Smoker, G.I. v. The Pharmacy Restructuring Authority & Ors [1994] FCA 859

JUDGMENT No, wm O2tat tt. CATCHWORDS

ADMINISTRATIVE LAW - judicial review - Minister empowered to

determine guidelines under National Health Act 1953 (Cth) which Pharmacy Restructuring Authority required to comply with

- guidelines determined requiring mandatory compliance by Authority - whether guidelines ultra vires.

HEALTH LAW - pharmaceutical benefits - application for approval of pharmacist to supply pharmaceutical benefits from premises - whether applicant satisfied requirements of

guideline 3(£) when approval of other pharmacist in respect of the same premises had been cancelled more than one month prior to the application.

Norbis v Norbis (1985-86) 161 CLR 513; discussed. Riddell v Riddell (1993) 42 FCR 443; distinguished.

"guideline"

National Health Act 1953 (Cth): Part VII, ss.90, 99K, 99L

GARY IAN SMOKER v

No NG278 of 1994

WILCOX, BURCHETT & HILL JJ SYDNEY 17 NOVEMBER 1994

17 NOV 1994

FEDERAL COURT OF AU

STRALIA PRINCIPAL REGISTAY

No NG278 of 1994

ee ee ewe

BETWEEN : GARY IAN SMOKER Applicant

AND: THE __ PHARMACY__ RESTRUCTURING AUTHORITY

First Respondent

COMMONWEALTH OF AUSTRALIA

Second Respondent

THE SECRETARY to the DEPARTMENT OF HEALTH

Third Respondent

CORAM: WILCOX, BURCHETT & HILL JJ PLACE: SYDNEY DATED: 17 NOVEMBER 1994

MINUTES OF ORDER

THE COURT ORDERS THAT:

(1) Application dismissed.

(2) Applicant to pay respondents' costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

FEDERAL RT AUSTRALIA

) NEW SOUTH WALES DISTRICT REGISTRY ) GENERAL DIVISION )

No. NG 278 of 1994

ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN: GARY IAN SMOKER Applicant

AND: THE PHARMACY RESTRUCTURING AUTHORITY

First Respondent

COMMONWEALTH OF AUSTRALIA

Second Respondent

THE SECRETARY to the DEPARTMENT OF HEALTH

Third Respondent

CORAM: WILCOX, BURCHETT & HILL JJ PLACE: SYDNEY

DATE: 17 NOVEMBER 1994

REASONS FOR JUDGMENT

WILCOX J: I have had the advantage of reading a copy of the reasons for judgment to be delivered by Hill J. I agree with his views. His discussion of the background to the Ministerial determination is informative, and supportative of his conclusion on the major issue in the case; although I would have been prepared to reach the same conclusion without

that material, simply because of the terms of s.99K(2) of the

National Health Act.

As Hill J indicates in his reasons, the case took an unusual turn. It was originally only an application by way of appeal from a decision of the Administrative Appeals Tribunal, to the effect that sub-para.(f) of the guidelines did not apply to Mr Smoker's application. However, when the case was called on before us, counsel for the applicant sought leave to amend the Notice of Appeal by adding two additional respondents, the Commonwealth of Australia and the Secretary of the Department of Health, and by seeking a declaration of the guidelines' invalidity and a consequential order. Counsel for the original respondent, the Pharmacy Restructuring Authority, had notice of this application. They had instructions to appear for the proposed additional respondents and were ready to meet the new points. So we granted the

application and argument proceeded on all issues.

It was not long before the wisdom of the amendment become apparent. Despite counsel's best endeavours, it became clear that the proposition that this case fell within sub- para.(f) of para.3 of the determination was unarguable. Hill

J deals with that matter. I need say no more.

It was common ground between counsel that, if sub- para.(f) does not apply to the case, then, as a matter of construction, sub-para.(a) forbids the Authority to recommend

an approval under s.90(1) of the Act. As s.90(3B) forbids the

3. Secretary to grant an approval without a recommendation to that effect from the Authority, the result of the application of sub-para.(a) is that the Secretary was correct in refusing

the application.

