement. Clause 1.2(d) was as follows:
The principles and objectives of this Agreement are to:
i. ensure a fair Commonwealth price is paid to Approved Pharmacists for providing pharmaceutical benefits while maximising the value to taxpayers by encouraging an effective and efficient community pharmacy network;
ii. ensure that the Programs are patient-focused and target areas of need in the community including continued improvement in community pharmacy services provided to Aboriginal and Torres Strait Islander people;
iii. ensure transparency and accountability in the expenditure of the Funds;
iv. promote the sustainability and efficiency of the PBS within the broader context of health reform and ensuring that community resources continue to be appropriately directed across the health system, while also supporting the sustainability and viability of an effective community pharmacy sector;
v. maintain a co-operative relationship between the Commonwealth and the Guild; and
vi. ensure the Location Rules work for the benefit of the Australian community including increased access to community pharmacies for the population of rural and remote areas. The specific objectives of the Location Rules are to ensure:
• all Australians have access to PBS medicines;
• a commercially viable and sustainable network of community pharmacies dispensing PBS medicines;
• improved efficiency through increased competition between pharmacies;
• improved flexibility to respond to the community need for pharmacy services;
• increased local access to community pharmacies for persons in rural and remote regions of Australia; and
• continued development of an effective efficient and well-distributed community pharmacy network in Australia.
e. The initiatives covered by this Agreement result in $1 billion in savings over the Term of the Agreement against the Commonwealth forward estimates. Those savings have been agreed by the parties in the context of extraordinary economic and budgetary circumstances.
f. The Commonwealth will deliver $15.4 billion under the Agreement as set out in the following table: […].
56 As noted previously, in Walkerden at [62]-[63], Mortimer J found that "clearly" the objectives of the 2011 Rules, as set out in cl 1.2(d)(vi) of the fifth Community Pharmacy Agreement, were of principal relevance to the construction issues on that application. Those objectives have twin themes: a sustainable and viable community pharmacy network (which focuses at least as much on the interests of pharmacy owners as on the community) and access to pharmaceutical benefits (with a focus only on the community's interests) but that was the most that could be gleaned from them.
57 The Court accepts the Authority's submission that, although the 2011 Rules seek to balance the interests of the community, the Commonwealth as the provider of pharmaceutical benefits, and pharmacists, it would be a mistake to construe the 2011 Rules as if their purpose were the protection of commercial interests of existing pharmacies. Rather, it is concerned with balancing the Commonwealth's financial burden against the need for an acceptable level of community service, relying on Assarapin v Australian Community Pharmacy Authority [2016] FCAFC 9; 239 FCR 161 at [41]; Kong v Minister for Health [2014] FCAFC 149; 227 FCR 215 at [96]-[97] (Jacobson J); Stambe v Minister for Health [2019] FCA 43 at [41]-[42] (Mortimer J).
58 The structure of each of the 2006, 2009 and 2011 Rules made under s 99L set out categories of locations from which a pharmacy may seek approval to supply pharmaceutical benefits. Each category sets out particular requirements which must be met to found a recommendation by the Authority to the Secretary to approve an application by a pharmacy. By that categorisation, those Rules sought to achieve the balance referred to in [57] above. If the requirements related to the category under which an application is made are not met, the Authority must recommend to the Secretary that an application not be approved (s 11(a) of the 2011 Rules) and the Secretary must then not approve the application (s 90(3B) of the National Health Act).
59 The 2009 Rules changed the definition of "large medical centre" from one which was under "single management" and "operates at least 55 each week" which appeared in the 2006 Rules to a more stringent definition, which required that the medical centre be under "single management", "operates at least 70 hours a week" and "has one or more prescribing medical practitioners at the centre for at least 70 hours a week". This amendment related to Item 112. The Explanatory Statement to the 2009 Rules explained this amendment as follows (emphasis added):
Paragraph 3 amends the definition of "large medical centre" by requiring that the medical centre is open for at least 70 hours each week and that general practice services are provided at the medical centre during those hours. This definition relates to Item 112, paragraph 1, which requires that the proposed premises must be located in a "large medical centre". The intention of having a pharmacy in a large medical centre is primarily to meet the needs of medical centre patients outside normal business hours, when nearby pharmacies have closed. This amended definition ensures that the medical centre is operating extended hours.
