Myers Pharmacy v Australian Community Pharmacy Authority

1. The second respondent pay the applicant's costs of the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THAWLEY J: 1 On 5 August 2022, an order was made dismissing this proceeding. The reason for this was that the applicant no longer wanted to prosecute the proceeding given that the second respondent (Ms Di Pilla) had withdrawn her application for approval to supply pharmaceutical benefits under s 90 of the National Health Act 1953 (Cth). The formal withdrawal of the application occurred on 14 July 2022, although it was notified on 13 July 2022. The decision the subject of challenge in the proceeding was a decision of the Australian Community Pharmacy Authority to recommend to the Secretary of the Department of Health that Ms Di Pilla's application be approved. The withdrawal of the application occurred before the Secretary had made any decision approving the application. 2 The proceeding was commenced by an Originating Application filed on 11 August 2021. The Authority was the sole respondent. By ground 1 of the Originating Application, the applicant contended that the Authority did not have jurisdiction to make the decision, or the decision was not authorised by s 99K(1) of the Act and the National Health (Australian Community Pharmacy Authority Rules) Determination 2018, because the relevant premises were not in a "large medical centre" as defined in s 5 of the Determination. This was based on contention that the medical centre did not operate for at least 70 hours a week and did not have one or more prescribing medical practitioners at the medical centre for at least 70 of the hours each week that the medical centre operated. 3 By ground 2 of the Originating Application, it was further contended: There was no evidence or other material to justify the making of the decision (ADJR, s 5(1)(h)) in that the Respondent based the decision on the existence of particular facts, and those facts did not exist, namely: a. the premises were not in a "large medical centre" as defined by s5 of the National Health (Australian Community Pharmacy Authority Rules) Determination because the medical centre located at the premises: i. did not, and does not, operate for at least 70 hours each week; and ii. did not have one or more prescribing medical practitioners at the medical centre for at least 70 of the hours each week that the medical centre operated or operates; b. during the 2 months before the day on which the application was made until the day the application was considered by the Respondent, the number of PBS prescribers at the medical centre was not equivalent to at least 8 full-time PBS prescribers, of which at least 7 PBS prescribers must be prescribing medical practitioners as required by paragraph ( d) of item 136 of Part 2 of Schedule 1 to the National Health (Australian Community Pharmacy Authority Rules) Determination. 4 Ms Di Pilla was joined by an Amended Originating Application (AOA) filed on 22 October 2021. The AOA included a new ground 3 which pleaded fraud in the following terms: The decision was induced or affected by fraud (ADJR, s 5(1)(g)), namely the fraud of the Second Respondent and/or Well Health Medical Services Pty Ltd, in that: a. the premises were not in a "large medical centre" as defined by s 5 of the National Health (Australian Community Pharmacy Authority Rules) Determination because the medical centre located at the premises: i. did not, and does not, operate for at least 70 hours each week; and ii. did not have one or more prescribing medical practitioners at the medical centre for at least 70 of the hours each week that the medical centre operated or operates; b. during the 2 months before the day on which the Second Respondent's application was made until the day the Second Respondent's application was considered by the First Respondent, the number of PBS prescribers at the medical centre was not equivalent to at least 8 full-time PBS prescribers, of which at least 7 PBS prescribers must be prescribing medical practitioners as required by paragraph (d) of item 136 of Part 2 of Schedule 1 to the National Health (Australian Community Pharmacy Authority Rules) Determination; c. the facts alleged at paragraph 3(a)-(b) hereof were known to "the Second Respondent or her agents, and/or Well Health Medical Services Pty Ltd by its officers, servants or agents, including but not limited to lrfan Naseeb Khan: i. when the Second Respondent's application was made to the First Respondent; ii. at all times between the date on which the Second Respondent's application was made to the First Respondent and the date on which the Second Respondent's application was considered by the First Respondent; iii. when the Second Respondent's application was considered by the First Respondent. 