It is at this point that the amendment becomes important. The amendment challenges the view, accepted by both the Authority and the Tribunal, that the guidelines are legally binding. The argument pursuant to the amendment asserts that the guidelines, as the name itself suggests, do no more than provide guidance to the Authority; that the Authority retains a residual discretion regarding its ultimate decision. Counsel argue that, as it is clear that the Tribunal did not approach the matter in this way, it fell into error of law; the Tribunal's decision must be set aside and

the matter remitted for rehearing.

There is no doubt that this is the stronger of the applicant's two points. However, like Hill J, I believe it

must fail.

Parliament's choice of the word "guidelines", to describe the contents of a Ministerial determination, was unfortunate. As Hill J points out, the Macquarie Dictionary defines "guidelines", in the plural, as "a statement which defines policy or the area in which a policy is operative". I think that is the way in which the word is ordinarily used in

Australia. Generally speaking, the function of "guidelines"

4. is to provide information and to point the way to a particular conclusion, without dictating that conclusion. Generally speaking, a residual discretion remains. However, like Humpty Dumpty in "Alice through the Looking Glass", Parliament can give a word any meaning it wishes. "When I use a word, it means just what I choose it to mean - neither more than less +». The question is, which is to be the master - that's all". Parliament is not bound by ordinary usage. Provided it makes its intention clear, Parliament can use any word it wishes, however much this may offend linguistic purists. The critical question in this case is whether Parliament has clearly evidenced an intention to subordinate the Authority's

discretion to the Ministerial guidelines.

It seems to me that when the case is considered in this way, there is no question about the proper result. Section 99K(2) provides that, in making a recommendation in respect of (inter alia) s.90 applications, "the Authority must comply with the relevant guidelines determined by the Minister

under section 99L". Section 99L reads:

"99L(1) The Minister must determine in writing the guidelines 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."

I do not place much weight on the language of

5. s.99L(1). Guidelines "subject to which the Authority is to make xecommendations"" need not necessarily be binding; they might merely provide guidance to which the Authority is to subject itself in working towards its decision. Nor is subs.(2) determinative of the issue. If Parliament intended that the guidelines be binding, it would be rational to make a determination a disallowable instrument. But not all disallowable instruments have binding force; for example,

Rules of court.

However, it seems to me there is no arguing with s.99K(2). That subsection states that the Authority is to "comply with" the guidelines. To refer once again to the Macquarie Dictionary, "comply with" means "to act in accordance with". A person does not "comply with" a document

by acting in contravention of it.

Paragraph 3(a) of the Minister's 1991 determination said that "approval of a pharmacist shall not be recommended in respect of premises located within 3 kilometres by normal access routes from other premises in respect of which a pharmacist is already approved". Once it concluded that the premises in respect of which Mr Smoker sought approval fell within that description, the only way the Authority could "comply with" the guidelines was to refrain from recommending an approval. As the Authority had to make a recommendation on the application one way or the other (see s.99K(b), it had no

option but to recommend refusal.

6.

When it came to consider the matter, the Tribunal was in the same position as the Authority. Having regard to its findings of fact, the Tribunal was bound in law to reject Mr Smoker's appeal. It follows that Mr Smoker is not entitled to any of the relief he claims in this Court. His appeal should be dismissed with costs.

I certify that this and the preceding five (5) pages

are a true copy of the Reasons for Judgment

of the Honourable Justice Wilcox.

Associate: L L tea oo

EE collna Dated: 17 November 1994

FE TRALI.

W. T_RE TRY

GENERAL DIVISION

NG 278 of 1994

ww

ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN: GARY IAN SMOKER Applicant

AND: Y RE TUR Al TY First Respondent MMONW TH OF AUST IA Second Respondent

ECRETARY TQ THE DEPARTMENT OF HEALTH

Third Respondent

CORAM: Wilcox, Burchett and Hill JJ. PLACE: Sydney DATE : 17 November 1994

REA: R DGMENT

I have had the advantage of reading the reasons for judgment

prepared by Hill J.