Irrespective of the hours that the medical centre operates or the number of medical practitioners rostered on during those hours, general practice services must be provided at the medical centre for [at] least 70 hours each week. If the medical centre closes for an hour over lunchtime then that hour is not counted towards the time that the medical centre is providing general practice services, as patients are unable to obtain a consultation with a medical practitioner during that hour.
Where more than one medical practitioner's hours overlap then the total hours that the medical centre is providing general practice services is not the combined hours of the medical practitioners, it is instead the total hours that the centre is providing general practice services.
60 It is notable that the Explanatory Statement for the 2009 Rules uses the words "each week", even though the 2009 Rules employed the term "a week", in contrast to the 2006 Rules. Also notable is the substantial extension of the required weekly hours (from 55 to 70) and the italicised language which suggests that 70 hours is intended to be read strictly, not to include lunch times and not to take into account overlapping hours worked by prescribing medical practitioners.
61 The 2011 Rules changed the definition of "large medical centre" only by changing the words "at least 70 hours a week" to read "at least 70 hours each week" and that change was not explained. The requirement that the proposed premises be in a "large medical centre" was included in sub-item 1 of the new Item 136. The Explanatory Statement to the 2011 Rules (at p 15) states the purpose of Item 136, noting that it applies to applications for a "new approval in a large medical centre" and that:
It aims to facilitate timely and convenient access to the supply of pharmaceutical benefits for patients of large medical centres that operate extended hours and also recognises the multidisciplinary health services that large medical centres may provide, for example, by dental practitioners or nurse practitioners approved to prescribe PBS medicines.
62 The explanation for the requirement that the pharmacy be located in a "large medical centre" has the same explanation as that italicised in the excerpt from the Explanatory Statement to the 2009 Rules set out at [59] above. It is notable that the requirement that the proposed premises of the pharmacy be located in a large medical centre is one of a number of requirements of Item 136. Sub-item 4 (taken with sub-item 5 as originally enacted) required that the Authority be satisfied that during the two months before the application was made and two months before the application is considered by the Authority there be equivalent to at least 8 full-time PBS prescribers of which 7 are prescribing medical practitioners. Since 2015, the requirement is found in sub-item 4 and requires that the Authority be satisfied that during the period of two months before the application is made and up to the time it considers the application there are the equivalent of the required number of full-time PBS prescribers. Those requirements indicate that it is intended that the pharmacy be located where there is a substantial demand generated by the presence of prescribing medical practitioners and other PBS prescribers. Sub-item 6 (as Item 136 was then drafted, now sub-item 5) requires that the Authority is satisfied that the applicant will make all reasonable attempts to ensure that the proposed hours of the pharmacy's operation will meet the needs of the patients at the medical centre.
63 The Court accepts the submissions that the term "operates at least 70 hours each week" used in s 5 (b) of the definition of "large medical centre" is capable of bearing more than one meaning and is, to some extent, evaluative. This is because there is nothing in Item 136 (or the 2011 Rules more broadly) which indicates for what period the medical centre must meet the test and the term "operates" is not defined. In the Court's view the word "operates" is important in the phrase "operates at least 70 hours each week", and it is notable that it does not feature in the submissions made by MC Pharmacy which seeks to equate "70 hours each week" with phrases commonly used to described an employee's working hours, which is an entirely different context. The context of Div 2 of Part VII of the Health Services Act and its subordinate legislation (and Item 136 in particular) is the provision of pharmaceutical benefits conveniently to a location at which services of at least eight full-time equivalent PBS prescribers are provided over extended hours during a week. There is nothing in that context that suggests that public holidays should be taken into account in such a way that would mean that the medical centre does not operate fewer than 70 hours each week.
