Terry White Chemists Australia Fair v Secretary to the Department of Health and Ageing

The legislation 6 Provisions relating to the Pharmaceutical Benefits Scheme are found in Pt VII of the National Health Act. In substance, the scheme aims to make available designated drugs and medicinal preparations to persons for whom they are prescribed, at the expense of the Australian Government, subject to the payment of financial contributions by those persons. Such a drug or medicinal preparation so supplied is described as a "pharmaceutical benefit", a term defined in s 84(1) and s 85. By s 89(a), a person is not entitled to receive a pharmaceutical benefit unless it is supplied by an approved pharmacist, at or from premises in respect of which the pharmacist is for the time being approved, consequent on a prescription by a medical practitioner or participating dental practitioner. Section 90 then deals with the approval of pharmacists and premises. Its relevant provisions are as follows: (1) Subject to this section, the Secretary may, upon application by a pharmacist who is willing to supply pharmaceutical benefits on demand at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at or from those premises. (2) Where a pharmacist desires to supply pharmaceutical benefits at or from several premises (being premises at which he or she carries on, or is about to carry on, business as a pharmacist) a separate application shall be made in respect of each of the premises and, where approval is granted in respect of 2 or more premises, a separate approval shall be granted in respect of each of the premises. (3) Subject to this section, where an approved pharmacist desires to supply pharmaceutical benefits at or from premises (being premises at which the pharmacist carries on, or is about to carry on, business as a pharmacist) other than premises in respect of which approval has been granted, the Secretary may on application by the approved pharmacist, grant approval in respect of those other premises. (3A) Subject to subsections (3AA) and (3AE), 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. ... (4) Nothing in this section authorizes the Secretary to grant approval to a pharmacist in respect of premises at which that pharmacist is not permitted, under the law of the State or Territory in which the premises are situated, to carry on business. ... (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 or from particular premises. (7) Subsection (6) does not permit an application to be made under subsection (1) by a beneficiary of a deceased approved pharmacist who is not himself or herself a pharmacist before the interest in the business of the deceased pharmacist is transferred to the beneficiary in the course of the administration of the estate of the deceased pharmacist. (8) Nothing in this section prevents the approval of more than one pharmacist for the purpose of supplying pharmaceutical benefits at or from particular premises. 7 The reference to "the Authority" in s 90(3A) is a reference to the Australian Community Pharmacy Authority, established by s 99J. Section 99K provides: (1) The functions of the Authority are: (a) to consider applications under section 90; and (b) to make, in respect of an application under section 90: (i) a recommendation whether or not the applicant should be approved under that section in respect of particular premises; and (ii) if an approval is recommended - recommendations as to the conditions (if any) to which the approval should be subject; and (2) In making a recommendation under subsection (1), the Authority must comply with the relevant rules determined by the Minister under section 99L. (3) All recommendations of the Authority under subsection (1) are to be made to the Secretary. 8 Section 99L provides: (1) The Minister must, by writing, determine the rules subject to which the Authority is to make recommendations under subsection 99K(1). (2) A determination under subsection (1) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901. 9 The determination required by s 99L(1) has been made and is found in the National Health (Australian Community Pharmacy Authority Rules) Determination 2006 ("the Determination"). Clause 9 of the Determination sets out the circumstances in which the Authority must recommend that an applicant be approved under s 90 of the National Health Act in respect of particular premises. Among those circumstances are those referred to in para (a)(iii) and para (b)(iii) namely that the requirements set out in Sch 2 to the Determination are met. Clause 10 of the Determination provides that the Authority must recommend that an applicant not be approved under s 90 of the National Health Act in respect of particular premises if a requirement that, under cl 9, applies in relation to the application is not met. Item 201 in Sch 2 to the Determination sets out as a requirement: The Authority is satisfied that: (a) the applicant has a legal right to occupy the proposed premises; and (b) the proposed premises can, under the applicable local government and State or Territory laws relating to land development, be used for the purpose of operating a pharmacy; and (c) within 6 months after the date on which the Authority makes a recommendation in respect of the application, the applicant will be able to begin operating a pharmacy at the proposed premises; and (d) the proposed premises are not directly accessible by the public from within a supermarket.