5 On 24 November 2021, Ms Di Pilla's then solicitor, Mr Michael Flaherty, filed a submitting notice, stating that Ms Di Pilla submitted to any order the Court may make, but that she wanted to be heard on the question of costs. 6 On 1 December 2021, a Second Amended Originating Application (SAOA) was filed. This joined the third and fourth respondents, Well Health Medical Services Pty Ltd and Mr Irfan Naseeb Khan. Unhelpfully, paragraph 3 of the SAOA did not follow the usual convention of containing underlining and strikethroughs to indicate amendments. Paragraph 3 provided: The decision was induced or affected by fraud (ADJR, s5(1)(g)), namely the fraud of the Second Respondent and/or Well Health Medical Services Pty Ltd and/or Irfan Naseeb Khan, in that: a. the premises were not in a "large medical centre" as defined by s5 of the National Health (Australian Community Pharmacy Authority Rules) Determination because the medical centre located at the premises: i. did not, and does not, operate for at least 70 hours each week; and ii. did not have one or more prescribing medical practitioners at the medical centre for at least 70 of the hours each week that the medical centre operated or operates; b. during the 2 months before the day on which the Second Respondent's application was made until the day the Second Respondent's application was considered by the First Respondent, the number of PBS prescribers at the medical centre was not equivalent to at least 8 full-time PBS prescribers, of which at least 7 PBS prescribers must be prescribing medical practitioners as required by paragraph (d) of item 136 of Part 2 of Schedule 1 to the National Health (Australian Community Pharmacy Authority Rules) Determination; c. the facts alleged at paragraph 3(a)-(b) hereof were known to the Second Respondent or her agents, and/or Well Health Medical Services Pty Ltd and/or Irfan Naseeb Khan: i. when the Second Respondent's application was made to the First Respondent; ii. at all times between the date on which the Second Respondent's application was made to the First Respondent and the date on which the Second Respondent's application was considered by the First Respondent; iii. when the Second Respondent's application was considered by the First Respondent. d. the Second Respondent and/or Well Health Medical Services Pty Ltd and/or Irfan Naseeb Khan, represented to the First Respondent in the Second Respondent's application and during the process concluding with the First Respondent's consideration of the said application that: i. the premises were in a "large medical centre" as defined by s5 of the National Health (Australian Community Pharmacy Authority Rules) Determination; and ii. during the 2 months before the day on which the Second Respondent's application was made until the day the Second Respondent's application was considered by the First Respondent, the number of PBS prescribers at the medical centre was equivalent to at least 8 full-time PBS prescribers, of which at least 7 PBS prescribers must be prescribing medical practitioners as required by paragraph (d) of item 136 of Part 2 of Schedule 1 to the National Health (Australian Community Pharmacy Authority Rules) Determination; 7 On 14 December 2021, a 'Notice of acting - change of lawyer' was filed by Ms Di Pilla recording that she had appointed Lawcrest Pty Ltd to represent her in the proceeding. 8 On 20 December 2021, the Court granted leave to Ms Di Pilla to withdraw her submitting appearance. 9 On 31 January 2022, the Court made orders permitting the second to fourth respondents to request particulars of the SAOA and for answers to be provided. No requests for particulars were in evidence. 10 The applicant filed the following affidavits and statements of anticipated evidence: (a) Affidavit of Mona Maklouf sworn 21 October 2021; (b) Affidavit of Mohammad Awad sworn 8 November 2021; (c) Affidavit of Pio Mario Capanna-Pisce affirmed 8 November 2021; (d) Affidavit of Riccardo Fantuzzi sworn 8 November 2021; (e) Affidavit of Rukhshana Nisha sworn 8 November 2021; (f) Affidavit of Samir Ibrahim sworn 10 November 2021; (g) Statement of Anticipated Evidence of Alex Volfneuk filed 16 December 2021; (h) Statement of Anticipated Evidence of Gayatri Majumdar filed 16 December 2021; (i) Statement of Anticipated Evidence of Ma Rochelle Orap filed 16 December 2021; (j) Statement of Anticipated Evidence of Muhammad Imran filed 16 December 2021; (k) Statement of Anticipated Evidence of Samer Farhan filed 16 December 2021; (l) Affidavit of Bishwy Ghaly sworn 16 February 2022; (m) Affidavit of Mohammad Awad sworn 9 March 2022; (n) Affidavit of Rukhshana Nisha sworn 9 March 2022; (o) Affidavit of Riccardo Fantuzzi sworn 9 March 2022; (p) Affidavit of Samir Ibrahim sworn 9 March 2022; (q) Affidavit of Pio Mario Capanna-Pisce affirmed 13 March 2022. 