Consideration
75 Mr Darnell accepted the primary judge's approach set out at [80] of Stonehealth (No 4) (see [51] above). That is he accepted that in order to succeed before the primary judge he had to prove either that:
(1) Stonehealth itself or in conjunction with Coles Developments or Stonehealth's consultants, Ann Mihulka & Associates, knowingly furnished the Authority with false or misleading information and that the information so furnished was material in the sense that it induced or affected the Authority's decision; or
(2) alternatively, that those matters would also be a sufficient basis for quashing the Authority's decision if the existence of a supermarket which had commenced trading on 20 March 2020 was a sham.
Mr Darnell also accepted that he bore the onus of proving the alleged fraud on the balance of probabilities. However, Mr Darnell contended that the primary judge erred in his application of the facts to the questions he identified.
76 The question of whether the Authority (or other relevant decision maker for the purposes of approval in relation to pharmaceutical benefits) had been misled such that the relevant decision was vitiated by fraud has been considered previously.
77 In Yu v Minister for Health (2013) 216 FCR 168 Jessup J considered whether there had been bad faith on the part of the applicant in relation to the transaction based on which the Minister for Health came to exercise his power under s 90A of the NH Act. That section empowers the Minister to substitute a decision of the Secretary under s 90 rejecting an application for approval to supply pharmaceutical benefits at particular premises. The relevant facts, which are somewhat complicated, were helpfully summarised in Stonehealth (No 4) at [72] as follows:
Yu was a case where a pharmacist, faced with the prospect, as a result of a forthcoming change in the then applicable rules made by the Minister under the [NH Act] applicable to recommendations for the approval of premises, of a second approval permitting a competitor pharmacy being established in the small country town where he had hitherto enjoyed a monopoly, devised, in conjunction with his solicitor, a blocking strategy. He signified to the Secretary an intention to cancel his existing approval in respect of particular premises in that country town and applied for approval under s 90 in respect of other premises, in effect a relocation application. He then later separately applied under s 90 for the second approval, and cancelled the relocation application.
78 At [49] Jessup J summarised the evidence given by Mr Yu:
The applicant was cross-examined about his intentions with respect to the relocation application of 17 October 2011, and he frankly said that it was his attempt, devised with the assistance of his solicitor, to navigate his way through the regulatory issues associated with the introduction of the 2011 Rules. The point to which he was navigating, of course, was the achievement of a second pharmacy approval for himself in Kilmore, and the exclusion, to the extent possible, of other pharmacists from securing that approval. The effect of his evidence was that the 2006 Rules and the 2011 Rules, and the transitional provisions associated with the commencement of the latter, gave him the legal right to act as he did, and he proceeded in what he perceived to be his own best interests. In submissions made on his behalf, his counsel accepted that there was a sense in which the course followed by the applicant might be regarded as a sharp practice, but it would be going too far, he submitted, to describe it as involving bad faith.
79 At [51] of Yu Jessup J made the following findings:
Central to the fourth respondents' bad faith point was the proposition that the applicant never intended to cease carrying on business as a pharmacist at 20 Sydney Street, and that his request for cancellation of the approval with respect to those premises was, therefore, a sham. In the light of the evidence given by the applicant himself, the first part of this proposition must be accepted, but the application for cancellation of the approval at 20 Sydney Street was a valid act done under the 2006 Rules, and in that sense, could not be described as a sham. It was a stratagem and, perhaps, a clever tactic. But it is not at all clear how the notion of "bad faith" imposed upon the applicant an obligation, unstated in the NH Act and the 2006 Rules, to refrain from making such applications as were in his own best interests. It must be remembered that it was not he who was exercising a statutory power or making a decision under an enactment. Neither is it suggested that he had any direct dealings with the fourth respondents in the context of which good faith might have been required. In the circumstances, and although I have considerable sympathy for the position occupied by the fourth respondents, I do not think that the notion of bad faith is apposite to circumstances in which a pharmacist requests a cancellation under s 98 of the NH Act with the unrevealed intention of withdrawing that request at a later, convenient, date.
80 In Hope the applicants sought judicial review of the decision to recommend approval for the third respondent to supply pharmaceutical benefits from certain premises on the basis that the approval recommendation decision was vitiated by the third respondent's fraud. The applicant alleged that the third respondent had misled the Authority by omitting to disclose certain facts or to make reference to its strategy. In considering whether that was so at [64]-[66] Kerr J said:
[64] Given the significance of the Rules in providing not only for the public interest in the availability of pharmaceutical benefits to the public but also for a limited and bounded protection of the commercial interests of existing providers, there must be some point at which the entitlement of an applicant to pursue his or her own interests will pass beyond what was, in Yu, accepted to be permissible sharp practice.
[65] In my opinion that point is reached and the dividing line is crossed if an applicant knowingly provides information in support of their application that is materially false or misleading with respect to any of the criteria mandated by the Rules relevantly required to exist if the Authority is to recommend approval - and the Authority is disabled because of its reliance thereon from fulfilling its function.