The proper construction of s 90(4) of the National Health Act 10 All parties to the proceeding accepted the proposition that s 90(4) of the National Health Act imposes a limitation upon the power of the Secretary to grant approval pursuant to s 90(1). What divided the parties was the extent of this limitation. The appellant contended that the limitation related to any provision of any law of the State or Territory in which the relevant premises are situated, under which the pharmacist seeking approval would not be permitted to carry on business as a pharmacist at the particular premises. The contention was that, if any such law existed, any approval granted by the Secretary was necessarily beyond the power conferred by s 90(1) of the National Health Act. In particular, s 90(4) was apt to include town planning laws, pursuant to which the relevant premises could not be used for carrying on business as a pharmacist without a permit, where no permit had been granted. The Secretary and the second respondent, on the other hand contended that the limitation applied only to State and Territory laws dealing with the right to carry on the business of a pharmacist, particularly laws requiring the registration of pharmacists. 11 Much of the argument in the case was about the meaning, and the correctness, of the principal authority on the operation of s 90 of the National Health Act, the Full Court judgment in Secretary, Department of Health, Housing, Local Government and Community Services v Kaderbhai (1994) 51 FCR 416. In that case, the application for approval described the premises in respect of which it was made as a shopping centre. The application included a plan of the shopping centre, with one shop marked as "chemist". The Pharmacy Restructuring Authority refused to recommend approval. On appeal to the Administrative Appeals Tribunal, the applicants for approval proposed that they would use part of other premises within the shopping centre for their pharmacy. The Tribunal substituted for the original decision a recommendation that those applicants be approved for the purposes of supplying pharmaceuticals from the shopping centre. On appeal, the Full Court held that the word "premises" could embrace a shopping centre and that the application was therefore made in respect of "premises", which did not need to be described in greater detail. A fresh application was therefore unnecessary. The Full Court also held that approval under s 90(1) of the National Health Act might be granted in respect of part only of the premises that were the subject of the application. In the course of its reasoning, the Court referred to submissions that had been made. These were that, consistently with s 90(4), the premises approved under s 90(1) must be the very premises at which the pharmacist is permitted under the State law to carry on business. The "particular premises" in respect of which an application for approval was granted must correspond exactly with the "particular premises" referred to in s 99K(1)(b), the "premises" referred to in s 90(4) and "those premises" in respect of which approval was granted under s 90(1). Approval could therefore not be granted in respect of part only of the premises the subject of the application. In response to these submissions, the Full Court said at 421-422: These submissions require consideration of s 90(4), which is a curiously worded provision. It does not say that the Secretary shall not approve a pharmacist whose premises are not approved and who is not registered as the owner of the relevant business under State or Territory law relating to control of pharmacies. At first glance it may seem to amount to no more than an expression of intention that the Act should not displace any such State or Territory law in accordance with s 109 of the Constitution. The Secretary, however, evidently takes the view that s 90(4) operates as a limitation on power and that an applicant must show that he is permitted under a law, such as the Pharmacy Act, to carry on business at the premises in respect of which approval is to be granted. The Secretary is plainly correct. The expression "Nothing in this section authorizes" signals a limitation on power. This expression is similar to the language limiting the legislative power of the Parliament employed in s 51 (xxiiiA) of the Constitution. The permission contemplated by s 90(4) must be specific to "that pharmacist" in respect of the premises for which approval is to be granted. The permission required is not of a town planning or land use type, which would relate only to the premises. French J explained s 90(4) in Pharmacy Restructuring Authority v Chatfield (1993) 18 AAR 34 at 51: "In truth, the subsection provides that the secretary has no power to make an approval where State law would not permit the pharmacist to carry on business at the subject premises. Because of this disempowering effect, the subsection requires the secretary to at least consider whether a proposed approval would be nugatory where by reason of State law the pharmacist would not be permitted to carry on business at the proposed premises." 