Commonwealth of Australia v Horsfall

Introduction 1 Part VII of the National Health Act 1953 (Cth) (National Health Act) regulates the operation of the Commonwealth Pharmaceutical Benefits Scheme (PBS) and is designed, among other things, to control the number and distribution of pharmacies approved to supply subsidised medicines under that scheme. To this end, it creates a process for decision-making about new approvals to operate a pharmacy supplying such medicines. 2 The Australian Community Pharmacy Authority (Authority) is an independent body established under s 99J of the National Health Act. Its role in the process is to consider applications for approval and make recommendations to the Secretary of the Department of Health and Ageing (Secretary) about whether or not an application should be approved. The Secretary - who has delegated this function to Medicare Australia (Medicare) - must then decide whether or not to approve an application. The Authority's recommendation is critical because, although the Secretary may still refuse an application endorsed by the Authority, the Secretary may not approve an application that has not been recommended for approval. 3 On 10 July 2008 the first and second respondents, Simon and Kathleen Horsfall, applied for approval to supply medicines under the PBS from a new pharmacy in Yackandandah, a country town in north-eastern Victoria near the New South Wales border (Horsfall application). On 2 September 2008 the Authority recommended to Medicare that the Horsfall application not be approved because it was not satisfied from information supplied by the Horsfalls that they had "a legal right to the proposed premises at date of lodgement of the application" (a statutory requirement) and advised them accordingly. 4 On 23 September 2008 the Horsfalls applied to the Administrative Appeals Tribunal (AAT) for a review of the Authority's decision. The Horsfalls' position, in short, was that their application, when it was lodged and considered by the Authority, had complied with all relevant requirements and the AAT should now reverse the Authority's decision and recommend its approval. 5 In March 2009 the Horsfalls filed material in the AAT proceeding to show that, despite what the Authority had found, they had a legal right to occupy the proposed premises. Unfortunately for the Horsfalls, however, the Authority (now properly named as the Commonwealth in this proceeding) argued that their application no longer met another essential requirement - which they had satisfied when the application was made and considered by the Authority. The reason for this was that, after recommending that the Horsfall application not be approved (but knowing that the Horsfalls had challenged its decision in the AAT), the Authority had recommended the approval of an application by the third respondent, Pamela Carter, relating to a pharmacy in the same street in the same town (Carter application). As I will explain below, under the relevant rules it was an obvious and necessary consequence of this second decision that (assuming the AAT had to apply them to the facts as they stood after the Authority recommended the Carter application for approval) it could not recommend the Horsfall application for approval. But the AAT held that it was not required under the rules to take notice of the Authority's recommendation that the Carter application be approved and (although the AAT's order is problematic) that the Horsfall application should be recommended for approval. 6 The Commonwealth now appeals to this Court from the AAT's decision. On 4 March 2010 I ordered that the Secretary be joined to this appeal and be restrained from making a decision whether or not to approve the Carter application until further order or the determination of this appeal. 7 In my opinion the AAT fell into error. The appeal must therefore succeed and the AAT's decision be set aside. As a matter of law the AAT was required to take into account the fact that the Carter application had been recommended for approval by the time it came to review the Authority's decision about the Horsfall application. The effect of this means that the AAT was bound to decide that the Horsfall application should not be recommended for approval. The general rule is that the AAT should reach its decision on the basis of the facts as they are at the time of its decision and not at some earlier point in time, such as the time of the primary decision, and there is nothing in this case that takes it outside the general rule. 8 Leaving aside problems with the AAT's orders, the substance of the appeal turns on the correct interpretation of the interaction between the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) and the National Health Act and the applicable rules made under it by the responsible Minister. For this reason it is convenient to start by setting out the legislative framework.

Legislative context 9 Upon the application by a pharmacist for approval to supply pharmaceutical benefits at particular premises, s 90 of the National Health Act confers on the Secretary the power to approve that pharmacist to supply those benefits at those premises. However, before the Secretary can do so, in most cases (including this one) the application must be referred to the Authority. Section 99K then requires the Authority to consider the application and make a recommendation to the Secretary about whether or not it should be approved. 10 The function of the Authority is to consider applications by pharmacists for approval to supply pharmaceutical benefits from particular premises, to make recommendations to the Secretary about whether or not these applications should be approved and, if recommending approval, whether or not approval should be granted subject to conditions. 11 Section 90(3B) provides that, in cases where an application must be referred to the Authority, the Secretary may only approve a pharmacist if the Authority so recommends, but the Secretary may still refuse to grant an approval recommended by the Authority. 12 Section 99L(1) requires the Minister to determine the rules subject to which the Authority is to make recommendations under s 99K(1). In making a recommendation the Authority is bound to comply with those rules: s 99K(2). 13 The relevant rules in the present case were those prescribed by the National Health (Australian Community Pharmacy Authority Rules) Determination 2006 (Determination) as amended by the National Health (Australian Community Pharmacy Authority Rules) Amendment Determination 2007 (No. 1), which commenced on 27 March 2007 and applied to the Horsfall application. This is a legislative instrument and therefore equally binding on the AAT. 14 Broadly speaking, the Determination distinguishes between two classes of application: an application for approval relating to new premises and an application to relocate an existing pharmacy, which involves cancellation of the approval for the current premises. 15 When making recommendations the Authority is not exercising a discretionary power. Section 9 of Part 2 of the Determination imposes an obligation on the Authority to recommend that an applicant be approved under s 90 of the Act in respect of particular premises if the prescribed conditions are met. Conversely, s 10 of Part 2 of the Determination obliges the Authority to recommend that an applicant not be approved if any of the prescribed conditions is not met. 16 The Horsfalls applied for approval to establish a new pharmacy in a rural location. So the application was subject to two sets of requirements: those in item 114 of Schedule 1 Part 2 of the Determination (rule 114), which apply only to applications for a new approval for proposed premises in a rural area, and those in item 201 of Schedule 2 Part 2 (rule 201), which apply to all applications for approval. 17 Rule 114 is in the following terms: Item Kind of Requirements application 113 New pharmacy (general) 1. The proposed premises are at least 1.5 km, in a straight line, from the nearest approved premises. 2. The Authority is satisfied that: (a) the resident population of the catchment area for the proposed premises is, for most of the year, at least 3 000; and (b) there is the equivalent of at least 1 full-time prescribing medical practitioner practising in the catchment area for the proposed premises 114 New pharmacy (rural): The proposed premises: (a) are in a rural locality; and (b) are at least 10 km, by the shortest lawful access route, from the nearest approved premises.