11 On 16 May 2022, the Court made orders for each of the second, third and fourth respondents to provide discovery within 21 days. An order was also made referring the matter to mediation by a Registrar of the Court. The mediation was scheduled for 19 August 2022. 12 None of the second to fourth respondents provided discovery in the time specified (or at all). At the applicant's request, the matter was listed for a case management hearing on 14 July 2022. This was for the purpose of addressing the second to fourth respondents' non-compliance with the orders for discovery. The applicant was informed on 13 July 2022 that Ms Di Pilla either had or would withdraw her application. The Court was advised that she confirmed this position by correspondence to the first respondent sent on the morning of 14 July 2022, before the case management hearing on that day. 13 Notwithstanding the fact that there was no longer an application for the Secretary to approve, and that the Authority's recommendation could not therefore result in any application being approved, the applicant insisted - at the case management hearing on 14 July 2022 - that there should be compliance with the orders for discovery. It was said that discovery should be complied with so that the question of costs could be examined. The Court took the view that this would be inconsistent with the overarching purpose in s 37M of the Federal Court Act 1976 (Cth), in particular by reason of the cost and delay which would be involved in circumstances where the applicant was no longer be relevantly affected by the recommendation decision. The parties wanted to dispose of the proceeding but were not in a position to state what orders were appropriate. The Court therefore made the following orders: 1. By 5.00pm on 29 July 2022, the legal representatives of the parties confer with a view to agreeing orders disposing of the proceeding including as to costs. 2. By 5.00pm on 3 August 2022, any agreement as to orders disposing of the proceeding be notified to the Associate to Thawley J. 3. Orders 1 to 3 of the orders dated 16 May 2022 [being the discovery orders] be stayed. 4. The matter be listed for a case management hearing at 10.00am on 5 August 2022. 14 Surprisingly, the parties were unable to reach agreement as to the disposition of any aspect of the proceeding. The applicant's position, as expressed in a short submission filed for the purposes of the 5 August 2022 case management hearing, was that it was "not in a position where it can simply agree to orders disposing of the proceeding without the issue of costs also being determined". 15 At the case management hearing on 5 August 2022, the Court observed that there was no application for the Secretary to approve and questioned whether the applicant wanted to proceed with its application to set aside the recommendation decision in circumstances where it could not be acted upon by the Secretary there being no application to approve. Senior Counsel for the applicant ultimately agreed that the proceeding should be brought to an end by an order dismissing the proceeding. Each party agreed with that order and it was made. The parties were then heard on the question of costs. 16 By its written submission filed for the purposes of the case management hearing, the applicant sought costs against the first to fourth respondents on an indemnity basis. The seeking of costs on the indemnity basis was abandoned during oral argument. 17 By its written submissions, the first and second respondents (the Authority and Ms Di Pilla, respectively) contended that there should be no order for costs. 18 By its written submissions, the third and fourth respondents contended that the applicant should pay their costs, they not being necessary parties and no relief having been sought against them or, alternatively submitted during the course of oral argument that there should be no order as to costs as between them and the applicant. 19 The Court's power to make an award of costs is discretionary: s 43(2) of the Federal Court of Australia Act 1976 (Cth). The power must be exercised judicially, not arbitrarily or capriciously or on grounds unconnected with the litigation, having regard to relevant principle and the justice of the case in all the circumstances: Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Mukiza [2022] FCAFC 105 (Markovic, Thawley and Cheeseman JJ). 20 I consider that both the applicant and the Authority conducted the litigation as against each other in a reasonable manner. Neither party has been successful after a hearing on the merits. The proceeding has been brought to an end as a result of Ms Di Pilla withdrawing her application and not as the result of any agreed settlement between the parties. There should be no order as to costs as between the applicant and the Authority. 