Deas v Issa

JUDGE: JESSUP J DATE: 4 SEPTEMBER 2013 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 This is an appeal, on questions of law, under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") with respect to a decision of the Administrative Appeals Tribunal ("the Tribunal") made on 14 May 2013, in which the Tribunal: set aside a decision made on 3 January 2012 by the third respondent, the Australian Community Pharmacy Authority ("the Authority"), recommending, pursuant to s 90(3B) of the National Health Act 1953 (Cth) ("the NH Act"), that the application of the first and second respondents, Bryon Issa and Paul Krassaris ("the respondents"), pursuant to s 90(1) of the NH Act, to supply pharmaceutical benefits from premises at 151 Myrtle Street, Myrtleford ("the premises"), not be approved; and substituted a recommendation that the said application be approved. The applicants, Sarah Deas, John Forsyth and Robert Wood, are the proprietors of an existing pharmacy in Myrtleford who were made parties to the proceeding in the Tribunal because their interests would be affected by its decision. 2 The process of approval for the provision of pharmaceutical benefits at particular premises is governed by s 90 of the NH Act, the terms of which include the following: (1) Subject to this section, the Secretary may, upon application by a pharmacist for approval to supply pharmaceutical benefits at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at those premises. …. (3A) … an application under this section must be referred to the Authority. …. (3B) An approval may be granted under this section in respect of an application that has been referred to the Authority under subsection (3A) … only if the Authority has recommended the grant of the approval …. …. (6) For the purposes of this section, a reference to a pharmacist is taken to include a reference to a person who owns, or is about to own, a business for the supply of pharmaceutical benefits at particular premises. By s 99K(2) of the NH Act, a recommendation of the kind referred to in s 90(3B) "must comply with the relevant rules determined by the Minister under section 99L." 3 The rules, made under s 99L, which governed the disposition of the respondents' application in respect of the premises were set out in the National Health (Australian Community Pharmacy Authority Rules) Determination 2011 ("the Rules"). A mandatory requirement was that contained in Sch 2 thereof as follows: The Authority is satisfied that: (a) the applicant had, on the day the application was made, and has, on the day the Authority makes a recommendation in relation to the application, a legal right to occupy the proposed premises on or after the day the application was made …. One of the questions which arose in the Tribunal in the present case was whether, at the relevant times, the respondents had "a legal right to occupy" the premises. The Tribunal held that they did. 4 On the present appeal, the only respect in which it was submitted that the Tribunal had been in error, as a matter of law, was its determination that the respondents had, on the day their application was made (18 October 2011), a legal right to occupy the premises on or after that day. In order to appreciate the force of that point, it will be necessary to lay out some of the facts of the case, as found by the Tribunal. 5 The respondents proposed to carry on business in partnership and, for that purpose, a meeting was arranged for 14 October 2011 with Fred Neal, a director and shareholder of the owner of the premises, F Neal Superannuation Pty Ltd. That meeting was arranged as between Mr Neal and Mr Krassaris, but, as events turned out, Mr Krassaris himself was unable to attend at the appointed time, and informed Mr Neal that his partner, Mr Issa, would attend instead. 6 Mr Issa did meet with Mr Neal as arranged on 14 October 2011. Mr Issa told Mr Neal that the tenant would be Mr Krassaris and himself in partnership. They agreed upon terms for the lease of the premises, which were subsequently reduced to writing. Mr Issa said that Mr Krassaris would contact him (Neal) to arrange for the execution of a document reflecting the terms of their agreement. That came about as follows. 14 October 2011 was a Friday, and, over the ensuing weekend, Mr Krassaris contacted Mr Neal by telephone, and asked him to set out the terms of the agreement which he had struck with Mr Issa in writing, and to send it to him forthwith, as it was critical to the application he intended to make under s 90 of the NH Act. In this conversation, Mr Krassaris told Mr Neal that Mr Issa would not be available to execute the document, and requested that he (Neal) specify the tenant as "Paul Krassaris and/or Nominees". 7 On 17 October 2011, Mr Krassaris received a document in the following terms from Mr Neal: Letter Of Intention To Lease Dear Paul, Offer to Lease Shop 151 Myrtle St Myrtleford Victoria