18 Section 6(1) of the Determination defines "rural locality" and s 6(2) of the Determination expands the meaning of "approved premises" in rule 114 to include premises that the Authority has recommended for approval, even if the Secretary has not yet acted upon that recommendation: In this Determination, in each reference to the nearest approved premises, approved premises: (a) includes premises in respect of which the Authority has recommended an applicant be approved under section 90 of the Act. 19 Section 8(2) of the Determination prescribes the method for calculating the distance by the shortest lawful access route between two premises. 20 Rule 201 was amended by the 2007 amendments to the Determination. Previously the requirement was in the following terms: Item Requirement 201 The Authority is satisfied that: (a) the applicant has a legal right to occupy the proposed premises; and (b) the proposed premises can, under the applicable local government and State or Territory laws relating to land development, be used for the purpose of operating a pharmacy; and (c) within 6 months after the date on which the Authority makes a recommendation in respect of the application, the applicant will be able to begin operating a pharmacy at the proposed premises; and (d) the proposed premises are not directly accessible by the public from within a supermarket.

21 However, following the 2007 amendments (which are emboldened below), the Determination provided: Item Requirement 201 The Authority is satisfied that: (a) the applicant had, on the date of the application, and has, on the date on which the Authority makes a recommendation in respect of the application, a legal right to occupy the proposed premises; and (b) the proposed premises could, on the date of the application, and can, on the date on which the Authority makes a recommendation in respect of the application, be used for the purpose of operating a pharmacy under the applicable local government and State or Territory laws relating to land development; and (c) within 6 months after the date on which the Authority makes a recommendation in respect of the application, the applicant will be able to begin operating a pharmacy at the proposed premises; and (d) the proposed premises are not directly accessible by the public from within a supermarket.

(Emphasis added) 22 The purpose of the amendments to paragraphs (a) and (b) is clear. Relevantly, paragraph (a) is designed to ensure that pharmacists making applications to the Authority have complied with it before lodging an application with the Authority, rather than lodging an application and seeking to comply with it before the Authority comes to consider the application. The amendments do not assist the Horsfalls in this appeal.

Factual background 23 I now turn to the important facts in this case, which are uncontroversial. 24 On 10 July 2008 the Horsfalls lodged their application for approval under s 90 of the National Health Act to supply pharmaceutical benefits from proposed premises at 9 High Street, Yackandandah. The application sought approval under rule 114 for a new pharmacy in a rural area. 25 On 14 July 2008 Medicare referred the application to the Authority. The Authority received it on 17 July 2008, considered it at a meeting on 29 August 2008 and on 2 September 2008 notified Medicare and the Horsfalls that it recommended the application not be approved. 26 The letter notifying the Horsfalls of their unsuccessful application incorrectly stated that it was unsuccessful because "[t]he Authority was not satisfied that the application met the requirements of Rule 114". In fact, the Authority was satisfied at the date of its recommendation that the Horsfalls met the requirement in rule 114 that there be no existing approved premises, (including, by dint of s 6(2)(a) of the Determination, premises in relation to which the Authority had already recommended approval) within 10 km by the shortest lawful access route. In fact, at that time the nearest approved premises were in the town of Beechworth, approximately 22.5 km from Yackandandah. 27 However, as the letter from Medicare itself made clear, the application was in fact unsuccessful because the Authority was not satisfied that the requirement in rule 201(a) had been met, namely that the applicants had a legal right to occupy the proposed premises on the date of the application. The letter recorded the Authority's reasons as follows: The Authority noted the letter of offer dated 7 July 2008 from Trivett Keating which had not been accepted. 28 This is a reference to a letter addressed to Mr Horsfall from the solicitors for the owner of the proposed premises in Yackandandah, which the Horsfalls attached to their application. The letter set out the main terms of the lease but also indicated that a formal lease had not yet been entered into: [The owners] understand that your commitment to sign a Lease depends upon you obtaining approval from various statutory authorities. They will instruct us to prepare the full formal required Lease and Disclosure Statement immediately you confirm that you are ready to sign the formal document. 