3.1 Ground 1 - legal unreasonableness
19 In ground 1 Freedom contends that the making of the Minister's decision was an improper exercise of the power conferred by s 90A of the Act in that it was so unreasonable that no reasonable person could have so exercised the power. This ground falls within s 5(1)(e) and s 5(2)(g) of the ADJR Act.
20 In broad compass, Freedom puts its case in three ways. First, that the Minister could not reasonably have reached his conclusion as to what group of people constituted a "community" within s 90A(2)(a). Secondly, that the Minister could not reasonably have formed the opinion that that community would be left without "reasonable access" to pharmaceutical benefits within s 90A(2)(a). Thirdly, that the decision of the Minister leads to a capricious and arbitrary result or one lacking intelligible justification.
21 There is no dispute as to the correct legal approach to be taken to this ground. Officials exercising a statutory discretion must comply with the cannons of rationality such that their decisions must be reached by reasoning which is intelligible and reasonable and directed towards and related intelligibly to the purposes of the power: Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332 at [25] (French CJ), [76] (Hayne, Kiefel and Bell JJ). The extent of discretionary power is to be ascertained by reference to the scope and purpose of the statutory enactment. A conclusion as to whether a decision has the character of being unreasonable, in lacking rational foundation or lacking an evident or intelligible justification, is reached by having regard to the terms, scope and purpose of the statutory source of the power, such that it cannot be said that the decision is within the range of possible lawful outcomes to amount to an exercise of that power: Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11; 237 FCR 1 at [11] (Allsop CJ).
22 In this context, the task for the Court is not to assess what it thinks is reasonable, and thereby conclude that any other view displays error. As Allsop CJ said in Stretton at [12]:
... rather, the task is to evaluate the quality of the decision, by reference to the statutory source of the power and thus, from its scope, purpose and objects to assess whether it is lawful. The undertaking of that task may see the decision characterised as legally unreasonable whether because of specific identifiable jurisdictional error, or the conclusion or outcome reached, or the reasoning process utilised.
23 The statutory context is first and foremost to be determined by having regard to the text of the section itself. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; 239 CLR 27 at [47] Hayne, Heydon, Crennan and Kiefel JJ said:
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
(citations omitted)
24 In the present case the statutory power giving rise to the decision of the Minister arises from s 90A. That section appears in part VII of the Act, which concerns the supply of pharmaceutical benefits. Section 90A(2) provides that the Minister may substitute a decision made by the Secretary to reject a s 90 application with a decision approving such an application. Section 90 relevantly provides:
90 Approved pharmacists
(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.
Note: There is an application fee for the application: see subsection (9).
…
(3A) Subject to subsections (3AA), (3AE) and (13), 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) or (3AF) only if the Authority has recommended the grant of the approval, but the Secretary may refuse to grant an approval even if the grant has been recommended by the Authority.
25 The regime by which the Secretary may grant approval in respect of premises is tightly regulated by the Rules. In short, the Authority is given power to make recommendations to the Secretary to grant an approval if it conforms with the requirements of the Rules. Jacobson J in Kong v Minister for Health [2014] FCAFC 149; 227 FCR 215 at [14]-[24], described the genesis of aspects of part VII of the Act. The Rules give effect to a scheme that has been the subject of several agreements between the Commonwealth and the Pharmacy Guild of Australia, to ensure that on the one hand the Commonwealth is able to take advantage of the services of pharmacists to distribute pharmaceutical benefits to the public and on the other hand that pharmacists are adequately recompensed for doing so. There have now been 6 agreements between the Minister and the Pharmacy Guild of Australia, the current one being entered in 2016.
26 In Walkerden v Wodonga Pharmacy Pty Ltd [2015] FCA 273; 230 FCR 243, Mortimer J wrote of at [60]-[66] of the historical background to these agreements. In relation to the effect of the National Health (Australian Community Pharmacy Authority Rules) Determination 2011 (Cth), her Honour said:
[12] Thus, much of the substantive content governing the approval and non-approval of applications to supply pharmaceutical benefits from particular premises is left by the legislative scheme to be done in the 2011 Rules. What is apparent from the terms of s 90 to which I have referred is that the scheme is location-based. This point was made, for different reasons and in a different context admittedly, by Jessup J in Yu v Minister for Health (No 2) [2013] FCA 367; (2013) 216 FCR 188 where his Honour said at 194 ([10]):
… approvals under s 90 or s 90A are not given as benefits or emoluments to particular pharmacists. Rather, the scheme of the NH Act, relevantly, is to ensure that the community is provided with convenient access to pharmacies, conducted by appropriately qualified professionals, for the purpose of obtaining drugs and medicinal preparations which are beneficial in the treatment of sickness or disease but which may, at the same time, be harmful if not properly prescribed and dispensed.