When Parliament confers a discretion to be exercised in accordance with guidelines, the meaning is, of course, to be ascertained in the light of the context. That is true of every statutory provision. But unless the context compels a contrary conclusion, language of that kind is not apt to withdraw the

discretion from the person or body addressed. A guideline does

2. not do that, just as guidance does not imply dictation, nor is

a guide normally thought of as a commander. See Norbis v. Norbis

(1986) 161 CLR 513 at 519-520, and Riddell _v. Secretary, Department of Social Security (1993) 42 FCR 443 at 450. Mason

and Deane JJ. in the former decision and the joint judgment of the Full Court in the latter make it clear that "guidelines" mean guidance that in its nature is not binding. And it is not asking too much of the legislature to expect it to use plain English

according to its plain meaning. See Liversidge v. Sir John Anderson [1942] AC 206 at 245, per Lord Atkin.

It was argued that s. 99K(2), by employing the expression "the Authority must comply with the relevant guidelines", required "guidelines" to be understood in a special sense. If that were the only point in the case, I would not find it convincing. The word "comply" is apt to describe action in accordance with something else, such as a request, or, in this instance, a guideline. The utilisation of a guideline as such, and not as a command, may fairly be regarded as a compliance with it, in the sense of acting in accordance with it, since there is no other way in which it can be complied with; to treat it as a command is not to comply with a guideline, but to distort it into something else. On this basis, the language can be read in a consistent sense that does no violence to the accepted meanings of the words. It would do violence to the ordinary understanding of "guideline" to read it as signifying a binding rule. In my opinion, it is important that the Court should give no

countenance to a loose usage which might introduce doubt wherever

3. a statute refers to guidelines. It would be particularly unfortunate if this decision not only introduced doubt, but suggested that discretions actually conferred by Parliament subject to guidelines, in other cases, might be eroded away to binding rules stated, not by Parliament, but by some subordinate

authority in a document called guidelines.

However, since the argument of this case, Hill J. has drawn attention to the wider legislative context in which the relevant provisions are set. They flow from the terms of an agreement recognized by the legislature, which provided for mandatory rules under the guise of guidelines. In that context, I agree with Hill J. that the so-called guidelines are rules, and the appeal

must therefore be dismissed.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

A/Associate: Liantbere

Date: 17 November 1994

No NG278 of 1994

wee ew

BETWEEN: GARY IAN SMOKER Applicant AND: THE __ PHARMACY _—~xRESTRUCTURING

AUTHORITY

First Respondent

COMMONWEALTH OF AUSTRALIA

Second Respondent

THE SECRETARY to the DEPARTMENT OF HEALTH

Third Respondent

CORAM: WILCOX, BURCHETT & HILL JJ

PLACE: SYDNEY

DATED: 17 NOVEMBER 1994 REASONS FOR JUDGMENT

HILL J:

Before the Court are what, in effect, amount to two separate applications (albeit contained in the one originating process) in the Court's original jurisdiction. The first is an application by way of appeal from a decision of the Administrative Appeals Tribunal ("the fribunal") constituted

by a Deputy President. To this appeal only the Pharmacy Restructuring Authority ("the Authority") is a party. The

second is by way of an application for judicial review

pursuant to the Administrative Decisions (Judicial Review) Act

1977 (Cth) ("the ADJR Act"), s39B of the Judiciary Act (1903) (Cth) and relying upon the Court's power to grant declarations. In respect of this second matter, the authority is the first respondent, the Commonwealth of Australia the second respondent and the Secretary to the Department of Health ("the Secretary") the third respondent. This second application seeks primarily a declaration that Guidelines purportedly issued by the Minister of State for Health ("the Minister") pursuant to s99L of the National Health Act 1953 (Cth) ("the Act") are invalid and, consequentially, orders setting aside the decision of the Secretary to refuse Mr Smoker's application for approval under s90 of the Act on 26

May 1993.

The background facts

The parties to the present application were, among others, parties to a previous application heard by Spender J and reported as Cenrin Pty Ltd v Lamb (1993) 42 FCR 167. That was an application brought under the ADJR Act to review, inter alia, a previous decision of the Authority not to recommend that an approval be given to Mr Smoker under the provisions of the Act to supply pharmaceutical benefits with respect to

premises at 85 Burwood Road, Burwood, New South Wales ("the premises"). Ultimately, his Honour acceded to the application

and remitted to the Authority for further consideration the

question whether to make that recommendation in respect of Mr

Smoker in relation to the premises.