[66] It is implicit in the Rules that an applicant must provide factually accurate information to the Secretary and the Authority.
81 On appeal from the decision in Hope a Full Court of this Court (Griffiths, Mortimer and Bromwich JJ) found that the appellant had been denied procedural fairness in the conduct of the proceeding before the primary judge because the case had been determined on a basis that was not pleaded or argued. Despite that, the Full Court declined to exercise its discretion to grant relief and set aside the primary judge's orders because it would be futile to do so: see Slopen Main Pty Ltd v Hope (2017) 256 FCR 156 at [54]-[57]. In considering the issue for resolution before them, their Honours set out the primary judge's process of reasoning in reaching his conclusion which, they noted, was not challenged and on which no appellate adjudication was called for. At [34] and [36] their Honours relevantly said:
34. … His Honour:
(1) set out what was considered to be the overarching purpose of the Determination, which should prevail over the interests of an applicant for approval;
(2) concluded that the provision of false or materially misleading information may be found to disable the Authority from fulfilling its statutory duty, considering and distinguishing Yu v Minister for Health (No 2) (2013) 216 FCR 188 (Yu) upon the basis that Jessup J's reasoning and conclusion in that case did not preclude a different outcome if false information was provided, rather than only the omission of information that could have been, but was not, provided; and
(3) observed that there was an obligation to provide factually accurate information in an application for approval.
…
36. The primary judge's reasoning above may be accepted, at least for present purposes.
82 The primary judge also had regard to these authorities. Neither them nor his Honour's application of them is challenged by Mr Darnell. Rather, Mr Darnell challenges the findings of fact made by the primary judge and inferences drawn from those facts.
83 Turning to the facts, we start with the evidence relied on by Mr Darnell to establish that there was a plan in place from at least January 2020 for Coles Flagstone to open on 20 March 2020 for the purpose of assisting Stonehealth with its application pursuant to s 90 of the NH Act.
84 The first contact between Mr Bakshi on behalf of Stonehealth and Mr Morgan was by email dated 18 September 2019. Mr Bakshi introduced himself noting that he would be in charge of the pharmacy approval process at the Flagstone Village Shopping Centre. He continued:
It would be great if we could discuss certain matters around the PBS approval strategy. First week or second week of October would be ideal but happy to work around your schedule.
85 By email of the same date Mr Morgan agreed to meet with Mr Bakshi the following day, among other things, "to discuss the PBS license strategy".
86 On 19 September 2019 Mr Bakshi sent an email to Mr Morgan, among others, with the subject "Notes for Today" (19 September Email) which provided (as written):
We will discuss more in person but below is a basic run down.
1. We will Apply under rule 130 for a new approval number.
What is the basic principles of this rule?
- No PBS approved Pharmacy for 1,5km - Which we have.
- Supermarket with Gross leasable area of 2500m2 (which means we dont need a doctor ) We will need floor plans from Coles - showing docks etc - but we should easily have 2500m2 for the Coles Supermarket.
- The Supermarket is within 500m of the Pharmacy site. This is the tricky part - there is a non pbs Pharmacy across the road - who is also waiting for Coles to be built and is aiming to apply under the same rule - as they also within 500m of the Coles. Who get the approval in first..gets in. Many applications are lodged at 12.01am!!
How do we overcome this hurdle?
1. We need a "soft highly confidential opening" a few days before the real opening.
2. We need access into the Coles - a few days before the opening - to show stock on the shelves and counter photos etc .
3. We need a docket., eg just chewing gum invoice ..showing the store was trading.
4. A Stat dec from the Coles Manager stating the Coles was open on "this" date would also greatly help.
5. Details Plans of the Coles - showing Leasable area and council plans etc. see below.
We have hired a specialist to undertake this approval as it is a complicated one. The specialist has over 20 years experience and her sole role is Pharmacy Approvals.
You must be reading this and thinking - are these crazy Pharmacists for real???
Sadly yes - this is what we do each day to get our approvals!
(Emphasis in original).
By email of the same date Mr Morgan responded to Mr Bakshi saying:
Navin, no you are not crazy and the pharmacy in the Coles centre does benefit from having a pharmacy possibly as much as you want to be in a centre with a supermarket. We can run through your list today, these are all what we were expecting and firm up the strategy further.
Coles plan attached as a start.
87 Mr Morgan was subpoenaed by Mr Darnell to give evidence at the trial and examined by counsel for Mr Darnell, Mr Flaherty. He gave the following evidence about the 19 September Email:
Mr Flaherty: And you've read all of this email?
Mr Morgan: Yes. Yes.
Mr Flaherty: Do you think there was anything particular about this that stood out?
Mr Morgan: Not really. It was just, as I say - that's what I would sort of class as being the strategy from their part was what was needed to - to achieve a licence, so they were just saying what they believed they needed to do to achieve a licence, so - -
Mr Flaherty: And when you say "achieve a licence", you say - what do you mean by strategy? What did you consider the strategy to be?
Mr Morgan: Well, strategy as in what the steps were needed for them to - to be able to get a licence, so…
Mr Flaherty: And what were those steps?
