Sayegh v Australian Community Pharmacy Authority

Federal Court of Australia|2006-09-28|Before: Stone J

background 1 The applicant, who is a registered pharmacist, wanted to relocate his pharmacy from Cairns in Queensland to Blacktown, New South Wales. To do this he needed the approval of the Secretary of the Department of Health and Ageing; National Health Act 1953 (Cth) s 90. The Secretary may only approve an application for relocation if the Australian Community Pharmacy Authority, the respondent in this proceeding, recommends in favour of the relocation. The Authority recommended that the applicant's application not be approved because the distance between the applicant's proposed premises and the nearest other pharmacy, measured in accordance with the relevant rules determined by the Minister under s 99L, was not sufficient to meet the statutory requirement. The applicant appealed to the Administrative Appeals Tribunal. 2 It is accepted by the parties that, in the present circumstances, the Authority was required to recommend that the application be approved if, in accordance with rule 6(b) of the Minister's rules, the proposed premises at Blacktown were at least: (i) 1.5 kilometres by straight line measurement from the nearest other premises in respect of which a pharmacist is approved under section 90 of the Act; or (ii) 2 kilometres by the shortest lawful access route measured from mid point at floor level of the public access door opening of the proposed premises nearest to the mid point at floor level of the nearest public access door opening of the nearest other premises in respect of which a pharmacist is approved under section 90 of the Act.' I will refer to the measurements in 6(b)(i) and 6(b)(ii) respectively as the 'straight line measurement' and 'lawful access measurement'.

This appeal 5 The applicant appealed to this Court on the basis that the Tribunal had misinterpreted rule 6(b) and was incorrect in holding that it only needed to consider rule 6(b)(i) in reaching its decision. The respondent filed a notice of contention also claiming that the Tribunal was in error in failing to apply rule 6(b)(ii) but asserting that, given the Tribunal's factual findings, the error made no difference to the result which, in the circumstances, was correct. 6 I agree with both parties that, as the two limbs of rule 6(b) are separated by the disjunctive, 'or', the applicant only needed to show that the proposed premises satisfied one of the two limbs of rule 6(b). The Tribunal was in error on this point however as, for reasons given below, I have concluded that the Tribunal's ultimate conclusion was not affected by this error, nothing turns on it. 7 The real issue in the appeal is the meaning of the phrase 'nearest other premises' which occurs in both rule 6(b)(i) and 6(b)(ii). In particular, the issue was whether the phrase had the same or different meaning in each subrule. Despite a cogent argument put by Mr Zipser, counsel for the applicant, I have concluded that the meaning of the phrase is determined by the context of the subrule in which it occurs and for that reason 'nearest other premises' has a different meaning in each subrule.

The applicant's position 8 Although I have reached the conclusion stated above, the starting point of my analysis (and the applicant's submissions) is the generally accepted principle that, unless there is a reason to conclude otherwise, such as an indication in the statute itself, 'it is a sound rule of construction to give the same meaning to the same words appearing in different parts of a statute'; Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 at 618 per Mason J. If that principle were to be applied, the first step in the application of either subrule would be to identify the 'nearest other premises' in respect of which a pharmacist is approved under s 90 of the Act. On that basis the premises so identified would be the same whether one was applying subrule 6(b)(i) or 6(b)(ii). 9 The Act does not say how one is to determine which other premises is the 'nearest' and therefore, subject to other indications to the contrary, one would give the word its ordinary English meaning. In the subrules under consideration 'nearest' is used in respect of proximity or distance; it is the superlative form of the adjective, 'near' which, according to the Oxford English Dictionary, means 'to, within or at a short distance' or 'close to a place, thing or person in respect of space or time'. The 'nearest' other premises are the 'closest' other premises or those which are the shortest distance away. 10 The shortest distance between two places is colloquially referred to as being a 'beeline' or 'as the crow flies', meaning a direct route that has no obstacles and is roughly a straight line measurement. On this analysis, the nearest other premises to the proposed premises are not necessarily those that are the quickest to reach from the proposed premises. The statement that 'X pharmacy is the closest' (or nearest), but that it would be 'quicker to get to Y pharmacy' is immediately understandable as making that distinction. 11 Measurement 'as the crow flies' is imprecise although the meaning is clear. In relation to rule 6, however, additional precision is given by the specific directions in rule 2(b) which states: 'Where in this Determination a reference is made to a straight line measurement in relation to two premises, that reference is to a straight line measurement from the mid point at floor level of the public access door opening of the first mentioned premises to the same point of the second mentioned premises and where either premises has more than one such opening the reference is to the shortest such straight line measurement which can be made in relation to the two premises.