The facts necessary to the determination of the present applications may be stated quite shortly. Up until 18 April 1991, Ms Allen, who was a party to the proceedings before Spender J and was a registered pharmacist, held an approval in respect of the premises, for the purpose of

supplying pharmaceutical benefits at or from those premises.

At the premises was conducted a 24 hour medical centre which included a pharmaceutical dispensary. The centre itself was owned by Cenrin Pty Limited, the business by Ms Allen. Ms Allen also held approvals with respect to two other premises

in close proximity to the premises.

For reasons which are not presently material, Ms Allen notified the Authority that she wished to cancel the approval granted to her in respect of the Burwood Road premises. Her action was not in any way connected with an intention to seek to have some other person approved with respect to the premises as a result of a sale of the pharmacy business, or similar transaction. Acting in accordance with 690(1) of the Act, the Secretary cancelled her approval on 18 April 1991. Prior to that date, on 5 April 1991, Mr Smoker telephoned an officer of the Authority and spoke of his intention to reopen a pharmacy at the premises after closure

of Ms Allen's pharmacy. The officer then sent to Mr Smoker an

application form for approval. Mr Smoker then completed that form in the name of his wife and forwarded it to the Authority where it was received on the same day as Ms Allen's approval

was cancelled, namely, 18 April 1991.

On 30 May 1991 Mr Smoker wrote to the Authority requesting it to change his wife's application to an application in his name and enclosed a fresh application in his name and signed by him. That letter was received by the Authority on 5 June 1991 but not dealt with for some time. After an application had been made to the Court by Mr Smoker, the application was considered on 17 April 1992 and the Authority notified Mr Smoker on 29 April 1992 that in its view he did not meet either Guideline 3(a) or Guideline 3(f£) to which reference will shortly be made. It was this decision which was the subject of the proceedings before Spender J to which reference has already been made. His Honour held that procedural fairness dictated that either Cenrin or Mr Smoker was entitled to notice of Ms Allen's application prior to any cancellation of her approval. On this basis it followed that the Authority's decision to refuse Mr Smoker's application for registration was contrary to law and should be set aside. However, his Honour also said that the Authority erred in law in the manner in which it went about determining to refuse Mr Smoker's application pursuant to Guideline 3(f). This was

because the Authority had taken the view that Guideline 3(f)

could have no operation other than in the case of the sale of

a pharmacy.

Spender J discussed the difficulty which the language of Guideline 3(f) contained. His Honour said that the Guideline was not restricted to circumstances concerned with the sale of a pharmacy business and in the result the Authority had not properly considered the application. In the event his Honour remitted the matter to the Authority for

further consideration.

The Authority considered the matter again at a meeting on 19 May 1993. It refused to recommend that approval be given to Mr Smoker in respect of the premises on the ground that Guideline 3(f) had not been met as a pharmacy was no longer approved on the premises. Mr Smoker then appealed to the Tribunal for administrative review of that decision. The Tribunal, in due course, affirmed the Authority's decision and Mr Smoker applied to this Court by way of an appeal from the

Tribunal's decision.

The legislative background

Australia's health system includes provision for benefits to be paid by the Commonwealth in respect of certain drugs and medicinal preparations, to which the provisions of

885 of the Act refers. The benefits so to be provided by the

Commonwealth are referred to in the Act as "pharmaceutical benefits": s84. A medical practitioner or, in certain cases, a dental practitioner may prescribe a drug to which s85 refers. If that drug is dispensed by a pharmacist approved under the Act, the patient is obliged only to pay a limited

fee to the pharmacist and the pharmacist is ultimately paid by

the Commonwealth.

Approval of pharmacists, for the purposes of the Act, is dealt with in s90 of the Act. A pharmacist willing to supply pharmaceutical benefits on demand at nominated premises is entitled to apply for approval for the supply of pharmaceutical benefits at or from the nominated premises. The application is required to be referred to the Authority (s90(3A)). The Authority is given, by the Act, the function of making a recommendation with respect to the application: 899K(1)(b). Approval by the Authority is a condition precedent to the giving of an approval under s90(1) ultimately by the Secretary: s90(3B). If a favourable recommendation has been given by the Authority, a discretion is given to the Secretary to refuse to grant it: s90(3B). The recommendation

procedure is to cease to have effect as and from 31 March

1995: s90(3C).