12 Manifestly, the Full Court's statement that "the permission required is not of a town planning or land use type, which would relate only to the premises", if correct, is fatal to the appellant's argument in the present case. For these reasons, the appellant argued that the passage quoted from the Full Court in Kaderbhai, was not part of the reasoning in the case, and accordingly was not binding. In any event, the appellant submitted, what the Full Court said in that passage was wrong and should not be followed. 13 Reference was also made to other cases. Pharmacy Restructuring Authority v Chatfield (1993) 43 FCR 418, from which the Full Court in Kaderbhai drew the quote from French J, was a judgment of the Full Court, dealing with the question whether the Administrative Appeals Tribunal had departed from the guidelines laid down under s 99L of the National Health Act. The guideline concerned required the pharmacist seeking approval to demonstrate to the Authority that there was a "definite unmet public need for" the approval. At 423, Davies and Lee JJ said: Counsel submitted that the Tribunal ought to have had regard only to that aspect of a pharmacy which involved the dispensation of prescriptions attracting benefits under the Commonwealth's health scheme. However, there is nothing in the legislation which limits the ambit of the Tribunal's consideration to such a matter. It is not irrelevant that an approved pharmacist dispenses all prescriptions, whether they attract a Commonwealth benefit or not. Nor is it irrelevant that pharmacies provide other services and sell other goods. The Minister's test is that of a definite unmet public need for an approved pharmacy. It is not necessary to artificially limit consideration of the consequences of granting or refusing approval in a manner which does not reflect the way in which pharmacies carry on business in this country. 14 The passage quoted above from Kaderbhai was followed in Battalis v Secretary, Department of Health, Housing and Community Services (1994) 34 ALD 483 at 488-489. Apparently, Kaderbhai was not drawn to the attention of the Court in Australian Community Pharmacy Authority v Eaves; Low v Australian Community Pharmacy Authority (1997) 47 ALD 664. That case concerned a decision of the Authority, to which s 90(4) of the National Health Act is not applicable, not a decision made under s 90(1) of the National Health Act, to which s 90(4) is applicable. At 669, Kiefel J said: The submission that questions to be addressed by the ACPA under the rules, such as need, proceed upon an assumption that that need would be met if the recommendation and subsequent approval were granted is, I consider, met by considering the secretary's powers. In this respect while the terms of r 6 (and r 5) would not permit the ACPA to withhold a recommendation of approval, on the basis that there was some outstanding town planning consent or other statutory approval necessary, those matters are to be considered by the secretary under s 90(4) 15 Her Honour then referred to the observations of French J in Chatfield at 435, which observations include the passage quoted by the Full Court in Kaderbhai. 16 Such authority as exists therefore reflects conflicting views on the question essential to this case, namely whether town planning and land use laws are irrelevant to the Secretary's consideration of an application for approval under s 90(1) of the National Health Act, because they do not fall within the limitation imposed by s 90(4). French J in Chatfield and Kiefel J in Eaves both seem to suggest that s 90(4) requires the Secretary to consider the effect of State and Territory town planning and land use laws, whereas the Full Court in Kaderbhai reached the conclusion that those laws are irrelevant to the Secretary's consideration of an application for approval under s 90(1). Unless this Full Court declines to follow Kaderbhai, on the ground that it is fundamentally wrong, the view of the previous Full Court should prevail. 17 Counsel for the appellant attempted to rely on the terms of item 201(b) of Sch 2 to the Determination, set out in [9] above. Counsel for the appellant argued that the fact that that item refers to local government and State or Territory laws relating to land development was to be regarded as a legislative indication that such laws have relevance for the purposes of s 90(4) of the National Health Act. The argument cannot be accepted. Item 201(b) is part of a direction to the Authority as to what it is required to consider when an application for approval under s 90(1) of the National Health Act is referred to it, pursuant to s 90(3A). As Davies and Lee JJ pointed out in Chatfield, in the passage quoted in [13] above, s 99L of the National Health Act has sufficient flexibility to permit the Minister to determine rules covering a broader range of subjects than the mere provision of pharmaceutical benefits pursuant to the scheme in Pt VII of the National Health Act. It is clearly open to the