[13] Thus, in accordance with the content of the scheme as filled out by the 2011 Rules, it is the appropriateness of a new pharmacy in the particular location which is the focus of the decision-making process. As part of that focus, consideration is given to the location of other pharmacies. But the principal focus, in my opinion, is on the community's need for adequate and sustainable access to pharmaceutical benefits and a new application is to be assessed according to criteria designed to advance that objective...
These observations are also apposite for the scheme under the 2018 Rules.
27 The Rules provide that the Authority must make a recommendation for the approval of a s 90 application if, amongst other things, it satisfies the relevant location-based criteria set out in one of two schedules: r 10 of the Rules. Conversely, if the applicant does not satisfy the relevant location-based criteria then the Authority must recommend that the applicant not be approved: r 11 of the Rules. For instance, Ms Rouchdi's application was made under schedule 1 part 2 item 133 (see [8] above), being in respect of a new pharmacy in a "small shopping centre". The Authority was required to recommend that her application be refused, on the basis that the definition of a "small shopping centre" in r 5 of the Rules was not met. The consequence of that recommendation was that the Secretary was obliged, pursuant to s 90(3B), to reject Ms Rouchdi's s 90 application.
28 In another instance, a new pharmacy will satisfy the requirements for approval if it is located at least 10km by the shortest lawful access route from the nearest approved premises: item 131 of part 2, schedule 1 of the Rules. In yet another, a new additional pharmacy in a town will be approved if, amongst other requirements, it is at least 200m in a straight line from the nearest other approved premises: item 132 of part 2, schedule 1 of the Rules.
29 Freedom submits that the Rules seek to balance the interests of the community, the Commonwealth as the provider of pharmaceutical benefits and pharmacists and, in particular, the need to balance the Commonwealth's financial burden against the need for acceptable community service. I accept that submission, which is supported by authority: Choice Pharmacy Vincentia Pty Ltd v Australian Community Pharmacy Authority [2020] FCA 93 at [57] (Farrell J); Vincentia MC Pharmacy Pty Ltd v Australian Community Pharmacy Authority [2020] FCAFC 163 at [55] (Perry and Stewart JJ), [81] (Jackson J); Assarapin v Australian Community Pharmacy Authority [2016] FCAFC 9; 239 FCR 161 at [41] (Bromberg, Rangiah and Perry JJ), Kong at [97] (Jacobson J).
30 Having regard to the policy objectives underlying the Rules, Freedom submits that the purpose of the discretion under s 90A is to address anomalies or unforeseen consequences arising from the strict application of the Rules. It contends that the Rules must be taken to embody and provide a geographic baseline for ascertaining what amounts to "reasonable access" and that the discretion under s 90A is available to remedy situations where the direct application of the Rules leads to a community being left without reasonable access to pharmaceutical benefits, conditioned by the requirement that it is in the public interest to exercise the power. As an example, Freedom posits that where a geographical feature such as a river prohibits access to a pharmacy, then the Minister might intervene to grant an approval even though a minimum distance requirement is not met.
31 I disagree with this analysis insofar as it suggests that the scope of the discretion is confined to the redress of anomalies arising from an application of the Rules. A fundamental premise of s 90A is that it involves stepping outside of the regime implemented by the Rules. Indeed, it is a pre-requisite for the exercise of the discretion that the decision of the Secretary was to refuse to approve the application because it failed to comply with the Rules: s 90A(1)(b). It would be peculiar for the discretion so conferred on the Minister to be constrained by reference to the terms of the location requirements in the Rules, absent any reference in the Act to such a constraint.
32 Furthermore, it is apparent that the legislature intended to give the Minister a very broad discretion within which to determine applications. This may be seen from a number of factors. The power is conferred on him personally: s 90A(4)(b). It is non-delegable: s 6(1)(ab). The Minister does not have a duty to exercise the power at all: s 90A(5), s 90B. The first two of these factors were taken in Stambe v Minister for Health [2019] FCA 43; 270 FCR 173 (Mortimer J) to indicate that a particularly wide range of factors and sources of information may be taken into account by the Minister: at [151], citing Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; 205 CLR 507 at [187] (Hayne J), [61], [102] (Gleeson CJ and Gummow J), [246] (Callinan J).