A person approved in respect of particular premises may request to have that approval cancelled in respect of

those premises under s98(1)(a) of the Act. If such an

application is made it is mandatory for the Secretary to cancel the approval. An approved pharmacist may also notify the Secretary that that pharmacist has ceased to carry on business as such at the premises and in such a case the

Secretary is empowered to cancel the approval: s98(2)(b).

The Authority is constituted, pursuant to Div 4B of Pt VII of the Act and consists of seven members including a chair person, two persons chosen from four to be nominated by the Pharmacy Guild of Australia, one person having experience in matters relating to the pharmacy industry and three other persons appointed. All are appointed by the Minister on a

part-time basis.

As I have already indicated, one of the Authority's functions is to make recommendations whether pharmacists should be approved under s90 to provide pharmaceutical benefits in respect of particular premises: s99K(1)(b).

Section 99K(2) provides:

"In making a recommendation under sub- section (1), the Authority must comply with the relevant guidelines determined by the Minister under section 99L."

Section 99L then provides:

"(1) The Minister must determine in writing the guidelines 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."

The background of those provisions of the Act concerned with the making of recommendations to the Authority is to be found in an agreement reached in 1990 between the Government and the Pharmacy Guild oof Australia, an organisation of employers registered pursuant to the provisions of the Industrial Relations Act 1988 (Cth), inter alia on the restructuring of the pharmacy industry in the form

of rationalising the number of pharmacies. That agreement

relevantly was given effect to by the Community Services and Health Legislation Amendment Act 1990 (Cth) which incorporated

into the Act, inter alia, the provisions referring to the Authority. As the Second Reading Speech of the then Minister for Aged, Family and Health Services, the Honourable Mr

Staples, records:

"For some time the Government has been concerned that there were too many pharmacies approved to supply Pharmaceutical benefits."

In the result 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.

Pursuant to the provisions of s99K(1)(b) of the Act the Minister made a determination effective from 29 May 1991 (Commonwealth of Australia Gazette, No GN20, 29 May 1991, 1745

at 1746) in the following terms:

"3. For the purposes of paragraph 99K(1)(b) of the Act, the following are guidelines with which the Authority must comply in making a recommendation on an application by a pharmacist under section 90 of the Act:

(a) approval of a pharmacist shall not be recommended in respect of premises located within 5 kilometres by normal access routes from other premises in respect of which a pharmacist is already approved;

(b) approval of a pharmacist in respect of particular premises shall not be recommended unless the pharmacist demonstrates to the Authority that there is a definite unmet public need for that approval;

(c) approval of a pharmacist in respect of particular premises shall not be recommended (except in the circumstances provided for in subparagraph (d)) if those premises

(d)

(£)

- 10 -

are situated within 5 kilometres by normal access routes of other premises in respect of which there has been granted financial assistance under section 99ZC or 992D of the Act;

approval of a pharmacist in respect of particular premises shall be recommended where those premises are located not more than 500 metres from other premises in respect of which that pharmacist is already approved under section 90 of the Act and from which the pharmacist proposes' to cease supplying pharmaceutical benefits;

approval of a pharmacist in respect of particular premises shall be recommended where those premises are located more than 500 metres but not more than 5 kilometres by normal access routes from other premises in respect of which that pharmacist is already approved under section 90 of the Act and from which the pharmacist

proposes to cease supplying pharmaceutical benefits, provided that:-

(i) there has been no grant of financial assistance made under section 99ZC or 99Z2D of the Act in respect of any other premises situated within 5 kilometres by normal access routes from the first-name premises; and

(ii) the pharmacist demonstrates to the Authority that there is a definite unmet public need for that approval;

approval of a pharmacist in respect of particular premises shall be recommended where a pharmacist 1s approved under section 90 of the Act in respect of those premises and where that approval is to be cancelled immediately prior to the granting of the first-named approval, as a consequence of a change of ownership arrangements of the premises;

-11-

(g) notwithstanding anything contained in subparagraphs (a) to (f), approval of a pharmacist in respect of particular premises shall be recommended where the Pharmacist entered into a financial commitment prior to 9 August 1990 (being the date on which the granting by the Secretary of approvals to pharmacies under section 90 of the Act was restricted pending the passage of legislation for pharmacy restructuring) in the expectation that an approval would be granted in respect of those premises, provided that the Authority is satisfied that there was such a prior commitment and the pharmacist produces to the Authority either -

(i) a bank statement, supported if necessary by an affidavit by the pharmacist's solicitor or accountant; or

(ii) details of any contractual arrangements together with = an affidavit by the pharmacist's solicitor or accountant attesting to the correctness of

the date that commitment was entered into.