Mr Morgan: Well, my understanding of those steps that he had set out, a lot of those things around the supermarket - he needed a supermarket of 2500 square metres; the supermarket needed to be within 500 metres of the - the pharmacy. So he was asking if we could look at doing a soft opening the days before. And then what they would need to provide to the pharmacy board or whoever it was that issues - issues the licence.
Mr Flaherty: Did that concern you, that this was what was required?
Mr Morgan: No. We - I help tenants with licencing (sic) - well, like, you know, I've got one in Andergrove at the moment, which is a relocation, and they've asked whether they could open on the Friday. They've - we've agreed to open on the Friday for the pharmacy, but the supermarket won't open. So it's just, again, trying to help a tenant achieve a licence.
88 As foreshadowed in the 19 September Email, Mr Morgan and Mr Bakshi met. Mr Morgan gave the following evidence about that meeting:
Mr Flaherty: And would you say that at the meeting, you were in agreement with this plan?
Mr Morgan: When you say "in agreement" - we would help where we could help. It was made quite clear that - and just to understand, too - so I work on the shopping centre side of things, so I deal with the shopping centre. Coles Supermarkets and the operations of Coles Supermarkets are a tenant for ourselves, so I would rely on supermarkets agreeing to an earlier opening or a soft opening. So yeah, look, I had no problems working with Navin on trying to see if the supermarket would open earlier, so - - -
Mr Flaherty: And did you have any problems with it being highly confidential?
Mr Morgan: Sorry?
Mr Flaherty: Did you have any problems with it being highly confidential, as described by Mr Bakshi?
Mr Morgan: No, not really. They're a tenant of ourselves and if that's what they were asking, then that's what they were looking to do to try and achieve their licence, I - yeah, we're happy to work - I was happy to work with them.
89 Between 7 and 9 December 2019, Mr Bakshi exchanged emails with Samantha Berry in relation to a proposed meeting to take place at the Flagstone Village Shopping Centre. Although not clear, given her email address, Ms Berry did not appear to work for either Coles Developments or Coles Supermarkets. In response to an inquiry from Mr Bakshi, Ms Berry confirmed that Mr Morgan would be at the meeting. In the same email, Ms Berry queried whether the meeting should take place in a meeting room or a nearby coffee shop. Mr Bakshi informed Ms Berry that he, Mr Morgan and, it seems, Ms Berry, would need to "discuss the approval process in private", and that "a room would be best".
90 On 21 January 2020, Mr Morgan sent an email to Mr Bakshi in which he wrote:
Navin, as per your wishes we are trying to pull the opening forward a week, if you can work towards the night before the 21st March to have your tenancy ready. We will confirm the date in the near future.
91 On 24 January 2020 at 7.18 am, Mr Bakshi sent Mr Morgan a list of what he described as the "PBS meeting dates" which was a list of the dates on which the Authority was to hold its meetings and the dates by which to lodge applications in order to be considered at a particular meeting. Mr Bakshi queried with Mr Morgan whether they "could look at a coles opening slightly sooner then expected" (sic) and whether they could make the "March 10 Cut-off" so that any application lodged by Stonehealth could be considered at the Authority's meeting scheduled to take place on 17 April 2020. Mr Bakshi said (as written):
If we Miss March 9 - then we get pushed out to May 22 to get PBS. Each day without PBS would cost us vital customers which we could have locked in to our Pharmacy before the other complex opens.
We really wish to action this PBS approval aggressively and leave nothing to chance.
92 In response, by email sent on 24 January at 8.16 am, Mr Morgan first queried whether Mr Bakshi was asking if they would need to open on the night of 9 March, a matter which he said he could discuss internally but which he did not believe they could achieve. He then noted that the change to 20 March 2020, which he described as a "soft opening the night prior", had just been approved and "recruitment, marketing etc" had started. It does not appear, based on the evidence, that any steps were taken to open Coles Flagstone on the proposed earlier date.
93 By email sent on 24 January 2020 at 8.30 am, Mr Bakshi then made the following inquiry:
How many days before opening do the IT systems go in? Lets say a store was going to open Tomorrow 25/01/2020 - 1 am guessing all the stock (groceries) - and computer systems are in a week or 2 prior and tested?
Tills etc and docket printers?
94 By email dated 24 January 2020 also timed at 8.30 am Mr Morgan responded to Mr Bakshi's inquiry in the following terms (as written):
Navin, the IT and registers should be in mid Feb but I am not sure if they can put sales through the system as it more about setting up all of the system including pricing etc which I would think is not loaded into the system until the store is ready to open. I can ask but I would think they can't print a ticket until about a week from opening.
Kenneth, at Flagstone we are trying to help the pharmacy in our centre get a pharmacy licence before the pharmacy across the road. This is triggered by the supermarket trading. How early could we put a sale through the registers?
Kenneth Clark, who we assume is the Kenneth referred to in Mr Morgan's email, was also an addressee of Mr Morgan's email.