33 In addition, the exercise of the power depends on the Minister being personally "satisfied" of the two specified matters. In Kong Jacobson J noted that the wide meanings of "community" and "reasonable access" in s 90A(3) "gave considerable latitude to the Minister" (at [126]). The second criterion in s 90A(2)(b), "public interest", is, as the Minister submits citing Kong at [132], a phrase of wide import, and not readily susceptible to confinement.
34 These matters give rise to the conclusion that the purpose of the discretion under s 90A is not simply to address anomalies or unforeseen consequences arising from the strict application of the Rules, as Freedom contends. Indeed, in my view it would be incorrect to consider that for the purposes of s 90A the Rules embody a geographic baseline for ascertaining what amounts to "reasonable access" and accordingly that the discretion under s 90A is only available to remedy situations where the direct application of the Rules leads to a community being left without reasonable access to pharmaceutical benefits. Whilst the Minister may choose to exercise the discretion in certain situations to ensure that the Rules do not operate capriciously, the scope of the discretion is not so confined.
35 It is in this context that the specific allegations of legal unreasonableness on the part of the Minister must be considered.
36 Freedom submits that the Minister's definition of what constituted a "community" within s 90A(2)(a) is legally unreasonable and illogical. It submits that the reasons identify that the Minister defined "community" in two different ways, first as "the group of people who attend the Medical Centre" (at [21]) and secondly as "the group of people who reside in the immediate area surrounding the proposed pharmacy and patients who attend the Medical Centre" (at [23]). It submits that there is an absence of reasoning as to why this group or these groups were selected. It submits that having made findings about the relatively regular opening hours of the Medical Centre, the extended opening hours of the TerryWhite pharmacy, and the proximity of 14 pharmacies within a 2km radius, the decision that the community did not have "reasonable access" to pharmaceutical benefits was unreasonable. Usually, Freedom submits, identification of the relevant community would be by reference to clear geographic features (by area or suburb) and/or demographic attributes (such as language or ethnicity), because it is those attributes that give the relevant group a commonality indicative of a "community". In Stambe Mortimer J found that the Minister permissibly defined a community as "those residents of Mount Waverley who attend Waverley Family Health Care". However, this finding is, Freedom submits, distinguishable on the basis of the opening hours of the pharmacy in that case.
37 Section 90A(3) gives the Minister a broad discretion to identify the relevant "community". It will mean "a group of people that, in the opinion of the Minister, constitutes a community". The Minister's identification of the relevant "community" must be one which is rational and legally reasonable and which bears a discernible connection to the purpose and context of the power which is being exercised.
38 In my view it is tolerably clear that the Minister did not adopt two definitions of "community". The Minister defined the relevant community in [21] as being "the group of people who attend the Medical Centre", in which the Premises reside. These are the people whom he considered would be affected if approval was not granted. Although in [23], in the course of his consideration of the reasonable access requirement, the Minister expresses himself slightly differently, indicating that the community is people from the local area as well as those who attend the Medical Centre, it is apparent from [26], where he says "were the proposed pharmacy approved, members of the community would not need to leave the Medical Centre to obtain PBS medicines", that his identification of the community is that set out explicitly in [21] . Paragraphs [29] and [30] also make it apparent that the Minister's identification of the community was that set out in [21].
39 The Minister provides his reasons for identifying the community as "the group of people who attend the Medical Centre" in [22]: namely that the premises are located in the Medical Centre, its patients are likely to be regular users of the proposed pharmacy and that the Medical Centre has the equivalent of four full time medical practitioners and that number is expected to double within 12 to 18 months.
40 In Stambe Mortimer J said of the term "community" in s 90A::
[36] The use of the noun "community" suggests that the "group" to which the definition directs the Minister's attention is a group which has some shared characteristic or attribute (such as language or ethnicity), or shares some other feature (such as geographic location). In other words, there is something which connects the people within the group to each other, and gives the group commonality.
[37] The use of the noun "group", given the nature of the decision (provision of pharmacy services to the Australian public, usually with location restrictions) must have some numerical element, but the fact the group must fit within the concept of "community" means - as I have noted - that the "group" must have some other characteristics.
41 Having identified the "community" considered by the Minister in that instance to be "residents of Mount Waverley who attend Waverley Family Health Care", her Honour concluded at [173] that the Minister's definition in that case satisfied the requirements of s 90A.