(h) notwithstanding anything contained in subparagraphs (a) to (g), approval of a pharmacist in respect of particular premises shall be recommended where the application for approval of the pharmacist in respect of those premises was made prior to 9 August 1990 (being the date on which the granting by the Secretary of approvals to pharmacists under section 90 of the Act was restricted

pending the passage of legislation for pharmacy restructuring)."

A subsequent determination made by the Minister and which came into effect on 1 May 1993, replacing the determination set out above, contained a new paragraph (f) in

slightly different terms as follows:

~12-

"(£) notwithstanding anything contained in Subparagraphs (a) to (ea), approval of a pharmacist in respect of particular premises shall be recommended where a pharmacist is approved under section 90 of the Act in respect of those premises and where that approval is to be cancelled immediately prior to the granting of the first-name approval, as a consequence of a change of

ownership arrangements of the pharmacy business conducted at those premises;".

Although counsel for Mr Smoker suggested that the new determination was the correct determination to be applied by the Authority and the Tribunal, the case proceeded on the basis that the earlier determination was the relevant determination, that being, if anything, more favourable to Mr Smoker. In any event there 1s no dispute between the parties that if Mr Smoker was unsuccessful in respect of the earlier determination, a fortiori he would be unsuccessful in respect of the new determination. The Tribunal considered the matter

by reference to the earlier determination.

The Tribunal's reasons

There was no dispute between the parties that there were other premises within 5 kilometres of the premises in respect of which a pharmacist was already approved. It followed, therefore, that if Mr Smoker was to succeed by reference to the Guidelines he had to bring himself within the

provisions of para(f). The Tribunal was of the view that Mr

Smoker could not succeed under that paragraph. It discussed the syntax of that "Guideline" and concluded that it required that an approval of a pharmacist in respect of the relevant premises had to be in existence at the time the Authority was to make its recommendation. As Ms Allen's approval had been cancelled prior to Mr Smoker's application having been lodged, the Tribunal was of the view that para(f) had no application. The Tribunal incidentally rejected a submission made to it and repeated to us that the telephone call by Mr Smoker on 5 April

1991 constituted an application.

Before this Court counsel for Mr Smoker maintained the submissions made before the Tribunal that as a matter of construction of Guideline (f) his client was entitled to be considered for a recommendation in respect of the premises. Mr Smoker also maintained a submission that the Tribunal erred in holding that the telephone call of 5 April 1991 did not constitute an application by him. There was a further submission that the decision of Spender J constituted an issue estoppel requiring the Tribunal at the very least not to reject the application and refuse therefore to make a recommendation upon the basis that no transfer of a pharmacy

had taken place.

The more substantial submission made on behalf of Mr Smoker, however, concerned the validity of the so-called

Guidelines, a matter which the Tribunal had no jurisdiction to

-14-

consider and which accordingly was raised before us for the first time. Shortly put, the submission was that s99L of the Act did not authorise the making of so-called "Guidelines" making it mandatory for the Tribunal to refuse to make a recommendation. The consequence of this submission, if accepted, would be that the matter would have to go back to the Authority to determine whether or not a recommendation should be made to the Secretary, presumably without reference to the Guidelines. Consequentially the Secretary's decision

would be set aside.

Upon the assumption that the Guidelines are valid the appeal from the Tribunal's decision can be shortly

disposed of.

The language of para(f) is, in its application to the present case, clear and unambiguous. The Guideline operates only where at a relevant point of time no later than the point of recommendation, there is, in respect of the relevant premises, a pharmacist approved under the Act for the purpose of supplying pharmaceutical benefits at or from those premises. It is not necessary to determine for the purposes of the present case whether that point of time is the time the recommendation is to be made or the time an application under

890(1) is lodged with the Secretary. Upon the facts of the

- 15 -

present case, by the time Mr Smoker had lodged his application for approval under s90(1), the approval of Ms Allen, in respect of the premises, had been cancelled. It follows that immediately prior to the time Mr Smoker lodged his application there was no approval in force in respect of the premises which was to be cancelled in the future with the consequence

that Guideline 3(£) could have no application.