95 Once again there was no evidence that this inquiry went any further. However, when examined, Mr Morgan was asked questions about Mr Bakshi's request. He gave the following evidence:
Mr Flaherty: Did you know why he wanted a ticket?
Mr Morgan: No. Well, I would - no. I don't, really. I would say - I don't - again, based off the information from our first meeting and those various bits and pieces that he was asking for, that he was looking to see whether it was possible to print a ticket before the opening. But - so - but - - -
Mr Flaherty: And why - and did it cross your mind why he would want a ticket before the opening?
Mr Morgan: Well, I would say he was trying to look to see whether he could include that in his application. Again, no. I don't know. That's not - it wasn't - - -
Mr Flaherty: And did you know why he would want to include a ticket before the opening in his application? There had - did Mr Bakshi discuss that with you?
Mr Morgan: No. As I say, the list of criteria for what he needed was pretty much - I don't set what's required and what's not required, and I don't really know what's required and not required apart from what he had asked us - what we could do.
…
Mr Flaherty: I will take you to the email that you sent at page 59. As a matter of fairness, you say this is triggered by the supermarket trading?
Mr Morgan: Yes. And that was my mistake, yes.
Mr Flaherty: And how early can we put a sale through the registers?
Mr Morgan: Yes.
Mr Flaherty: So you were aware that it was to generate a fake sale that could be relied upon to demonstrate trading?
Mr Morgan: No. I wouldn't say it's a fake sale. It's how soon you could print a ticket of which my understanding is you can print a ticket a week or so out. I don't - like, I can't tell you what he needed it for. I don't - -
Mr Flaherty: You say in your answer, don't you, Mr Morgan? It's to help the pharmacy out?
Mr Morgan: I'm saying we're trying to help the pharmacy in our centre to get a pharmacy license before the pharmacy across the road. This is triggered by the supermarket trading, how could we put a sale through the register. And it's just a question mark. It's not - I'm not asking them to do it, I'm just asking what's possible. All I'm doing in there from what I was doing is just asking what Navin had asked of me, what's possible and what's not possible.
96 On 24 February 2020, Mr Bakshi emailed a photograph of shelving which had been installed that day, we assume in the pharmacy, to, among others, Mr Morgan and noted "[a]ll on track". Mr Morgan responded informing Mr Bakshi, among other things, that the Coles Flagstone store manager was on site that week and that he would "run through with him in more detail the requirements [they] spoke of for opening".
97 By email dated 1 March 2020, which appears to have been sent in anticipation of a meeting planned to take place the following Wednesday and in response to an express request on the part of Mr Bakshi to have the Coles Flagstone store manager present at that meeting, Mr Morgan wrote:
Navin, I can introduce you to the store manager if he is out there and we can try to speak with him if he does not have other meetings. He is aware of what is required and will work with us on the requirements on the Friday.
98 On Thursday, 5 March 2020, Mr Bakshi sent an email to Ann Mihulka and Mr Morgan suggesting a change to an advertisement for the "opening celebration weekend" on 21 and 22 March for the Flagstone Village Shopping Centre. In response Ms Mihulka informed Mr Bakshi that she believed that "Coles know what they are doing". On 6 March 2020, Mr Morgan then sent an email addressed only to Ms Mihulka in which he wrote:
Ann, thanks, he is all over the place but we will get there. For info all on track to open the doors on the Friday night 6pm to 9pm.
99 On 17 March 2020, Mr Mihulka sent Mr Morgan a "word doc" for him "to put on letterhead and sign". The attached document was a draft of what became the 17 March Letter included in the Stonehealth Application. It seems that on 18 March 2020 Mr Mihulka sent Mr Morgan a further copy of the document that became the 17 March Letter together with an alternate version of the draft to be used in the event that the sublease to Stonehealth was not finalised in time. On 19 March 2020, copies of the two versions of the draft provided by Mr Mihulka both bearing the date 17 March 2020 (which was the date included in the drafts) on Coles Developments' letterhead signed by Mr Morgan were returned to Mr Mihulka.
100 As we have already observed, the Stonehealth Application was lodged on 20 March 2020 at approximately 12.14 am. We pause to note that based on the evidence as recited to this point the primary judge found ([at 94]) that if Mr Bakshi's plan as formulated in the 19 September Email had been implemented it might "have crossed the line" in the way described in Hope at [65]. However, his Honour went on to find (at [104]-[106]) that the planned opening for Friday, 20 March 2020 was not "cosmetic"; that a site meeting took place at Flagstone Village Shopping Centre on 18 March 2020 to discuss aspects of the planned opening on 20 March 2020; and that, at the time Mr Morgan signed it, the contents of the 17 March Letter were accurate. His Honour found that it accorded with the day of opening that Mr Morgan, and therefore Coles Developments, had in mind as at 6 March 2020 as evidenced by his email of that date, and which remained as at 17 and 18 March 2020.
101 These findings were open on the evidence and are not the subject of challenge save insofar as Mr Darnell contends that the plan evidences that the opening of Coles Flagstone was a sham, a matter which we address below.