29 In its Statement of Reasons, which the Authority lodged with the AAT pursuant to s 37 of the AAT Act (s 37 statement), the Authority expanded on the reason why it was not satisfied that the Horsfalls had a legal right to occupy the proposed premises on the date of their application (or on the date of its decision): The Authority considered the letter from Trivett Keating, Legal Practitioners on behalf of the landlord dated 7 July 2008. The Authority noted that the letter contained the proposed terms of the lease and that a formal lease would not be prepared until the Applicants indicated their intention to proceed. The Authority noted there was no evidence that the Applicants had provided the landlord with information indicating their intention to proceed prior to the date the Application was made. 30 In the meantime, on 22 August 2008 - approximately 6 weeks after it received the Horsfall application - the Authority received Ms Carter's application for approval to supply pharmaceutical benefits from proposed premises on the same street in the same town. 31 On 23 September 2008 the Horsfalls applied to the AAT for a review of the Authority's decision. In an annexure to their application the only substantive reason they gave for seeking review was: that the [Authority] erred in determining that a letter dated 7 July 2008 from the solicitors for the owners of the proposed premises, which was attached to the Application for Approval under section 90 of the National Health Act 1953 ('the Act'), was not evidence of a legal right to occupy the premises, as required under the National Health (Australian Community Pharmacy Authority Rules) Determination 2006. 32 On the same day the Horsfalls' solicitor wrote to the Authority notifying it of the AAT application and requesting, in effect, that the Authority not make a decision about the Carter application. At no time did the Horsfalls approach the Court for an order restraining the Authority from doing so. 33 On 25 September 2008 the Authority received a copy of the Horsfalls' application for review. Later that day, Ms Karen Prstec sent an email on the Authority's behalf advising the Horsfalls' solicitor that the Authority would consider the Carter application the next day and, if satisfied it met all requirements, was obliged to recommend its approval. The Horsfalls' solicitor replied a little over an hour later, asserting the Horsfalls' right to an injunction restraining the Authority from considering or making a recommendation in respect of the Carter application but, in the end, seeking only to be promptly informed of the Authority's recommendation. The failure to seek injunctive relief had serious consequences. 34 The next day the Authority recommended that the Carter application be approved, as it met all the relevant statutory criteria. As I explained above, once the Authority was satisfied that all criteria were met, s 10 of the Determination left it with no discretion as to whether or not to recommend approval. 35 On 29 September 2008 the Horsfalls' solicitor now sought an undertaking from Medicare, as the Secretary's delegate, that it give at least 48 hours notice that it was going to make a decision about the Carter application. Medicare gave that undertaking the next day. 36 On or about 16 April 2009 Medicare informed Ms Carter that it would not make a decision about her application until the AAT had made its decision. It appears that from around that time Ms Carter commenced operating a pharmacy at 24A High Street, Yackandandah, the premises proposed in her application, without having the necessary approval, meaning that she could not provide medicines subsidised under the PBS. 37 In a document entitled "Statement of Agreed Facts", signed by the solicitors for the Horsfalls, the Authority and Ms Carter (who had been made a party to the AAT proceeding) and lodged with the AAT, the Authority made the following concession: On 2 June 2009 the respondent conceded that the further material filed by the Applicant in approximately March 2009 (including the statements of Mr Horsfall and Mr Zahra) satisfied the requirements of Item 201(a). 38 Item (or rule) 201(a), it will be recalled, requires an applicant to satisfy the Authority that he or she has the legal right to occupy the proposed premises as at the date of the application and at the date of the Authority's decision. Given this, it is unfortunate that the terms of the concession are ambiguous; it does not specify whether or not the Authority agreed that the Horsfalls had the necessary legal right at the date of their original application or had only acquired it at some later date. 39 If the latter, then the AAT should have affirmed the Authority's decision, as it is clear that rule 201(a) must be satisfied by an applicant before he or she lodges an application with Medicare. If the former, which was the only concession worth extracting from the Authority, then - leaving aside the impact of the Authority's later recommendation of the Carter application for approval - the Horsfalls were entitled to succeed at the AAT because their failure to satisfy rule 201(a) had been the Authority's only reason for refusing their application in the first instance. It is clear from the AAT's reasons that the Senior Member understood this to be the concession: Re Simon & Kathleen Horsfall and Australian Community Pharmacy Authority and Pamela Carter [2009] AATA 811 (Re Horsfall) at [21]. 40 The AAT therefore approached its review of the Authority's decision on the basis that the only question for it to determine was whether or not the Horsfall application met the requirement in rule 114 that the proposed premises were at least 10 km from the nearest approved premises. If the fact that the Authority had by this time recommended the Carter application for approval was relevant to the AAT's decision, then rule 114 was not satisfied and the AAT was obliged by s 9 of the Determination to recommend that the Horsfall application not be approved. That issue is ultimately the issue upon which this appeal turns.