The applicant's position is that the everyday meaning of 'nearest' as used in both limbs of the rule implies a reference to a straight line measurement. 12 Applying the above analysis to the facts as found by the Tribunal, the applicant identifies Chemworld Chemist as the nearest other premises to the proposed premises. Using the straight line measurement, it is less than 1.5 kilometres from the proposed premises but more than 2 kilometres by the shortest lawful access route. Therefore, according to the applicant's construction of the relevant provision, the proposed premises fails to meet the requirement in rule 6(b)(i) but does satisfy rule 6(b)(ii). Consequently, the applicant submits, the Tribunal should have found that a positive recommendation to the Secretary was mandated. 13 The applicant's position must be accepted unless there is a good reason to give the phrase 'nearest other premises' a meaning other than its ordinary English meaning. The respondent finds that good reason in the context of each subrule and in the background and policy of the rules governing the relocation of approved pharmacies.

Respondent's contextual analysis 14 The respondent submits that the criterion for determining the 'nearest other premises' is contained within the language of each subrule, in particular in the reference in rule 6(b)(i) to straight line measurement and in 6(b)(ii) to lawful access measurement. The subrules are expressed as alternatives and each provides a different means of measuring distance. In the respondent's submission, it is 'inherently unlikely' that Parliament would have intended the distance measurement expressed in one of these subrules to affect the calculation performed under the other subrule. Accordingly, the respondent submits that the ordinary meaning of the phrase 'nearest other premises' must yield to the context in which it is expressed. 15 Further, the respondent submits that the applicant's interpretation defeats the purpose of having two rules as it would leave rule 6(b)(ii) with nothing to do. The respondent also submits that the applicant's interpretation involves reading into rule 6(b)(ii) an unarticulated criterion to determine the 'nearest premises'. According to the respondent the reference to the method of measurement is part of the definition of 'nearest other premises' in each subrule and thus to apply rule 6(b) one finds both the premises that are nearest to the proposed premises by straight line measurement as well as the premises that are nearest by the lawful access measurement. 16 This exercise might identify only one other pharmacy (say premises A) as the 'nearest' by both criteria in which case a positive recommendation can only be made if the distance from A to the proposed premises is at least 1.5 km by straight line measurement or at least 2 km by the lawful access measurement. In other circumstances, however, finding the nearest other premises could lead to two premises (say A and B) being identified as the 'nearest' under subrules 6(b)(i) and 6(b)(ii) respectively. In that case a positive recommendation could only be made if the distance from the proposed premises to A was at least 1.5 km by straight line measurement or the distance from the proposed premises to B was at least 2 km by the lawful access measurement. Counsel for the respondent submitted that rule 6, in providing these alternatives, gave effect to the intention expressed in the Third Community Pharmacy Agreement to simplify the measurement process and thereby provide an alternative for pharmacists who could benefit from the straight line measurement in rule 6(b)(i). On this analysis the respondent submits that the application must fail because: · by straight line measurement, Chemworld Chemist is the nearest premises and since it is less than 1.5 kilometres from the proposed premises, the proposed premises do not satisfy rule 6(b)(i); and · by lawful access measurement, Fegents Pharmacy is the nearest premises and, since it is less than 2 kilometres from the proposed premises, the proposed premises do not meet the requirement in rule 6(b)(ii). 17 Finally, the respondent submitted that if the ordinary meaning of the word 'nearest' was 'nearest, measured by a straight line measurement' then there would be no need, in rule 6(b)(i), for the words 'by straight line measurement'. I doubt that this submission adds much to those already put and it is not necessary to discuss it further.