64 Section 5(c) also requires some evaluation, although it is arguably clearer in its requirement that there be at least one prescribing medical practitioner "at the centre for at least 70 hours each week" and the Explanatory Statements to the 2009 and 2011 Rules make it clear that the intention is that someone be working (that is, not at lunch) in each of the 70 hours and that an hour only be counted once no matter how many prescribing medical practitioners are working during it. These features are indicative of an intention that "at least 70 hours each week" be read strictly.
65 Even though changes to the terms "each week" (2006 and 2011 Rules) and "a week" (2009 Rules) were made without comment and apparently interchangeably, the Explanatory Statements to both the 2009 and 2011 Rules and the express terms of Item 136 indicate that it is intended that the medical centre whose patients the pharmacy will serve will be open at a time suitable to those patients having regard to the prescribing medical practitioner's extended working hours so that the patients can have convenient access to the supply of pharmaceutical benefits. That militates towards a more strict interpretation of "at least 70 hours each week" than that contended for by MC Pharmacy. It is unnecessary (and likely inappropriate) to resort to changes in the definition of a different term, "full-time", which occurred after 2011 to interpret the meaning of "at least 70 hours each week".
66 The words "at least 70 hours each week" in ss 5(b) and (c) of the 2011 Rules should be given a meaning consistent with the context in which they occur having regard to the purpose for which Item 136 is designed. The phrase is not a term of art. There is nothing in the National Health Act or the 2011 Rules which indicates an intention to create exceptions or suggests that "each week" should not have a plain meaning.
67 In the Court's view, the meaning to be derived from "at least 70 hours each week" in ss 5(a) and (b) is a requirement that the ordinary and habitual hours in which the medical centre operates and a prescribing medical practitioner will be in attendance are at least 70 hours in each consecutive period of seven days. This is what the evidence before the Authority should demonstrate, for whatever period the Authority elects to receive evidence. This interpretation serves the purpose of Item 136 by ensuring that in each week, the medical centre operates with the services of a prescribing medical practitioner during extended business hours. The purpose of creating a category for approvals related to "large medical centres" is to meet the demand for dispensing of PBS medicines that such centres generate. That purpose would be undermined if the "at least 70 hours each week" criterion is not strictly interpreted.
68 A stated intention to operate on some "selected" public holidays, when the usual hours are only 70.5 per week, has the result that on up to eight weeks in a year the medical centre will not operate at least 70 hours each week where (as here) there is no intention expressed to make up the lost hours at other times during the relevant weeks and no evidence that those lost hours were in fact made up in the weeks in which public holidays fell during the evidence period. It demonstrates that the Medical Centre's operating hours are not ordinarily or habitually at least 70 hours each week or that its intended operation is to have at least one prescribing medical practitioner at the Medical Centre for that period each week, even though it may often do so. In the Court's view, it would be necessary for there to be express words in the 2011 Rules addressing public holidays to produce the result contended for by MC Pharmacy.
69 The Court does not accept that this interpretation has the effect of reading the words "and every" into ss 5(b) and (c); it gives the words "at least 70 hours each week" their plain meaning in circumstances where there is nothing in the National Health Act or the 2011 Rules which suggests that some other meaning should be adopted. The Court also does not accept that that interpretation operates to frustrate the stated intention of Item 136 in which the definition of "large medical centre" has relevance. The stated intention is that there be a pharmacy available where a medical centre of a particular kind operates outside normal business hours consistent with the 70 hours each week requirement in ss 5(b) and (c) of the 2011 Rules.