The AAT's decision 41 The AAT delivered its decision on 22 October 2009. Essentially, it decided that the Horsfall application should be recommended for approval 42 The AAT considered that it should determine whether or not rule 114 was satisfied on the basis of the facts as they were at a point in time before its own decision. It is not entirely clear from the AAT's reasons what that point in time was, but at [29] of her reasons the Senior Member appears to assume that the appropriate point in time is the date of the Horsfall application. As at that time the Authority had not recommended the Carter application for approval and (she inferred from the concession) the Horsfall application met all applicable requirements including the requirement in rule 114, she decided that it should be recommended for approval. 43 The Senior Member's conclusion turned on her understanding of the High Court's decision in Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286 (Shi). 44 The Senior Member summarised the effect of Shi at [24] as follows: In essence, the High Court in Shi held that there is nothing in the Tribunal's enabling legislation that confines it to the facts and circumstances before the primary-decision maker [sic]. The exception to this general principle is that, if the statute under which the decision under review was made limits the review to the particular time in the past, then the Tribunal will similarly be limited to the state of affairs existing at the relevant time. [Footnote omitted.] 45 The Senior Member then quoted a long passage from the judgment of Kiefel J in Shi at [142] and went on to say at [25]: Any restriction on the Tribunal to consider only conduct and events up to a certain point in time would have to arise from the intention of the legislation under consideration and the nature of the decision under review. 46 The Senior Member recognised at [26] that, unlike rules 201(a) and (b), rule 114(b) did not specify a time at which its requirement had to be met. However, relying on a passage from another decision of the AAT in Re Friendly Society Medical Association Ltd and Australian Community Pharmacy Authority [2008] AATA 1055; (2008) 106 ALD 635 (Friendly Society), and after making the gratuitous observation that "curiously, the Authority's position was contrary to the position it takes in this matter", she went on: [I]t is inherent in the nature of a decision under section 99K [a decision of the Authority whether or not to recommend approval of an application] that review of that decision is confined to identified past events. It would be bizarre, in my view, if the evidence in respect of different aspects of an application under section 90 were to be strictly considered as at different times. A decision as to whether an Applicant meets all the requirements, because of the temporal element inserted by Item 201 of the Rules flavours, in my view, the whole entitlement question. 47 The Senior Member also considered that she could disregard the fact that the Carter application had later been recommended for approval on another ground, saying: Even if I am wrong in my view, the Applicants would still succeed as I do not consider the change in the compliance with Item 114(b) to be in the nature of 'circumstantial changes' to which Kirby J referred in Shi at [49]-[50]: Circumstantial changes [emphasis added] may sometimes be adverse to an applicant before the tribunal. Given the tribunal's powers in certain circumstances to make a decision "in substitution for" a decision of the tribunal which has been set aside upon review, it would be remarkable if the substituted decision could not take into account evidence of relevant, and even critical, supervening events. Such events might include the intervention of bankruptcy, or a criminal conviction for an offence of dishonesty of significance for the continued registration of the agent under the Migration Act. This reasoning is further strengthened by an appreciation that the fundamental object of the exercise of the authority's power to cancel or suspend the registration of an agent under the Migration Act is the protection of the section of the public that deals with migration agents. It is not, as such, the punishment of agents. This object is best achieved by the tribunal making its decision upon the most up-to-date material available to it at the time of its own decision. It would be impeded if the tribunal were confined to the facts and circumstances subsisting at the time of the authority's original decision weeks, months or even years in the past. 48 After quoting this passage from Kirby J's reasons, the Senior Member explained: The examples of events to which Kirby J referred were events such as bankruptcy or a criminal conviction for an offence of dishonesty. These were of significance in Shi in the context of continued registration of a migration agent. The type of event - the new evidence - which has altered the Applicants' position in this matter is not one of their doing, unlike in Shi, and one which would not have occurred but for the actions of the decision-maker itself, the Authority, in recommending the Carter application. Geography usually does not change; although an extreme example of a new expressway may alter the distance between proposed premises during the relevant dates. Neither in this matter is there a direct issue of protection of the public, as there was in Shi, that creates a greater imperative on the Tribunal to consider the most up-to-date material available at the time of its decision. 49 Finally, at [32] of her reasons, the Senior Member indicated that she did not consider it necessary to deal with several alternative submissions by counsel for the Horsfalls as to why the Tribunal should decide the application in their favour. 50 It made the following order: The Tribunal sets aside the decision under review and remits the matter to the Authority for its recommendation in accordance with section 99K of the National Health Act 1953 (Cth) that the Applicants' application under section 90, in respect of the Horsfall premises, be approved. The Tribunal orders that the Authority pay the Applicants' costs of the application.

The appeal 51 The appeal is confined to questions of law arising from the Tribunal's decision: AAT Act, s 44. There is no dispute that the appeal is concerned with such questions. 52 There was no appearance for Ms Carter in the appeal, her interest being the same as the Commonwealth's. With the parties' consent, I gave the Commonwealth leave at the hearing to file an amended notice of appeal to better state the questions of law. In substance they are: (a) whether the AAT misinterpreted rule 114, specifically rule 114(b), of the Determination; (b) whether the AAT misinterpreted some remarks of Kirby J in Shi; (c) whether the AAT's order remitting the decision to the Authority was authorised by s 43(1) of the AAT Act; and (d) whether the AAT's order that the Authority pay the Horsfalls' costs was beyond its power. 53 I will deal with these questions one by one.