102 As set out at [22]-[28] above, on 11 November 2020 Mr Morgan provided the November Letter to the Authority and on 9 December 2020, Ann Mihulka & Associates, in response to a request from the Authority, provided further material to it.
103 In the 17 June Letter which was included in Ann Mihulka & Associates' letter dated 9 December 2020 (see [28] above) Mr Morgan noted that the reason for opening Coles Flagstone on 20 March 2020 was because of the rapidly evolving situation brought on by the COVID-19 pandemic. Mr Darnell submitted that this was the first time the COVID-19 pandemic had been stated to be the reason for the early opening and that it was inconsistent with the settled plan which emerged from the documentary evidence set out above.
104 In his examination in chief Mr Morgan was asked about the stated reason in the 17 June Letter for opening Coles Flagstone on 20 March 2020. He gave the following evidence:
Mr Flaherty: You would consider that that document would have conveyed to somebody that - the ordinary reader that the decision to open on 20 March was because of COVID?
Mr Morgan: Related to COVID, yes.
Mr Flaherty: And is that your evidence: that you believe that the decision to open on 20 March was due to COVID-19?
Mr Morgan: Managing COVID-19, yes.
…
Mr Flaherty: An acceptance that there was a requirement for the soft opening - that you say in your evidence before the court today - is that the reason that this store opened on 20 March was because of COVID-19?
Mr Morgan: In managing COVID-19, yes, how we would operate the centre. Yes.
…
Mr Flaherty: And when you say the executive decision, was that your decision or somebody else's?
Mr Morgan: No. So that's my decision with the store manager on the day around how we were going to deal with COVID, which was just - yes, causing a huge amount of worry and concern and grief. Yes.
Mr Flaherty: On 20 March, it was?
Mr Morgan: Yes, it was. Yes. Yes.
Mr Flaherty: Okay. And so what was the decision? It was between you and who?
Mr Morgan: And the store manager. So the store manager had the okay from a regional manager. It was back to him to make the decision whether he would open or not open, and as for the centre, that sat with me, and, again, were just trying to manage how we were going to queue people, how we were going to do quite a few things in that centre when - when it actually opened. And the fear was on the Monday that - and we had the police - we had all sorts of people lined up for - - -
Mr Flaherty: Sorry. On the Monday? I didn't catch - - -?
Mr Morgan: For - for the - for the Saturday opening.
...
Mr Flaherty: You accept that, yes, but just on this point, just so I can get some clarification, it was your decision with the store manager, was it?
Mr Morgan: Yes.
Mr Flaherty: And what was that decision?
Mr Morgan: The decision was to try and look at opening at - for a couple of hours to basically see how things would - how we would manage COVID, like, things that we looked at during the day - whether they would work or not work. At the time there were things such as, you know, people talking about a 1.5 metre rule, a two-metre rule, did we have the corralling side by side and where we're going to have people touching side by side or - you know, was the queue going to end up that long that it was - we weren't going to manage that, how do people get to the toilets. How do people access other tenancies within the tenancy so - - -
…
Mr Flaherty: And when do you say was the executive decision made?
Mr Morgan: Within a few hours of when - like they had the ability to open so I asked the question probably a few hours prior to that - so on that day.
Mr Flaherty: On the 20th a decision - - -?
Mr Morgan: Yes, yes.
Mr Flaherty: The executive decision was made on - - -?
Mr Morgan: Yes.
Mr Flaherty: - - - the 20th?
Mr Morgan: Yes, yes.
Mr Flaherty: Okay. And it was a decision between yourself and the store manager?
Mr Morgan: Yes, understanding that I looked after the centre. The store manager is responsible as a tenant, like if he was in agreeance to open then, yes, he would open, but yes, with myself and the store manager.
Mr Flaherty: And so it was unrelated to anything to do with Mr Bakshi - the decision?
Mr Morgan: That decision, yes. So I will say - so part of the decision with the COVID was that Coles were looking, actually, and that put a bit of quash on that opening on the Friday, again, because of the concerns of, you know, things not being set up. We also said on the Friday, if we did open - or the proviso was put on the operators is if we did open - if the store managers - if they did open and it got onto Facebook and it got out of control so we had the ability to shut the doors. So - so really all we were looking to do was try and test how things would work on that night.
105 Mr Morgan did not agree that the draft of the 17 June Letter provided to him by Mr Mihulka was the first mention of COVID-19 and did not agree that he "went along" with the suggestion that the opening was associated with COVID-19. While Mr Morgan agreed that there had been a plan for some time to open on 20 March 2020, he said that ultimately the decision to open was made by him together with the Coles Flagstone store manager. Mr Morgan had authority to make the decision to open the shopping centre while the store manager was authorised to make the decision to open Coles Flagstone.
106 Mr Morgan gave some further evidence about the 17 June Letter and the decision to open on 20 March 2020:
Mr Flaherty: Two hours beforehand is the basis for you to provide the letter dated 17 June 2020?