42 In my view no relevant distinction may be drawn between the definition provided in that case, and the meaning ascribed to "community" by the Minister in the present case. The Minister has identified a group and explained why that group has been identified: namely, that is likely to consist of regular users of the Medical Centre. In my view Freedom has not established that that conclusion on the part of the Minister was unreasonable. Nor has it established that the decision to so define the community was unintelligible or irrational. The Minister was entitled to consider that patients of the Medical Centre are likely to be regular users of the proposed pharmacy, and that that group of people constituted a community. There is a rational connection between that community and the existence of a pharmacy supplying pharmaceutical benefits at the proposed premises.
43 Freedom next submits that the Minister failed to identify the base level of reasonable access and failed to identify why it was said that the relevant community would be left without reasonable access to pharmaceutical benefits. It submits that people who attend the Medical Centre are going to have to leave it. If they live nearby, they will in any event have to walk more than 60m, which is the distance from the Premises to the TerryWhite pharmacy. It is also likely that patients at the Medical Centre would also attend the St Martins Village shopping centre to visit the supermarket or other premises there. To do so they would have to walk along the one concrete footpath that separates the Mega Centre from the St Martins Village shopping centre. If they drive to the Medical Centre, they will likely park in the carpark shared with the St Martins Village shopping centre. All of those people are likely to have to walk past the TerryWhite pharmacy. Patients of the Medical Centre already had reasonable access to pharmaceutical benefits because there was an approved pharmacy within 60m. Freedom submits that there was no unforeseen consequence created by the application of the Rules that required the exercise of the power contained in s 90A(2). Accordingly, the decision was unreasonable and leads to a capricious and arbitrary result.
44 It may be accepted that the principal focus of the legislative scheme is on the community's need for adequate and sustainable access to pharmaceutical benefits. The Rules provide metrics by which the Authority and Secretary may implement that aim, having regard to rigid location and distance requirements. In the present case, the Rules precluded the grant of an approval in circumstances where another pharmacy was within 60m.
45 However, I have rejected the submission that the scope of the Minister's discretion is constrained by the "baseline" or "geographical constraints" supplied by the Rules. It is open for the Minister to consider broader factors than simply whether or not the application of the Rules leads to an anomalous result. In the present case the Minister considered whether the refusal to grant approval would leave the community without reasonable access to PBS medicines (at [24]). He acknowledged that the TerryWhite pharmacy was less than 60m away from the Medical Centre, that residents of the community had access to a further 14 approved pharmacies within a radius of about 2km and that granting approval would result in two approved pharmacies operating within less than 100m of each other (at [25]). He then explained that he weighed these points against the fact that the grant of the approval would mean that members of the community would not need to leave the Medical Centre to obtain PBS medicines (at [26]). That weighing process involved an evaluation by the Minister of the merits of the application. It is manifest from his reasoning that he took into account factors concerning the proximity of other pharmacies and convenience. He took into account the likelihood that the Medical Centre would expand from four to eight full time medical practitioners (at [22]). He had available information to the effect that there was a demand for the pharmacy to be approved from local residents in circumstances where many of the patients live locally, many are long-standing patients of the Medical Centre and the pharmacy, and all would have to leave the Medical Centre to fill their PBS scripts at another pharmacy. Furthermore, within the materials to which the Minister referred in making his decision were aerial photographs of the Mega Centre and the neighbouring St Martins Village shopping centre. The arrangement of parking and access to the Mega Centre relative to the St Martins Village shopping centre indicates that convenient parking access can be secured immediately proximate to the Medical Centre, without any need to attend St Martins Village. Matters of convenience, proximity and alternative pharmacies available are plainly considerations that the Minister was entitled to take into account in reaching the conclusion that a decision not to grant the approval would result in a community being left without reasonable access to PBS medicines.
46 Having regard to the breadth of scope of the discretion imparted to the Minister by the operation of s 90A, in my view it cannot be said that the decision was legally unreasonable. The matters to which the Minister refers about the existence of the community and the nature of access to alternative pharmacies provide a rational basis for him to have formed his opinions. Indeed, the challenge mounted on this basis equates to a challenge to the merits of the decision of the type that has long been rejected: Li at [66] (Hayne, Kiefel and Bell JJ). The decision of the Minister lay within the range of decisional freedom left to him by Parliament.
47 Ground 1 is accordingly rejected.