Did the Tribunal misinterpret rule 114(b) of the Determination? 54 The issue here is whether the AAT misconstrued rule 114(b) by finding that the date upon which it had to be satisfied of the criterion contained in it was the date of the Horsfalls' application rather than the date of the AAT's decision. 55 The Commonwealth submitted that rule 114(b) was expressed in the present tense and the Tribunal should have determined whether it was met on the date of its decision, consistently with the nature of its function as described by Davies J in Jebb v Repatriation Commission (1988) 80 ALR 329 at 333: [T]he general approach of the tribunal has been to regard the administrative decision making process as a continuum and to look upon the tribunal's function as part of that continuum so that, within the limits of a reconsideration of the decision under review, the tribunal considers the applicant's entitlement from the date of application, or other proper commencing date, to the date of the tribunal's decision. 56 The Commonwealth acknowledged that in Shi the High Court had recognised exceptions to the general position but submitted that this case was not an exception. 57 Specifically, the Commonwealth submitted that the AAT was wrong to consider that it was "inherent" in the Authority's power to make recommendations under s 99K of the National Health Act that the AAT be confined to the facts as they were at some particular past time. The Commonwealth submitted that the AAT misunderstood the decision in Friendly Society: it referred only and correctly to provisions that contained "an identified time" and it did not support the Senior Member's general proposition about s 99K. 58 The Commonwealth also submitted that there was no legal basis for the AAT's view that the temporal requirement in rule 201(a) 'flavoured' rule 114(b). It argued that the insertion of the words "on the date of the application" into rule 201(a) had the limited purpose of requiring a pharmacist to secure a legal right to occupy proposed premises before lodging an application with the Authority and did not affect the construction of rule 114(b). 59 The submissions of counsel for the Horsfalls focussed on the words of rule 114, arguing, as I understood them, that they imported a time limitation into the consideration of the application as a whole. In their written submissions they argued that: the words of Item 201…plainly avert to timing. Item 201 is within the General Requirements for all applications, and each of sub regulations (a) - (c) is explicit as to timing. … The plain words of Item 201 mandate consideration of the application in relation to a point in time. The Rules, considered generally, do not suggest otherwise. 60 They specifically challenged the relevance of the fact that rule 114(b) was expressed in the present tense, contending: [T]he distance requirement at Item 114…does not change the essence of the application, as set out in the General Requirements. Distance is a matter of geographical fact. The fact that the distance requirement is not expressed in the past tense is meaningless. 61 In my opinion, the Commonwealth must succeed on this point. The AAT was wrong to conclude that it should consider whether or not rule 114(b) was satisfied by the Horsfall application at the date it was lodged. The Authority, and the AAT standing in its place, was bound to consider whether there was another approved premises within 10 km of the premises from which the Horsfalls proposed to run their pharmacy under the PBS at the date it came to make its decision. 62 My conclusion follows from the language of rule 114, the terms of s 43(1) of the AAT Act and the High Court's decision in Shi. 63 It is not necessary for me to do more than state the main principles that emerge from Shi. First, however, I should briefly set out the relevant facts. 64 Mr Shi was a migration agent whose registration had been cancelled by the Migration Agents Registration Authority (MARA) in July 2003 because it was satisfied that he had not complied with the Code of Conduct (Code) prescribed under the Migration Act 1958 (Cth) (Migration Act) and he was not a person of integrity or was otherwise not a fit and proper person to give immigration assistance. Later it made some other decisions about his registration including a decision that he not be re-registered. MARA found 98 breaches of the Code. Mr Shi applied to the AAT for review of that decision. The AAT found 51 breaches of the Code, all of which had occurred before MARA made its decision. The AAT concluded that - despite the breaches - it was not satisfied that Mr Shi was not a person of integrity or was not otherwise a fit and proper person to give immigration assistance and, accordingly, set aside the cancellation decision and the other decisions under review. Instead, it administered a caution and made certain other orders. In deciding that it was not satisfied that Mr Shi was not a person of integrity etc. it took into account evidence of Mr Shi's conduct between the time MARA cancelled his registration and the time of its decision. MARA successfully appealed to this Court, and its success was replicated (by majority) in the Full Court. Mr Shi obtained special leave to appeal the Full Court's decision and finally prevailed in the High Court. 65 The primary issue the High Court resolved was whether or not the AAT was confined to the facts as they stood at the time of the original decision. The relevant provision of the Migration Act under consideration in Shi was s 303(1). It provided that MARA may cancel or suspend the registration of a registered migration agent or caution him or her "if it becomes satisfied" that (amongst other things) he or she "is not a person of integrity or is otherwise not a fit and proper person to give immigration assistance". 66 The Court held that generally the AAT's function is to review on the merits the original decision-maker's decision using all the material available to it, not just the material before the original decision-maker, and on the basis of the facts as they stand at the time it makes it decision, not at the time of the original decision: Shi at [34]-[38] per Kirby J, [96]-[101] per Hayne and Heydon JJ. It held that this followed from an analysis of the AAT's empowering legislation, the AAT Act, and the functions that legislation conferred on it. 67 As Kirby J observed at [41] the rule of practice is that administrative decision-makers are generally obliged to have regard to the best and most current information available to them when making a decision. Such a rule is "no more than a feature of good public administration". Thus, when the AAT chooses to substitute its own decision for the decision it sets aside, "it would be surprising in the extreme if the substituted decision did not have to conform to such a standard". Further, his Honour noted at [49], it would be "remarkable" if the substituted decision could not take into account evidence of relevant, even critical, supervening events. In the context of the case the Court was considering, they could include factors adverse to the applicant, such as bankruptcy and criminal convictions for offences of dishonesty. 