Mr Morgan: There was a lot that went on during the days, the day, and the days before that with Coles and, again, going backwards and forwards as to whether they would open, whether the issue would be that opening the night before would cause problems with, more problems with panic buying and so on. So at one point in time in those few days, they were looking at not opening to then getting back to a point where I asked if they could open, to help - - -
Mr Flaherty: And Mr Morgan, was that by email communication?
Mr Morgan: No. It wasn't via email communication.
Mr Flaherty: But not a single email to a single staff member altering (sic) them to the potential that they may have to be in the store?
Mr Morgan: No. There, there was no communication except for discussion?
Mr Flaherty: Not even asking for someone to work as a - on the till, someone to work as a customer service officer and take the sales?
Mr Morgan: Yes. So there was discussion around it. No communications as far as, it was just verbal talking about it - - -
107 Mr Morgan did not accept that the 17 June Letter and any subsequent material provided in support of the Stonehealth Application that referred to COVID-19 was false. Nor did he agree that he simply signed material provided to him for the purpose of the Stonehealth Application without considering it. He said "I read it all, understood it all and even amended it at times".
108 Mr Morgan was also asked about the 11 November Letter. The following exchange took place:
Mr Flaherty: As a matter of fairness - do you recall sending an email directly to the Australian Community Pharmacy Authority?
Mr Morgan: Yes. At the request of Ann and Stuart, or Stuart.
Mr Flaherty: Stuart asked you to send that?
Mr Morgan: He asked if I could - if I would be willing to do that, and I said yes, if you provide the address and pretty much tell me what you would like me to say, I'm happy to do that, and I did.
Mr Flaherty: And you had no previous dealings with the Australian Community Pharmacy Authority, had you?
Mr Morgan: No. No.
Mr Flaherty: So it's a matter of you just doing what you were asked?
Mr Morgan: Doing what I was asked, but I was willing to do that. Again, in helping Navin as a tenant to achieve a pharmacy licence. So - but I didn't just blindly take it, sign it, send it, so. And I think - you know, there's a few where I did actually edit them.
109 The primary judge's observations and findings about Mr Morgan's evidence are set out at [53] above. As we have already observed the primary judge noted Mr Morgan's evidence that after the 17 March Letter "COVID-19 had happened" effectively putting the plan that had been in place up to that point in a state of flux.
110 The primary judge accepted Mr Morgan's evidence because, among other things, it was consistent with the contemporaneous documents and the evidence of other witnesses. Mr Darnell submitted that was not so and that Mr Morgan's evidence ought not to have been accepted.
111 As a general matter of approach to Mr Morgan's evidence Mr Darnell said that because he, rather than Stonehealth, was left to call Mr Morgan to give evidence, his counsel, Mr Flaherty, was not able to cross-examine Mr Morgan, save on a very limited basis. While senior counsel for Stonehealth cross-examined Mr Morgan he did not do so with the purpose of demonstrating the falsity of any of the material put to the Authority. Mr Darnell said that accordingly, save for the very narrow ground upon which he was permitted to cross-examine, Mr Morgan's evidence was not tested by way of a "head on challenge to its veracity". For that reason Mr Darnell was critical of the primary judge's approach to Mr Morgan's evidence and submitted that his Honour did not, in his consideration of that evidence, acknowledge that to be so and made no adjustment for the fact that Mr Morgan's evidence had not gone through the "usual testing process" that would be expected in a contested trial.
112 The primary judge was under no obligation to make any adjustment in the approach to Mr Morgan's evidence. Mr Darnell bore the onus of proving his case and acknowledged as much. It was not for Stonehealth to call witnesses to assist Mr Darnell. Mr Darnell made a forensic decision to call Mr Morgan to give evidence and to examine him. Stonehealth was then given the opportunity to cross-examine Mr Morgan, as is usual. Given the decision to call Mr Morgan and the process that was followed, there is no reason why the primary judge should treat Mr Morgan's evidence any differently or discount it in any way.
113 The primary judge provided a detailed summary of Mr Morgan's evidence and made observations about his demeanour as a witness and the nature of the evidence all of which led to and were provided by way of explanation for his Honour's acceptance of that evidence (see [52]-[53] above).
114 Mr Darnell contended that the contemporaneous documents set out above establish that from at least January 2020 there was a covert plan to open Coles Flagstone on 20 March 2020 which was put into place for the sole purpose of assisting Stonehealth in its Pharmaceutical Benefits Scheme (PBS) application. The documentary trail relied on by Mr Darnell establishes a number of things: the importance to Stonehealth of being first in time to lodge its application under s 90 of the NH Act; that success of its application depended upon its ability to establish to the Authority's satisfaction the requirements in the Rules; central to those requirements was the requirement that Coles Flagstone be open for business on the day the application was lodged; and that Mr Morgan, as the person responsible for the development and opening of the Flagstone Village Shopping Centre, was prepared to assist Stonehealth to make its application and achieve its goal of approval by the Secretary. Indeed, as the primary judge found to be the case, until 17 March 2020 there was a plan in place for Coles Flagstone to open on 20 March 2020.