Supporting authorities 18 In support of its construction of rule 6 the respondent referred to Pharmacy Guild of Australia v Australian Community Pharmacy Authority (1996) 70 FCR 462 and a decision of Deputy President McMahon of the Administrative Appeal Tribunal in Re Levis and Australian Community Pharmacy Authority (1998) 51 ALD 757. Both of these cases were concerned with earlier versions of the rules than those presently under consideration. 19 The rules considered by Branson J in the Pharmacy Guild case were made by a determination under s 99L of the Act on 2 May 1995 and were set out in her Honour's reasons at 465-466 as follows: '3. For the purposes of paragraph 99K(1)(b) of the Act, the rules with which the Authority must comply in making a recommendation on an application by a pharmacist for approval under s 90 of the Act in respect of particular premises are set out in paragraphs 4 to 9. 4. Approval of a pharmacist under section 90 of the Act in respect of particular premises must not be recommended except as provided for in paragraphs 5 to 8. … 6 . … approval of a pharmacist under section 90 of the Act in respect of particular premises must be recommended if the pharmacist is already approved under section 90 of the Act in respect of other premises from which the pharmacist proposes to cease supplying pharmaceutical benefits immediately before granting the approval if: … (c) the premises in respect of which approval is sought are not less than two kilometres, measured door to door by the shortest lawful access route, from the nearest other premises in respect of which a pharmacist is approved under s 90 of the Act … ' 20 Branson J rejected the submission that these provisions required the decision maker to determine which were the 'nearest other premises' by a straight line measurement before establishing the measurement of the shortest lawful access route from those premises to the premises in respect of which approval was sought. Her Honour found no warrant for such an approach in the words of the provision and held that in relying on evidence as to which pharmacy in the vicinity of the proposed premises was the 'closest' the decision maker took into account an irrelevant consideration. Her Honour commented (at 478): 'The issue before it was not whether the Oyster Bay pharmacy was the closest relevant pharmacy to the [proposed premises] but whether the distance from the nearest other relevant premises measured door to door by the shortest lawful access route to the [proposed premises] was less than 2 kilometres. 21 The provisions considered in Re Levis were not relevantly different and Deputy President McMahon relied upon the decision in the Pharmacy Guild case in reaching a similar conclusion. 22 I respectfully accept that the context of the phrase 'nearest other premises' justified Branson J's conclusion in the Pharmacy Guild, and that this meaning might coherently be adopted in respect of the present provisions. However, the present provisions are different from those considered by Branson J and the significance of that difference must be examined. Whereas previously the relevant rules used only one criterion to test distance from the nearest other premises, rule 6, in 6(b)(i) and 6(b)(ii) respectively, uses both the straight line measurement and the lawful access measurement. Accordingly, there is a competing principle to the principle of contextual analysis applied by Branson J namely the 'sound rule of construction' referred to in [8] above. The issue is which of the two competing principles should prevail? 23 The respondent also referred to Murphy v Farmer (1988) 165 CLR 19 in connection with the weight that should be given to the principle referred to in [8]. In Murphy the appellant had submitted that there was a presumption that the word 'false' should mean the same thing in s 229 of the Customs Act 1901 (Cth) as it did in s 234 of that Act. The majority held (at 27): 'Plainly, there is some force in that argument. On the other hand, as Gibbs J. commented in Clyne v Deputy Commissioner of Taxation, the presumption that a word is used with a uniform meaning in a statute is not one "of very much weight… it all depends on the context". In the same case, Mason J. pointed out that the "presumption readily yields to the context".' (footnotes omitted) 24 In the circumstances it is appropriate to consider the history of the rules and the policy that they were intended to promote.

Regulatory background and purpose 25 The background to these rules was explained by Hill J in Smoker v Pharmacy Restructuring Authority (1994) 53 FCR 287. His Honour referred to an agreement made in 1990 between the Government and the Pharmacy Guild of Australia which was intended to reduce the number of pharmacies approved to supply pharmaceutical benefits. His Honour continued at 294: '… the Government ultimately accepted recommendations made to it that pharmacy numbers should be reduced by encouraging pharmacists to either amalgamate or close to reduce the number of inefficient pharmacies and to strengthen the more viable pharmacies that remained. Provision was to be made for closure payments and, where an amalgamation or closure payment was made, no new approval in respect of the premises was to be granted unless certain approval criteria were met.' 26 The subsequent development of this policy through two subsequent agreements and the change in emphasis from 'a preoccupation with concentration of pharmacies in a particular locality … to a desire to introduce more competition between pharmacies' was referred to in the AAT decision under review. The Third Community Pharmacy Agreement, made in 2000, refers in clause 21(d) to a purpose in amending the rules governing pharmacy relocations as being "to enhance competition consistent with the maintenance of a viable and well distributed community pharmacy network".