68 However, the Court recognised that the general rule was not of universal application and that the enabling legislation may in fact confine the AAT to the facts, and material that bears on those facts, as they stood at some earlier point in time, such as the date of the original decision. As Hayne and Heydon JJ explained (at [99]): Once it is accepted that the Tribunal is not confined to the record before the primary decision-maker, it follows that, unless there is some statutory basis for confining that further material to such as would bear upon circumstances as they existed at the time of the initial decision, the material before the Tribunal will include information about conduct and events that occurred after the decision under review. If there is any such statutory limitation, it would be found in the legislation which empowered the primary decision-maker to act; there is nothing in the AAT Act which would provide such a limitation. [Emphasis added.] 69 Kirby J expressed a similar view at [44]-[46]. This was the position Downes J took in his dissent in the Full Court: [2007] FCAFC 59 at [35]-[36]. 70 In Shi the High Court held that there was nothing in the Migration Act that fixed a particular time as the point at which a migration agent's fitness to provide assistance was to be assessed and contrasted the provisions of the Act with other legislation, such as certain legislation providing for pension entitlements which contained what it referred to as a "temporal element". 71 Similarly, in the present case, there is no temporal element in rule 114. Thus, there is no textual basis for confining any further material to such as would bear upon circumstances as they existed at the time of the initial decision. 72 Furthermore, like the provision considered in Shi, the statutory test is expressed in the present tense. The question which the Tribunal was to consider on review was "are the proposed premises at least 10 km by the shortest lawful route from the nearest approved premises?" - not were they at the time of the application - and, to use the words of Hayne and Heydon JJ in Shi at [101], this is a question which invites attention to the state of affairs as they exist at the time of the AAT's decision (compare Kirby J at [48], who also relied on the fact that the provision was drafted in the present tense). Just as the circumstances that could affect fitness to practise as a migration agent could be changed by supervening events, so, too, could the status of the proposed premises. The legislation does not permit, let alone require, the Authority to stop recommending applications for approval because one disaffected applicant has put on an application for review. There is no reason why another pharmacist might not seek approval for premises in the same area while the application is pending, which, of course, is what happened in this case. 73 Counsel for the Horsfalls argued that the purpose of rule 114 was to grant approval to rural pharmacies where they satisfy the requirements of the rules and not to meet the Authority's administrative needs. Counsel for the Commonwealth disputed this characterisation. She submitted that the purpose was to reduce the number of pharmacies and control the grant of approvals to supply pharmaceutical benefits from new premises. In my view, the Commonwealth is right. However, the purpose of the rule does not really provide assistance in answering the question posed in this case. Here the language of the relevant statutory provision supports the conclusion that the general principle applies and this is not a case where the review was limited to the particular time in the past when the Authority made its decision or to the state of the evidence at that time. 74 With respect, there is nothing "inherent" in the nature of a decision under s 99K of the National Health Act that would justify a departure from the general rule. The Senior Member's reliance on the remarks of Deputy President Jarvis in Friendly Society was misplaced. That case concerned the operation of rule 201. It had nothing to do with rule 114. The questions in that case related to whether the AAT was satisfied that the relevant premises could be lawfully used to operate a pharmacy at the date of the application. There was an issue in Friendly Society about whether the date of the application was the date the Authority received the application or a later date when information supporting the application was submitted. There is an express temporal element to rule 201. For this reason it is entirely unsurprising that the Authority took a different position in that case. I do not see how the time limit in rule 201 "flavours" the question, so as to import a time limit into rule 114. The omission of the words "at the date of the application" from rule 114 is a significant one. If the rules were intended to work together one would expect to see some connecting words. The Determination was amended in 2007 to insert words of temporal limitation into paragraphs (a) and (b) of rule 201 but not into rule 114. 75 Whilst it is true, as the Senior Member observed, that "geography usually does not change", the distance between proposed premises and approved premises may very well change with new approvals. In any event, the Senior Member's observation seems to me to be irrelevant. 76 I do not find it "bizarre" that there are different time limits in respect of different criteria an application has to fulfil. In fact, this is all entirely understandable. The amendments in 2007 to rule 201 reflect a specific concern that pharmacists secure premises before lodging an application. One can imagine a number of reasons why this would be so, including the administrative problems that might arise if a pharmacist could apply and have the application approved without any certainty she or he had premises from which to carry on business but could nonetheless block an application from another pharmacist who wished to set up business in the same area and who had secured premises to enable her or him to do so. 77 By contrast, the concern which underlies rule 114 is different. This condition, in combination with the expanded definition of "approved premises" in s 6(2) of the Determination, is aimed at preventing the Authority from making two recommendations to the Secretary that relate to premises within 10 km of each other, one of which the Secretary must reject. Take the following situation. Two pharmacists lodge applications (A and B) a few days apart in respect of two sets of premises in the same country town. On the dates the applications are made both sets of premises are at least 10 km by the shortest lawful access route from the nearest approved premises. The Authority considers the applications in the order in which they were lodged. It is satisfied that the first application (A) meets the statutory criteria and recommends it be approved. The Authority then comes to consider the second application (B). The Authority would have no option but to recommend that it not be approved as it does not meet the requirement in rule 114(b) because the first application has already been recommended for approval and its premises are therefore deemed to be approved premises under section 8 of the Determination. On the reasoning of the Horsfalls, if the unsuccessful applicant appealed to the AAT, the AAT would have to disregard the fact that the first application had been recommended for approval because the proper point in time for it to consider compliance with the rule was the date the second application was lodged (when neither application had been recommended for approval). It cannot have been the intention of the legislation that the AAT should consider whether the second application complied with rule 114(b) as at the date it was lodged and disregard the later approval given to the first application. 