1.   Landlord:            F Neal Superannuation PTY.
   

2.   Tenant:              Paul Krassaris and or nominees
   

3.   Premises:            Shop 151 Myrtle St Myrtleford
   

4.   Lettable Area:       260 SqM (approx)
   

5.   Lease commencement:  January 1st 2012
   

6.   Annual Rent:         $26,000 with CPI
   

7.   Lease Term:          Initial term of 5 years, followed by two of 5 years each. (5x5x5)
     further terms
   

7.[sic] Special Conditions (a) This offer is subject to ACPA (Australian Community Pharmacy Authority) approval. Such approval shall be granted before the 30th December, 2011. (b) This offer is subject to the tenant obtaining Bank finance no later than the 24th January 2012. (c) All partitions removed in the renovation shall remain the property of the landlord. (d) Tenant to pay all rates and outgoings for property (151 Myrtle St Myrtleford) (e) Payment of $10,000 non refundable deposit to be paid on acceptance of the offer to lease. In the event that application is successful this amount to be subtracted from monies owing during first year rent. (f) Tenant to undertake shop fit at own cost.

The document was signed by Mr Neal as "lessor" and (presumably after he received it from Mr Neal) by Mr Krassaris as "lessee". 8 The Tribunal dealt with the question whether the respondents had a legal right to occupy the premises on the day when they made their application under s 90 of the NH Act, at two levels. As to the legal efficacy of the letter of intention to lease as between lessor and lessee, the Tribunal said: On the basis of the evidence of Mr Krassaris, Mr Issa and Mr Neal I am satisfied that on the day the application was made the [respondents] did have a legal right to occupy the premises on and after 1 January 2012. I have reached this conclusion on the basis that at the time the application was made the Letter of Intention to Lease was an enforceable agreement to lease the premises. The [applicants] did not dispute that the agreement between Mr Krassaris and the landlord was enforceable. 9 There then arose the question whether Mr Issa, as well as Mr Krassaris, had the rights of the lessee under the letter. It had been argued by the applicants that he did not. Here the Tribunal said: I do not accept this argument. I am satisfied that at all relevant times it was the intention of all parties to the agreement that the respondents would be tenants of the premises and that it was agreed by all parties that the nominee of Mr Krassaris would be Mr Issa. On this basis I am satisfied that Mr Issa could have enforced his agreement with Mr Krassaris had it been necessary and that therefore he had a legal right to occupy the premises. Thus the Tribunal held that Mr Issa, no less than Mr Krassaris, had a legal right to occupy the premises as required by Sch 2 of the Rules. 10 On the present appeal, it was argued on behalf of the applicants that the transactions of 14-17 October 2011, and the letter of intention to lease, did not give rise to a legal right, on the part of Mr Issa, to occupy the premises either on or after 18 October 2011. The applicants accepted that it was the intention of Messrs Issa and Krassaris to lease the premises jointly but, it was submitted, effect was not given to this intention when Mr Neal drew, and Mr Krassaris signed, the letter of intention to lease. Rather, that letter had legal effect, it was submitted, as an agreement to lease as between the company and Mr Krassaris, it being contemplated that, at some appropriate stage, Mr Krassaris would nominate Mr Issa as a co-tenant. However, no such nomination had been made before, or on, 18 October 2011. In the absence of any such nomination, Mr Issa did not have, on that day, a right to occupy the premises either then or later. 11 Conformably with the nature of the applicants' case as outlined above, they stated the following question of law as the subject of the present appeal: Does a person have a "legal right to occupy the proposed premises" for the purposes of item 211(a) of the National Health (Australian Community Pharmacy Authority Rules) Determination 2011 ("the Rules") if they have to take enforcement action to obtain that right? This question reflected a perception on the part of the applicants that the legal basis of the Tribunal's conclusion that Mr Issa had a right to occupy the premises was the proposition that he could take proceedings, as against Mr Krassaris, to enforce what was presumably an oral agreement between them to permit him (Issa) to participate in the occupancy of the premises. It was submitted on behalf of the applicant that, if Mr Issa's relevant right was no more than a cause of action against Mr Krassaris in this sense, it was not "a legal right to occupy" within the meaning of Sch 2 of the Rules. 