115 The false information provided to the Authority is alleged to be the 17 June Letter which states that the advent of the COVID-19 pandemic and concern about potential issues with the expected influx of customers at the grand opening of the Flagstone Village Shopping Centre was the reason for the early opening of Coles Flagstone. It is said to be false because the contemporaneous documents tell a different story about a long planned early opening for the purpose of assisting Stonehealth in its PBS application. But, having heard Mr Morgan's evidence, the primary judge found that the stated reason for the early opening in the 17 June Letter was not false.
116 As we have already observed, his Honour accepted Mr Morgan's evidence that everything had been on track for a 20 March 2020 opening, albeit subject to confirmation and change, and the managerial impact of the threat presented by COVID-19 and its ramifications changed the landscape and what had otherwise been planned for Coles Flagstone and the Flagstone Village Shopping Centre. The former is supported by the contemporaneous documents on which Mr Darnell relies; they show that the relevant stakeholders were working towards a soft opening of Coles Flagstone on the evening of 20 March 2020. The latter is based on a combination of the primary judge's assessment of Mr Morgan's oral evidence and the stage of the COVID-19 pandemic, as it was understood at the time. These findings are not glaringly improbable as Mr Darnell contends. They were available findings based on the evidence before the primary judge.
117 Mr Darnell also relied on the lack of crowds on 20 March 2020 and a failure to explain how the limited trading activities which took place on that day could reduce panic buying or assist in preparing for trade in light of the pandemic. But, the lack of explanation of these matters does not make the primary judge's acceptance of Mr Morgan's evidence and his Honour's findings glaringly improbable. Mr Morgan was simply not asked to explain the detail of how the opening would assist. The examination was limited to the purpose of the opening and how the decision to open was made.
118 In accepting Mr Morgan's evidence, the primary judge also drew comfort from the fact that it was consistent with the evidence of other witnesses: see Stonehealth (No 4) at [123]. Mr Darnell submitted that there was no such consistency because the evidence of those other witnesses did not go to the reason why Coles Flagstone was open. That is so. The witnesses in question, Messrs Howard and Nguyen and Ms Devlin, gave evidence of their attendance at Coles Flagstone on the evening of 20 March 2020 and their purchase of goods at that time. Their evidence goes to the fact that Coles Flagstone was open.
119 Neither Mr Howard nor Ms Devlin are related to Stonehealth. Mr Howard is a construction worker who at the time was working at the shopping centre and Ms Devlin is a pharmacy group manager for Pharmacy Alliance who happened to be working back late assisting at Stonehealth's pharmacy (which was to trade as a "Watson's Pharmacy"). Mr Nguyen is one of the two pharmacists who was to be licensed to dispense drugs at the pharmacy in issue. The primary judge summarised Mr Howard's evidence at [124]-[125], Ms Devlin's evidence at [126] and Mr Nguyen's evidence at [127]-[129] of Stonehealth (No 4).
120 Given their respective roles, it is not surprising that these witnesses did not address the purpose for which Coles Flagstone was open on 20 March 2020. But that does not make the primary judge's statement about consistency with Mr Morgan's evidence incorrect. Mr Morgan also gave evidence about the fact that Coles Flagstone was open on the evening of 20 March 2020 (see [117]-[118] of Stonehealth (No 4)). To the extent Mr Morgan did so, his evidence was consistent with that given by Mr Howard, Ms Devlin and Mr Nguyen.
121 The primary judge's findings were not glaringly improbable. His Honour assessed Mr Morgan's evidence and found him to be a reliable witness whose evidence should be accepted. We can see no basis upon which his Honour's findings in that regard should be disturbed. It follows that the contention that false or misleading information was provided to the Authority either by silence or in the 17 June Letter could not be made out and the primary judge's finding that Mr Darnell had not established that to be so should not be disturbed.
122 The next question to address is the alternative basis on which Mr Darnell puts this ground of appeal, namely whether the primary judge erred in not finding that the limited trading activities on 20 March 2020 were a sham.
123 That Stonehealth and Coles Developments worked together on a strategy to open Coles Flagstone on the day before the official opening of the shopping centre in order to support the Stonehealth Application, i.e., by assisting Stonehealth to gain the advantage of first lodgement ahead of any application by a competitor, is not of itself improper or fraudulent. Whether the conception and implementation of the strategy and ultimately the opening was a sham will depend on the circumstances.
124 Mr Darnell relies on the strategy devised by Stonehealth and Coles Developments for an early soft opening on the evening of 20 March 2020, coupled with the number and nature of the members of the public who attended the store that evening, to contend that the primary judge's finding that the strategy to open the store was not a sham cannot be sustained.
125 The primary judge was satisfied that the attendance by Mr Howard and Ms Devlin and their purchases were in no way a sham and, although, Mr Nguyen was a director of Stonehealth, accepted his evidence and found that the purchases he made were not a sham despite him having some advance knowledge that Coles Flagstone would be open.
126 For present purposes, it is instructive to set out Mr Howard's evidence:
Mr Flaherty: How - do you know the pharmacy at Flagstone?