78 Here, of course, the Horsfalls were first in time, having lodged their application before Ms Carter did. Intuitively it may seem unfair that they miss out when the Authority has since conceded they had a legal right to occupy the premises. But this intuitive reaction cannot dictate the outcome. Moreover, the ACPA Application Handbook sets our the practicalities of making applications and points out that: [a] valid application must include… evidence that the applicant has a legal right to occupy the proposed premises It is important to ensure that any information that is provided in relation to an application is accurate and up-to-date…. In providing evidence, it is the applicant's responsibility to summarise the material, draw conclusions from the material and clearly identify how the relevant requirements of the pharmacy location rules are met by the evidence…. 79 The Determination itself offers guidance to applicants about the sort of evidence that would satisfy the Authority of their legal right to occupy premises. The examples given are a signed lease and a rates notice. The Horsfalls provided neither to the Authority before the primary decision was made. 80 I well understand that the Horsfalls would feel aggrieved that the Authority did not follow up the letter from Trivett Keating to see whether they had accepted the offer of a lease before it considered the Carter application. It is true, as counsel for the Horsfalls pointed out, that the ACPA Application Handbook provides that: [i]n considering an application, the ACPA might find that certain information needs to be clarified, or that additional information is necessary. In this case, the ACPA will defer its consideration until a subsequent meeting and request, in writing, that the applicant or another party provide the requested information by a specified date. 81 However, this provision does not assist the Horsfalls' case in this appeal. Even if the Authority could generally be said to be obliged to follow its own guidelines, this provision could not give rise to an expectation that the Authority would follow up information submitted by an applicant where the Authority did not first find that there was a need for clarification or additional information (of which there is no evidence here). It might be argued that an applicant in these circumstances would have a legitimate expectation that the Authority would defer considering her or his application, but there is no basis in this passage for concluding there is a legitimate expectation that it would defer considering another application that might be submitted in the meantime. 82 Counsel for the Horsfalls also argued that the distance requirement was not an issue before the original decision-maker (the Authority) because the Carter application had not then been recommended and therefore it could not be an issue in the AAT. They relied a passage in the judgment of Kiefel J in Shi at [142] (also cited by the Senior Member) in which her Honour said that, in considering what is the right decision, the AAT has to address the same question the original decision-maker was required to address. 83 The problem with this argument is that the proceeding before the AAT is not an appeal in the strict sense or even a rehearing. 84 Section 43(1) provides: For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision …. 85 This means that an application for review to the AAT is a new hearing. The Tribunal stands in the shoes of the original decision-maker. The general principle is well-established. As Bowen CJ and Deane J said in Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409 at 419: The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal. [Emphasis added.] 86 As Smithers J said in the same decision at 429-430, the AAT is not performing a supervisory role; it is the actual decision it is authorised to review for the purpose of making the correct or preferable decision, not the reasons for it. Regardless of whether the AAT was limited to determining the dispute on the facts presented to it or the facts as they were at the time of the original decision, the question the AAT was required to address was whether the Horsfalls met the statutory criteria for approval. They included rule 114. That is also clear from the Authority's s 37 statement. 87 The Commonwealth was right to contend that the effect of rule 114 is that the Authority's approval of the Carter application spelled doom for the Horsfall application. The Horsfalls' counsel described this situation as "Kafkaesque". I disagree. The reason the Horsfalls have found themselves in this position is, at least in part, of their own making. Had they submitted the necessary documentation in the first place to prove their legal right to occupy the premises, they would have trumped Ms Carter. To protect the status quo it was open to them to seek an injunction to restrain the Secretary from considering the Carter application before their appeal was finalised. They acknowledged their right to do so in correspondence with the Secretary. As counsel for the Commonwealth pointed out in her submissions, Kafka did not write about citizens who decide not to pursue available remedies. 88 In the result, therefore, the text and underlying purpose of rule 114(b) point decisively to the conclusion that the Tribunal must consider whether or not it is satisfied the criterion in the rule is made out as at the date of its own decision and not at the time the application was lodged.

Did the AAT misinterpret the remarks of Kirby J in Shi? 89 In full, this ground of appeal reads: Did the Tribunal err by interpreting Shi v Migration Agents Registration Authority (2008) 235 CLR 236 (Shi) as authority for the proposition that, in cases where the Tribunal is required to take into account events which alter an applicant's position, the Tribunal is required to disregard certain categories of events. 90 The Commonwealth fleshed out its position as follows: The Tribunal erred in finding that it was not bound by Shi to take into account circumstantial changes adverse to an applicant that occurred between the date of the reviewable decision and the date of the Tribunal's decision unless the change was brought about by the Respondent's own action. 91 The Commonwealth's submission, in effect, was that the Senior Member incorrectly interpreted Kirby J's remarks and, in any event, they did not form part of the ratio decidendi of Shi. Counsel for the Horsfalls defended the decision, submitting that the AAT had correctly exercised a discretion. They also argued that the Senior Member's decision was supported by the reasons given in Shi by Kiefel J, with whom on this point Crennan J agreed. 92 The Senior Member's reasons on this aspect are not entirely clear. But I think on a fair reading of them she considered that, even when the AAT is required to make a decision on review based on the facts as they are at the date of its decision, it need not take into account all changes in an applicant's circumstances since the date of the original decision, even if otherwise relevant to its decision, and has a discretion whether or not to disregard them, depending on the nature of the circumstances. 