12 I do not accept that argument. When they separately dealt with Mr Neal, first Mr Issa, and then Mr Krassaris, acted as intending members of a proposed partnership. The leasehold of the premises was a valuable opportunity which came to them in that context. Relevantly, each was the fiduciary of the other when he dealt with Mr Neal. The subject was dealt with by the High Court in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1, where the relevant business structure was to be a joint venture. Relevantly to the fiduciary obligations which arose, however, the court assimilated the position to that of a proposed partnership. Mason, Brennan and Deane JJ said (157 CLR at 11-12): It was submitted on behalf of U.D.C. that no fiduciary relationship existed and no fiduciary duties arose between the prospective participants in the joint venture until the joint venture agreement was actually executed in July 1974. To the extent that that submission involves a general legal proposition that the relationship between prospective partners or joint venturers cannot be a fiduciary one until a formal agreement is executed, it is clearly wrong. A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled. Indeed, in such circumstances, the mutual confidence and trust which underlie most consensual fiduciary relationships are likely to be more readily apparent than in the case where mutual rights and obligations have been expressly defined in some formal agreement. Likewise, the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal arrangement to assume such a relationship and have proceeded to take steps involved in its establishment or implementation. To like effect were the concurring judgments of Gibbs CJ (157 CLR at 5-6) and Dawson J (157 CLR at 16). 13 When Mr Krassaris executed the letter of intention to lease, he did so not on his own behalf but on behalf of the partnership of which he was, or was proposing to be, a member with Mr Issa. In these circumstances, the "right to occupy", which arose from the execution of the letter was, at least in equity, Mr Issa's no less than Mr Krassaris'. 14 No submission was made on behalf of the applicants that the "legal" right to occupy mentioned in Sch 2 to the Rules was a right which would be recognised at law, as distinct from in equity. I do, with respect, agree with the judgment implicitly made on behalf of the applicants that a submission along those lines would not have been tenable. In my opinion, the adjective "legal" does not invoke that distinction. Rather, it is an intended reference to the whole body of law which would recognise the existence of a right to occupy. On any view that would include the right of an intending member of a proposed partnership on whose behalf another of the intending partners executed the document, in his or her own name, under which a right to occupy uncontroversially arose. 15 In supplementary written submissions filed, by leave, after I had reserved, the applicants contended that the respondents ought not to be allowed to raise, for the first time on this appeal, an issue which they (the applicants) expressed as follows: Did Mr Issa have a legal right to occupy the … premises on 18 October 2011 because he and Mr Krassaris were (allegedly) in partnership and the lease in question was an asset of that partnership? As it happens, the relevance of the partnership point was, at least in the form expressed above, raised by the court at the hearing of the appeal, rather than by the respondents. However, one of the facts which had been established in the hearing before the Tribunal, and to which the respondents drew attention in their outline, was that they had made it clear to Mr Neal, and he understood, that they intended to operate a business in partnership at the premises. Indeed, in his submissions on appeal, counsel for the applicants accepted, seemingly as uncontroversial, that the respondents' intention, both as between themselves and in their conversations with Mr Neal, was to carry on business in partnership at the premises. 16 It is now submitted on behalf of the applicants, however, that the factual question whether a partnership existed on 17 October 2011 was not explored before the Tribunal because, at that stage, it was not the respondents' case that the right to enter into a lease in relation to the premises was an asset of such a partnership. The difficulty with this submission, in my view, is that it proceeds from an unduly limited perception of the factual state of affairs which would give rise to the relevant fiduciary relationship. I do not propose to decide the present case on the basis that the respondents were in partnership as such on 17 October 2011: no such finding was made by the Tribunal and, as stressed by the applicants, a number of factual matters might need to be investigated before any such finding could be made. Rather, I am content to proceed by reference to what was effectively a finding made by the Tribunal - expressed as what Mr Neal understood "at all times during the discussions with Mr Krassaris and Mr Issa" - that the respondents intended to operate a pharmacy business in partnership at the premises. This was wholly uncontroversial. It was not suggested on behalf of the applicants that this matter of fact might have been differently determined at the level of the Tribunal if the legal question now under consideration had been raised then. 17 In the present case, the question concerned is purely one of law. The facts are uncontroversial. On those facts, I do not understand it to have been submitted on behalf of the applicants that the capacity in which Mr Krassaris executed the letter of intention to lease on 17 October 2011 was other than a fiduciary one. As I said, their only relevant submission was that the respondents should not be permitted to run the point. However, there is no respect in which it could seriously be suggested that any different course which the applicants might have followed before the Tribunal would have improved the position which they now occupy. 18 For the above reasons, I would hold that, to the extent that it involved legal issues, the Tribunal's conclusion that, on 18 October 2011, both of the respondents had a legal right to occupy the premises on and after 1 January 2012 was correct. The present appeal will, therefore, be dismissed. I shall lay out a timetable for the filing of written submissions on costs. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.