Mr Howard: I was the site manager who built that project so I knew those tenants previously, like, when they were working there.
Mr Flaherty: The - when you say project, the whole of the - - -? The whole - - -shopping centre?
Mr Howard: The whole shopping centre, yes.
Mr Flaherty: So you became - you got to know the pharmacists, did you, or - - -?
Mr Howard: I don't know them personally at all, no, but I know who they are, so I had dealings with them as part of their tenancy.
Mr Flaherty: So in terms of the contact that you had from the - was it from the legal representatives for - - -?
Mr Howard: Yes.
Mr Flaherty: - - - the pharmacists?
Mr Howard: Yes.
Mr Flaherty: And did you have any understanding of how they would know who you were?
Mr Howard: Only - I would - yes, I would imagine that they would have found out, perhaps, from Coles.
Mr Flaherty: So you had no discussions with the pharmacy - - -?
Mr Howard: No.
Mr Flaherty: prior to - in relation to being there on 20 June, were you talking to the - - -?
Mr Howard: No.
Mr Flaherty: to the pharmacists? Sorry, 20 March. I withdraw?
Mr Howard: That's right.
Mr Flaherty: So you hadn't - had any discussions with anybody else there in the - at the store - - -?
Mr Howard: No.
Mr Flaherty: That night?-
Mr Howard: That night.
Mr Flaherty: Yes?
Mr Howard: Of 20 March?
Mr Flaherty: Yes?
Mr Howard: Yes.
…
Mr Flaherty: And how did you become aware of the whole supermarket, well, being opened?
Mr Howard: I recall - I don't know exactly which day I was told but I knew at least two or three days prior to them opening up on that evening that they were going to open on that evening. You know, it's quite typical for a supermarket to open up for a soft opening.
Mr Flaherty: And you don't recall who said that to you?
Mr Howard: I'm pretty sure it was John Morgan who would have told me that.
Mr Flaherty: And he informed you that, on Friday night, the store was going to be opened?
Mr Howard: That's right, for anyone who walked in, yes.
Mr Flaherty: And you availed yourself of that opportunity and were you finishing for the day then?
Mr Howard: I was finishing for the day and, yes, I had to be out there early the following morning as well. But, yes, I was finishing that day and when I was aware that it was open, so I walked around and admittedly got a packet of toilet paper at that time and some stuff for dinner that night.
Mr Flaherty: Did you notice anything - was anybody taking photos of you or did you notice that?
Mr Howard: I didn't notice that, no.
Mr Flaherty: Did you notice anything in relation to the other people that were shopping there that was unusual?
Mr Howard: No, not particularly. I do remember seeing maybe half a dozen other people around the store who were just quietly shopping.
Mr Flaherty: But you didn't - - -?
Mr Howard: I don't know who they were.
…
Mr Flaherty: And how did you - do you recall how you paid for the items that you purchased that night?
Mr Howard: I paid for - by cash and it was normal for me at that time. I normally used to just keep $100 cash on me and that's what I would buy groceries and stuff with.
Mr Flaherty: You just, as a habit, just kept $100 cash?
Mr Howard: Yes.
…
Mr Flaherty: Generally. For grocery shopping?
Mr Howard: Yes.
…
Mr Flaherty: Were you asked for your docket by anybody?
Mr Howard: I was, yes.
Mr Flaherty: And who asked for your docket?
Mr Howard: The legal team for the pharmacy.
Mr Flaherty: And when was that requested?
Mr Howard: Probably after the - prior to the 18th.
Mr Flaherty: Prior to 18 - - -?
Mr Howard: Of June just gone.
Mr Flaherty: And you had it?
Mr Howard: No, I couldn't find any - like, I never - I rarely keep receipts from shopping at all.
Mr Flaherty: No. And nor do I. But on the date of 20 March, no one asked for your docket?
Mr Howard: No.
127 Mr Howard's evidence quite clearly supports the primary judge's findings. He was unconnected to the pharmacy, had learnt Coles Flagstone would be open on the evening of 20 March 2020 (prior to its official opening) and, upon seeing that it was, entered the supermarket and did some shopping. Ms Devlin's evidence is to like effect. It is not necessary to set it out.
128 That there may not have been significant numbers of customers and thus significant sales volume does not support a finding that the plan to open and the opening on 20 March 2020 was a sham. The strategy which was devised as between Stonehealth, its advisors, Ann Mihulka & Associates, and Coles Developments was permitted under s 90 of the NH Act. It did not "cross the line". Coles Developments was prepared to assist its tenant to achieve its objective; it did so by working towards a soft opening of Coles Flagstone on 20 March 2020. Ultimately it was a decision for Coles Supermarkets as to whether that opening would proceed. It did and the evidence before the primary judge established that Coles Flagstone was open to the public and that members of the public took advantage of that, entered the store and purchased groceries.
129 Mr Darnell has not established the alleged error in the primary judge's reasons. The findings made by his Honour were open on the evidence. They were not glaringly improbable. That being so ground 2 must fail.