93 I doubt that the Commonwealth is correct to assert (as it did in its notice of appeal) that the Senior Member thought she was in fact obliged to disregard certain circumstances. But on either view, the Tribunal fell into error. 94 I accept the Commonwealth's submission that the Senior Member misinterpreted what Kirby J was saying. The passage quoted by the Senior Member must be read in context. In context his Honour was explaining that, as circumstances may change between the time of the original decision and the time of the review, the proper interpretation of the relevant statutory provision in that case was that the AAT had to have regard to events that superseded the original decision. He most certainly was not saying that the AAT had a discretion to disregard otherwise relevant material. 95 Neither do I accept that Kiefel J supported the Horsfalls' submission that there was a discretion to disregard otherwise relevant facts arising after the original decision was made. The relevant passage in her Honour's judgment appears at [143]: Where the decision made contains no temporal element, evidence of matters occurring after the original decision may be taken into account by the Tribunal in the process of informing itself. Cases which state that the Tribunal is not limited to the evidence before the original decision maker, or available to that person, are to be understood in this light. It is otherwise where the review to be conducted by the Tribunal is limited to deciding the question by reference to a particular point in time. (Emphasis added) 96 In my opinion this submission fundamentally misinterprets the decision in Shi. The High Court distinguished cases where the AAT should have regard to material bearing on the facts as they stand at the time of its decision (said to be the general position) from cases where it should only have regard to material that bears on the facts as they stand at a particular point in time before its decision. There is no basis in the judgments in Shi, despite Kiefel J's use of the use of the word "may" in the passage quoted above, for thinking that the High Court was also identifying the existence of a discretion in the Tribunal which entitled it to have regard to certain relevant circumstances arising after the original decision but not others. 97 In my view her Honour's use of the word "may" was not intended to connote the existence of a discretion. Rather, her Honour was using the word "may" to indicate (correctly) that, while the AAT may have regard to material bearing on events occurring after the date of the original decision, it obviously only does so subject to whether that material is relevant to the question that the original decision maker, and the AAT in its place, must ask itself. This is made clear when the passage relied on is read with her Honour's remarks in the preceding paragraph. There she emphasised that: [i]dentifying the question raised by the statute for decision will usually determine the facts which may be taken into account in connection with the decision. The issue is then one of relevance, determined by reference to the elements in the question, or questions, necessary to be addressed in reaching a decision. 98 This points to what is the fundamental error here. The alternative premise upon which this part of the Senior Member's reasons is based is that she was wrong to conclude that there was a temporal element in rule 114 and any change of circumstances after that date was irrelevant. The effect of what she was saying at this point in her decision is that the AAT had a discretion (or might be obliged) to disregard material that was otherwise relevant to the questions it is required by the legislation to ask. The proposition only has to be put in these terms to expose the error. The AAT does not have a discretion to disregard otherwise relevant material. Indeed, the location of the Carter pharmacy was a matter the AAT (standing in the shoes of the Authority) was bound to consider. Accordingly, a failure to have regard to it is an error of law: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24. 99 Nothing said in any of the judgments in Shi supports the alternative conclusion. 100 Thus, the Commonwealth succeeds on this ground, too.

Was the AAT's order authorised by s 43(1) of the AAT Act? 101 There are two questions here: First, did the AAT err in remitting the decision to the Authority in circumstances in which the AAT was able to make a decision in substitution for the reviewable decision? Secondly, did the AAT err in remitting the decision to the Authority with a direction determining the outcome of the reconsideration, i.e. a direction that the Authority approve the application? 102 The Senior Member's powers were set out in s 43(1) of the AAT Act. Once she had decided that the Authority's decision should be set aside, she had only two options under subsection (1)(c): to make her own decision in substitution for that of the Authority or to remit the matter for reconsideration in accordance with any directions or recommendations she wished to make. 103 Here, there is force in the appellant's submission that the Senior Member purported to do both and impermissibly melded the powers conferred by s 43(1)(c) of the AAT Act: c.f. Civil Aviation Safety Authority v Allan [2001] FCA 1064; (2001) 114 FCR 14 at [18] per Moore J. In any case I cannot see that there was any useful purpose to be served by remitting the matter to the Authority. 104 However, as the AAT's decision must be set aside and the Authority's decision affirmed, it is unnecessary for me to answer either of the questions raised by this ground of appeal.

Should the AAT have made a costs order? 105 It is common ground that the Tribunal had no power to award costs. Accordingly, ground 2.6 of the appeal must succeed and the order in the Horsfalls' favour for costs should be set aside.

Conclusion 106 The appeal is allowed and the decision of the AAT set aside. 107 The Commonwealth asked the Court to make a finding of fact pursuant to s 44(7) of the AAT Act that "at the relevant time the nearest approved premises for the purposes of rule 114(b) [were] closer [than] 10km to the [Horsfalls'] proposed premises". Such a finding would not be inconsistent with findings of fact made by the AAT. To the extent that it is necessary for me to do so, it having been implicit in the AAT's decision, it is certainly convenient for the Court to make such a finding taking into account the considerations in s 44(7)(b)(i)-(vii). As there was never an issue about the proximity of the Carter premises to the Horsfalls' proposed premises, I make that finding. 108 As all relevant facts are undisputed and the question concerns their legal consequences, the proper order pursuant to s 44(4) of the AAT Act is that the Authority's decision is affirmed. See, e.g. Loughnan (Principal Registrar, Family Court of Australia) v Altman (1992) 111 ALR 445 and Federal Commissioner of Taxation (1990) 89 ALR 137 at 160. 109 The Horsfalls should pay the Commonwealth's costs. The Secretary made no application for costs and I therefore make no separate order with respect to the Secretary's costs. I certify that the preceding one hundred and nine (109) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.