Reference to decisions such as Litster v Forth Dry Dock and Engineering Co Ltd (In Receivership) [1990} 1 AC 546

where it was held that notwithstanding that an employee's contract of employment had been terminated prior to the transfer of the employer's undertaking to a transferee the employee was to be taken to be employed "immediately before that transfer" can not avail Mr Smoker. That case depended upon the context of the regulation being construed and a

number of decisions of the European Court in similar cases.

The interpretation given to Guideline (f) by the Tribunal, with which, with respect, I agree, accords also with the policy inherent in the legislation for the restructuring of pharmacies. That legislation was designed to reduce the number of pharmacists approved for the purposes of the Act in a process of rationalisation. As a pharmacy closed approval was generally no longer to be given to pharmacists in respect of the premises upon which the closed pharmacy had previously

operated. However, there were obvious exceptions to that

- 16 -

policy. One of those exceptions was where no other pharmacy traded within 5 kilometres of the closed pharmacy by normal access routes. Another was where, subject to certain qualifications, there was a definite unmet public need for the service. Such a policy clearly could be seen to be unfair in so far as it restricted the ability of a pharmacist to deal with that pharmacist's business by way of sale or otherwise. Paragraph (f) was thus introduced to ensure that the other Guidelines were overruled where there was a change of ownership arrangements. The precise meaning of that expression need not be the subject of consideration in the present case. The expression appears to owe its origin to the provisions of cl 8.6 of the agreement reached between the Minister and the Pharmaceutical Guild of Australia pursuant to which the present legislation was implemented. That clause

stated as follows:

"Nothing in this agreement will prevent the granting of a new approval number to a pharmacy which continues to operate on the occasion of or following its_ sale, amalgamation or change in ownership arrangements.

Although the wording of para(f) of the Guidelines as considered by the Tribunal could hardly be described as felicitous, the paragraph should not be given a narrow construction and the reference to change of ownership arrangements of the premises should be read as at least

extending to a change of ownership arrangements in respect of

the premises so as to encompass a change of ownership of a pharmacy business operated on particular premises as well as a

change of ownership of the premises themselves.

Counsel for Mr Smoker drew attention to the difficulties which a construction in accordance with the ordinary language of the Guideline produced in the case of pharmacies that were leased or where the premises upon which the pharmacy business was constructed were the subject of a mortgage. It was submitted that a lessor could be substantially disadvantaged if the lessee of the pharmacy business acted under s98 of the Act to request cancellation of that pharmacist's approval in respect of the premises. It was submitted that the Secretary would have no discretion but to cancel the approval and the consequence would be that the value of the lessor's business would be seriously affected by virtue of the fact that an approval was no longer in force and Guideline (£) would not permit a new applicant to be approved in respect of the premises. Similarly it was submitted that the security of a mortgagee could be affected if the mortgagor carrying on a pharmacy on the premises sought to cancel the approval. However difficult such cases may be, they can not affect the construction of the clear words of Guideline 3(f). Further, lessors or mortgagees could take commercial steps to

minimise the difficulties said to exist.

- 18 -

The argument put based on res judicata may be simply dealt with. Spender J set aside the previous decision of the Authority on the basis that it had not given proper consideration to the question whether Guideline 3(f) applied at all in the circumstances of Mr Smoker's application. There were two reasons for his Honour's decision. The first was his Honour's view that the pharmacy had adopted a wrong construction of the words "change of ownership arrangements of the premises", the second was his Honour's view that the Authority had failed to accord procedural fairness to Mr Smoker in not advising Mr Smoker prior to cancelling Ms Allen's approval, of the cancellation application she had made to the Secretary. The decision on appeal to us is the decision of the Tribunal which stands in the shoes of the relevant decision-maker, the Authority. The decision of Spender J in no way precluded the Authority or the Tribunal standing in its place from considering whether Guideline (f) had application to Mr Smoker in the circumstances of the case. Indeed, that was the very matter which his Honour reserved for

consideration by the Authority.