21 Ms Di Pilla should pay the applicant's costs. As mentioned, this is not a case in which a settlement was reached, but without resolution of the question of costs. Rather, the point of the proceeding has evaporated because Ms Di Pilla withdrew her application. Ms Di Pilla took no issue with being joined as a party to the proceeding, her interests necessarily being affected by the relief sought in the proceeding. Ms Di Pilla's application was withdrawn only at a point in time when the applicant's substantial evidence was complete and an order for discovery against the second respondent was extant. The inference I draw, on balance, is that Ms Di Pilla assessed the applicant's evidence and the documents she would be required to discover and took the view that the applicant was likely to be successful in the proceeding. 22 I reject the submission that it is equally open to infer that Ms Di Pilla withdrew her application for the reason that she had decided that she no longer wished to be involved in what was likely to be expensive litigation. In reaching these conclusions, I do not conclude that Ms Di Pilla engaged in the blameworthy conduct alleged against her in the SAOA. Rather, I reach the conclusions expressed in [21] on the balance of probabilities. 23 The applicant did not have a real opportunity to negotiate a settlement of the proceeding in a way which might address the substantial costs it had incurred. The applicant conducted the proceeding against Ms Di Pilla reasonably. 24 It was submitted for Ms Di Pilla that the pleading of fraud was insufficient. It is true that the pleading does not make it clear precisely what it is that Ms Di Pilla is alleged to have known to be false. The use of the phrase "and/or" in the pleading causes this result. Ms Di Pilla could have, but did not, request particulars of the SAOA. As mentioned, orders were specifically made to permit that to occur. I conclude that, at the time of the withdrawal of her application, being a time when the applicant had filed a substantial amount of evidence and probably before that time, she understood the allegations made against her. As discussed further below, the applicant behaved reasonably in pursuing the third and fourth respondents. Taking all of these matters into account, I conclude that it is appropriate for Ms Di Pilla to pay the applicant's costs of the proceeding. 25 I turn next to the position of the third and fourth respondents. No relief was sought against the third and fourth respondents in the SAOA (other, possibly, than costs). The applicant took the view that it was proper to join the third and fourth respondents on account of the allegations of fraud levelled against them. The third and fourth respondents did not object to being joined to the proceeding and participated in the proceeding without raising any issue about them having been joined. The third and respondents did not seek particulars of the SAOA notwithstanding an order that they be permitted to do so. I consider that they understood the allegations made against them. Whether or not the third and fourth respondents were properly joined as parties, the applicant was justified in the circumstances in pursuing those parties given it could not be sure about the extent of knowledge as between the second to fourth respondents of the matters pleaded in paragraph 3 of the SAOA. The third and fourth respondents would have been entitled to be heard irrespective of whether they were proper parties. There has been no determination of the proceeding on the merit. Although consenting to an order for discovery, the third and fourth respondents did not provide discovery in the time to which they consented (or at all). Leaving aside their failure to comply on time with orders for discovery which they consented to, the third and fourth respondents' conduct of the litigation has been reasonable. The applicant's conduct of the proceeding as against the third and fourth respondents has also been reasonable. There was no real opportunity for settlement discussion between the applicant and the third and fourth respondents which might have involved some agreement about costs. This was because of the sudden withdrawal by Ms Di Pilla of her application. 26 Taking all of these matters into account, I do not think it appropriate in these circumstances to order the applicant to pay the costs of the third and fourth respondents. Nor do I think it appropriate that the third and fourth respondents pay the applicant's costs. In my view, there should be no order as to costs as between the applicant and the third and fourth respondents. 27 The only necessary order therefore is that the second respondent pay the applicant's costs of the proceeding. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.