Minister to require the Authority to take into account the land use requirements of State, Territory and local laws if the Minister should consider that to be appropriate. This is an altogether different proposition from the proposition that, when the Secretary comes to consider the recommendation of the Authority pursuant to s 90(3B) of the National Health Act, she is obliged to consider the impact of those laws again. If, in applying the rule in item 201(b), the Authority has found that the relevant land development laws do not permit the relevant premises to be used for the purpose of operating a pharmacy, the Authority will not have recommended the grant of approval, and the Secretary will be unable to grant the approval. The contention that, on receipt of a recommendation to grant approval, the Secretary is required by s 90(4) to revisit questions of State and Territory law relating to land use is another thing altogether. (It is noteworthy that, in the present case, the Authority must have recommended in favour of the grant of approval, notwithstanding the fact that the second respondent requires a permit under the planning scheme to conduct the business of a pharmacy at the relevant premises, and does not have such a permit. Neither the proceeding at first instance nor this appeal involves a challenge to the recommendation of the Authority, however.) 18 In considering the construction of a legislative provision, s 15AA of the Acts Interpretation Act 1901 (Cth) ("the Acts Interpretation Act") requires the Court to prefer a construction that would promote the purpose or object underlying the Act to a construction that would not promote that purpose or object. Section 15AB of the Acts Interpretation Act provides that, in ascertaining the meaning of a provision, regard may be had to certain extrinsic materials. In the present case, counsel for the second respondent (whose submissions in this regard were adopted by counsel for the Secretary) attempted to rely on the second reading speech in respect of the bill that introduced into the National Health Act s 90(1) and s 90(4). In essence, the second reading speech was called in aid of the proposition that these provisions were designed to preserve the existing State and Territory schemes for the registration of pharmacists. The remarks in the second reading speech are of a general nature, and do not refer to specific provisions. They are of no help in determining whether s 90(4) requires the Secretary to consider provisions of State and Territory law relating to town planning and land use. 19 The purpose of s 90(1) of the National Health Act is ascertainable from its context in Pt VII of the National Health Act. Approval of a pharmacist to dispense pharmaceutical benefits at particular premises is part of a scheme the object of which is to establish and regulate the provision of drugs and medicinal preparations to members of the public for whom they are prescribed, on a subsidised basis. It is unlikely that, in the pursuit of a purpose associated with that scheme, Parliament would have intended to require the Secretary to search for and consider every provision of the law of the State or Territory in which the relevant premises were situated that might bear on the legality of the person applying for approval conducting the business of a pharmacist at those premises. Not only would the task of ascertaining what were the relevant provisions be onerous, the process of applying them would involve duplication of functions that are already committed to the authorities of the State or Territory concerned. It is unlikely that Parliament intended that such duplication should occur. The rights and wrongs of the conduct of particular activities at particular premises are matters for the concern of State and Territory authorities, and not for the concern of the Secretary. A construction that requires the Secretary to engage in an onerous procedure, involving duplication of functions, should not be adopted if there is an alternative construction that promotes the purpose or object of the provisions. To the extent to which it might be considered that State or Territory laws are relevant, it is open to the Minister to make rules pursuant to s 99L of the National Health Act, requiring the Authority to apply those laws as part of its consideration of an application for approval referred to it under s 90(3A) of the National Health Act. As is pointed out in [17] above, so much is apparent from what was said by Davies and Lee JJ in Chatfield, in the passage quoted at [13] above. 