Competing principles 27 I do not accept that the applicant's interpretation interpolates into rule 6 an unarticulated criterion for determining which premises are the nearest. In my view the reasons for interpreting 'nearest other premises' as set out in [8]-[10] are coherent and acceptable subject to there being indications in the statute or otherwise that a different meaning was intended. In addition, I do not accept that the applicant's interpretation defeats the purpose of having the two subrules with their different modes of measurement. On the applicant's interpretation once the 'nearest' premises have been identified, if the straight line measurement is at least 1.5 kilometres then the application must be approved. If, however, that measurement is less than 1.5 kilometres then the distance from the proposed premises by lawful access measurement must be determined. If that distance is 2 kilometres or more then a positive recommendation must be made under rule 6(b)(ii). For instance, using a common example, assume pharmacy A is only 500 metres by straight line measurement from the proposed premises but is directly across a river so that the shortest means of lawful access is across a bridge some 3 kilometres downstream. In that example the criterion in subrule 6(b)(ii) would be met and a positive recommendation made even though subrule 6(b)(i) has not been met. 28 Ultimately the strength of the respondent's interpretation and the possible conflict between the applicant's interpretation and the policy behind the provisions lead me to conclude that the respondent's interpretation is to be preferred. The point can be illustrated by elaborating and sharpening the example in [26]. Assume that pharmacy B is on the same side of the river as the proposed premises and is 600 metres away by both straight line and lawful access measurement. Despite the distance between pharmacy B and the proposed premises being considerably less than that provided for in either 6(b)(i) or 6(b)(ii), on the applicant's interpretation, this would be irrelevant. Pharmacy A is the 'nearest other premises' referred to in both subrules and pharmacy B would not be considered. This result does not seem to be consistent with 'the maintenance of a viable and well distributed community pharmacy network' or the final objective of the Third Community Pharmacy Agreement, 'the fostering of a stable and viable community pharmacy sector in Australia'. Indeed there is the potential to produce absurd results. Consider the following example: pharmacy A is only 100 metres from the proposed premises but because it is on the other side of a major expressway the lawful access measurement is a distance of 6 kilometres. Pharmacy B is 110 metres away from the proposed premises on the same side of the expressway with the lawful access measurement being 150 metres. Were the applicant's construction to be adopted, the proposed premises in this example would satisfy rule 6(b)(ii), resulting in two pharmacies within 110 metres of each other. 29 Even at its extremes the respondent's interpretation does not present such incongruity. The application fails on the respondent's interpretation because Chemworld Chemist is the nearest to the applicant's proposed premises by straight line measurement (less than 1.5 kilometres) and Fegent's Pharmacy is the nearest by lawful access measurement (less than 2 kilometres). On the applicant's analysis the relocation would be approved because Chemworld Chemist is more than 2 kilometres from the proposed premises. 30 On the respondent's interpretation the most extreme case might result in an application being refused with the result that the pharmacies in a particular area are over 4 kilometres apart however this does not suggest any distortion of the policy that the rules are intended to support. While this result may seem harsh to the applicant, who is denied relocation to the premises of his choice, ultimately, the policy behind the relocation rules is not directed to individual rights but to maintaining the desired pharmacy network.

The Minister's subsequent determination 31 At the hearing of this appeal, I gave both parties leave to file and serve further submissions in relation to a Ministerial determination made under s 99L of the National Health Act 1953 (Cth), which commenced on 1 July 2006, after the Tribunal's decision in the present case. The Minister's 2006 determination is in a different format to the rules that govern the applicant's application; it effectively replaced rule 6(b) with the following: 'The proposed premises are: (a) at least 1.5 km, in a straight line, from the nearest approved premises; or (b) if paragraph (a) does not apply - at least 2km, by the shortest lawful access route, from each approved premises that is within 1.5km, in a straight line from the proposed premises.' 32 It would seem that the Minister's new determination yields a result consistent with the result that would flow from the applicant's interpretation but this does not seem to me to assist in the interpretation of the rules that apply to the current application. As indicated above, the rules under consideration here were implemented pursuant to the Third Community Pharmacy Agreement. The 2006 determination is made pursuant to the Fourth Community Pharmacy Agreement. The preamble to Part 4 of the Fourth Community Pharmacy Agreement notes that, in addition to correcting difficulties associated with the previous location rules, the amendments to the location rules contained in the agreement 'are intended to provide greater flexibility to respond to community need for pharmacy services and to improve access to pharmacy services'. In addition, the Fourth Community Pharmacy Agreement indicates several objectives of the Location Rules that are not evident in the Third Community Pharmacy Agreement - for instance to ensure that 'all Australians have access to PBS medicines'. It seems clear that the Fourth Community Pharmacy Agreement has different objectives from the Third Agreement even if those objectives have evolved from those in the earlier Agreement. There is no basis on which to suggest that the later rules can be relied on to clarify the meaning of the earlier rules. In the circumstances the caution advocated by Gummow J in Interlego AG v Croner Trading Pty Ltd (1992) 39 FCR 348 at 382 is well advised. 33 The orders in this matter must be that the respondent's notice of contention is upheld, the application is dismissed and the applicant must bear the respondent's costs. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate: Dated: 28 September 2006 Counsel for the Applicant: B Zipser

Solicitor for the Respondent: Australian Government Solicitor

National Health Act 1953(Cth)s 90, 99L, s 90.

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