70 Contrary to submissions put by MC Pharmacy, this interpretation does not require the conclusion that a medical centre fails to meet the definition of "large medical centre" because its provision of service is interrupted due to some unforeseen circumstance, such as the need to evacuate the building because of a fire, bomb scare or infection risk or some other unforeseen contingency such as sudden illness of a rostered doctor. In the Court's view, a medical centre which habitually or ordinarily operates at least 70 hours each week will continue to answer that description even if it does not in fact operate for 70 hours in a week on some occasions due to such a contingency. MC Pharmacy's submissions take the argument to an extreme that the plain meaning of the words "at least 70 hours each week" does not require consistent with the purpose of Item 136 and the broader purposes of the 2011 Rules.
71 The Authority's statement of reasons is before the Court. The evidence before the Authority and the Court was three statutory declarations sworn by an employee of the Medical Centre in which he advised the Authority that the Medical Centre did not open on "selective public holidays" and MC Pharmacy accepts that that conveyed that the Medical Centre was not "generally" open on public holidays. The rosters attached to the statutory declarations show that the Medical Centre was not open on each of the public holidays between 30 January and 8 June 2017 so that the Medical Centre was not open for at least 70 hours in the weeks the public holidays fell and that is consistent with the concession made by counsel for MC Pharmacy.
72 Although the statement of reasons makes express reference to the existence of the statutory declarations and rosters and the declaration that the Medical Centre opened 70.5 per week, it made no reference to the evidence concerning public holidays. The inference that the Court draws from this is that the Authority did not take into account the relevant consideration that the Medical Centre did not operate for at least 70 hours in weeks with a public holiday during the evidence period and that management of the Medical Centre had expressed an intention that the Medical Centre would generally not be open on public holidays. The absence of comment about public holidays in the statement of reasons indicates that the Authority failed to appreciate the significance of the evidence concerning public holidays because it misconstrued the statutory test in ss 5(b) and (c). That is an error of law having regard to the proper construction of those requirements as found in these proceedings. In light of the requirement in s 11(a) of the 2011 Rules, the Authority was required to recommend that MC Pharmacy's application not be approved, since it did not meet the definition of "large medical centre" because it did not satisfy ss 5(b) and (c). The Court is satisfied that grounds 1 and 2 of the amended originating application are made out.
73 The Court finds that there was no evidence justifying the Authority's finding that the Medical Centre operated at least 70 hours each week in light of the proper interpretation of that term. The evidence was that the Medical Centre did not operate and did not have one or more PBS prescribing medical practitioners at the Centre at least 70 hours each week during the evidence period even though the Medical Centre operated and there was one or more prescribing medical practitioners at the Medical Centre for that time in some weeks. It also had evidence that there was an expressed intention that the Medical Centre would generally not be open on public holidays. On that evidence, it was not open to the Authority to find that the Medical Centre did or would operate at least 70 hours each week and have at least one prescribing medical practitioner at the Centre at least 70 hours each week. It was therefore not open to the Authority to find that the Medical Centre was a "large medical centre" as defined in s 5 of the 2011 Rules.
74 MC Pharmacy's suggestion that, because there was evidence that the Medical Centre met the requirements of ss 5(b) and (c) in the weeks immediately preceding the day on which the application was considered by the Authority and it made its recommendation, there was some evidence that the Centre met the definition of "large medical centre" must be rejected. At the very least, the evidence disclosed that there was a continuing intention that the Medical Centre would not be open in weeks in which a public holiday fell, so that that submission must be rejected. In any event, "each week" is a continuing concept so that the Authority could not discharge its fact finding obligation by reference to only some of the relevant evidence which had been provided by the Medical Centre. Once there was evidence that the Medical Centre did not open on public holidays in that period and its management had a general intention not to be open on public holidays, there was no evidence to support a finding that the Medical Centre is a "large medical centre". Section 11(a) of the 2011 Rules required the Authority to recommend that the Secretary not approve MC Pharmacy's application made on the basis that the Medical Centre was a "large medical centre". The Authority therefore based its findings at [28], [30] and [31] and its recommendation on a critical fact which did not exist. Ground 2A of the amended originating application is made out.