20 The preferable construction is to regard s 90(4) of the National Health Act as not so much a limitation on the power of the Secretary to grant an approval pursuant to s 90(1), as a limitation on the extent of the approval that the Secretary grants. Viewed in this way, s 90(4) makes it clear that an approval granted by the Secretary pursuant to s 90(1) is not to be regarded as extending beyond the purposes of the scheme set up by Pt VII of the National Health Act, the Pharmaceutical Benefits Scheme. The approval is not to be regarded as overriding any provision of State or Territory laws under which the carrying on of the business of a pharmacy at the relevant premises by the particular pharmacist would not be permitted. On this construction, the Secretary would not be concerned with the operation of any laws of any State or Territory, but only with the granting or refusal of approval to a particular pharmacist to supply pharmaceutical benefits at particular premises, for the purposes of the Pharmaceutical Benefits Scheme. A pharmacist to whom such approval is granted would still need to be permitted by the laws of the relevant State or Territory to carry on the business of a pharmacist at the premises in respect of which the approval has been granted. The Secretary cannot grant the pharmacist an approval that would oust the effect of those State and Territory laws, but only an approval for the purposes of the Pharmaceutical Benefits Scheme. It would be for the authorities of the relevant State or Territory to apply and enforce the laws of that State or Territory. Accordingly, s 90(4) of the National Health Act is a declaratory provision that seeks to put beyond doubt that, although a pharmacist might be approved under s 90(1) for the purpose of supplying pharmaceutical benefits at or from particular premises, he or she being willing to do so on demand at particular premises, such an approval does not cover the field of all permits, licences or approvals a pharmacist may be required to obtain in order to comply with a law of a State or Territory in which the premises are situated, in order to carry on the business of a pharmacist. In that sense, s 90(4) of the National Health Act is not a limitation on the power of the Secretary, but explanatory of the content of the power. 21 The acceptance of such a construction has the effect of rejecting both the appellant's argument and the arguments put on behalf of the Secretary and the second respondent. The latter argument, that the Secretary is required to take into account laws of the relevant State or Territory relating to the registration of pharmacists, seems to be inconsistent with the terms of the National Health Act itself. In particular, s 4(1) of the National Health Act contains a definition of "pharmacist" in the following terms: pharmacist means a person registered as a pharmacist or pharmaceutical chemist under a law of a State or Territory providing for the registration of pharmacists or pharmaceutical chemists, and includes a friendly society or other body of persons (whether corporate or unincorporate) carrying on business as a pharmacist. Approval pursuant to s 90(1) of the National Health Act can only be granted to a person who is a "pharmacist", ie one who satisfies the definition in s 4(1). In this way, State and Territory laws relating to the registration of pharmacists are brought into consideration expressly. It is unnecessary to regard s 90(4) as requiring consideration of laws relating to the registration of pharmacists.

Conclusion 22 The adoption of a purposive construction of s 90(4) of the National Health Act leads to the conclusion that, when considering an application for approval under s 90(1), the Secretary is not concerned with provisions of State or Territory laws, but only with the functioning of the Pharmaceutical Benefits Scheme. To the extent to which it stated that town planning and land use laws are irrelevant to the Secretary's function, what the Full Court said in Kaderbhai (quoted at [11] above) is consistent with that conclusion. Not all of the reasoning of the Full Court in Kaderbhai is consistent with the reasoning based on a purposive construction, however. Whether a purposive construction is adopted, or whether what was said in Kaderbhai is followed, the proper conclusion is that s 90(4) of the National Health Act does not require the Secretary to consider laws of a State or Territory relating to town planning or land use. On either view, the appellant cannot establish that the Secretary's grant of approval to the second respondent to supply pharmaceutical benefits from the premises in respect of which he applied for approval was invalid. In our view, the purposive construction is to be preferred to the reasoning in Kaderbhai. The primary judge was correct to dismiss the application to set aside the Secretary's decision. The appeal must be dismissed. No reason was advanced, and none appears, why the usual principle, that costs follow the event, should not be applied. Accordingly, the appellant will be ordered to pay the costs of the appeal of the Secretary and the second respondent. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Gray, Greenwood and Tracey.

Associate: Dated: 19 June 2009 Counsel for the appellant: Mr G Gibson QC with Ms S Brown

Counsel for the first respondent: Mr K Dorney QC with Ms M Brennan

Solicitor for the first respondent: Australian Government Solicitor

Counsel for the second respondent: Mr R Gotterson QC and Mr S Cooper

Solicitor for the second respondent: DLA Phillips Fox