The argument based upon factual matters must similarly fail. The appeal to this Court from the Tribunal is an appeal on, that is to say limited to a question of law. It is not sufficient for an applicant to submit that the Tribunal

ought to have found the facts differently. For a question of

law to emerge in a case such as the present, the applicant

must show that the finding of fact challenged was one not open

to the Tribunal at all.

Far from showing that it was not open to the Tribunal to find that Mr Smoker's application preceded the cancellation of Ms Allen's approval, the facts make it abundantly clear that the initial telephone conversation was not an application and that the first time Mr Smoker made an application was when on 30 May 1991 he requested the Authority to change the application from one in the name of his wife to one in his own name and enclosed with that request a signed application form. The telephone conversations could not, having regard to the provisions of reg 8(a) of the National Health (Pharmaceutical Benefits) Regulations being regulations in force under the Act be treated as an application, even if, contrary to the facts, the terms of the conversation otherwise so permitted, because an application has to be made in

accordance with an approved form.

0 lidi ¢ the Guidelines

The more difficult question in the present case is the validity of the Guidelines. The power in the Minister to determine the Guidelines which operate as disallowable instruments for the purposes of s46A of the Acts

Interpretation Act 1901 (Cth) is a power to determine

Guidelines subject to which the Authority is to make its

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recommendation under s99K(1). As has been seen s99K(2)

requires the Authority to comply with those Guidelines.

There is an inherent tension between the concept of a "Guideline" on the one hand and a mandatory requirement that the "Guidelines" be complied with, on the other. The normal meaning of the expression "Guideline" can be discerned from its dictionary meaning. The Macquarie Dictionary (2nd Rev)

supplies the following definitions:

"1. a line drawn as a guide for further writing, drawing, ete 2. (usu.pl) a statement which defines policy or the area in which the policy is operative."

In the context of administrative law the meaning of the expression is shown by cases such as Norbis v Norbis (1985-86) 161 CLR 513 at 519-20 where the distinction is drawn between the giving of guidance in the form of Guidelines and binding principles of law. In that case Mason and Deane JJ

said (at 520):

"The term 'guidelines', though not commonly used in relation to judicial discretions, is familiar enough in the bureaucratic and administrative world, where it denotes rules or standards which are not binding and may be relaxed when it is expedient to do so in order to do justice in the particular case. Guidelines were what Lord Wright had in

mind in Evans yv. Bartlam when he said ([1937] AC 473 at 488):

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'it is ... often convenient in practice to lay down, not rules of law, but some general indications, to help the Court in exercising the discretion...'".

See too the distinction drawn by the full court of this Court in Riddell v Secretary, Department of Social Security (1993) 42 FCR 443 at 449, to which reference will

shortly be made.

On the other hand, the mandatory language of s99K(2) appears inconsistent with this ordinary usage of the expression. A legislative command that the Authority "must comply with the relevant Guidelines" suggests that the Guidelines to be determined are to be mandatory. The first meaning in the Macquarie Dictionary of the word "comply" namely "to act in accordance with wishes, requests, commands, requirements, conditions etc" and, when coupled with the word "must", suggests that the Authority is to act in accordance

with the commands of the Minister contained in the Guidelines.

Reliance was placed upon the full court decision in

Riddell, to which reference has already been made. That case

arose under the provisions of s1237 of the Socia] Security Act 1991 (Cth) which provided:

"(1) The Secretary may ... decide to waive the Commonwealth's right to recover from a person the whole or a part of an overpayment or a debt.

(2) In exercising the power under subsection (1) the Secretary must act in accordance with directions from time to time in force under subsection (3).

(3) The Minister may, by determination in writing:

(a) give directions relating to the exercise of the Secretary's

power under subsection (1)...".

The Minister had made a determination that the power of the Secretary to waive the Commonwealth's right be exercised only in circumstances set out in the determination subject to a schedule which set out the circumstances where certain debts had to be waived. Neaves, Burchett and O'Loughlin JJ held the Minister's determination to be invalid.

Their Honours said (at 449):

"Putting aside the textual difficulties to some of which reference has been made, the evident purpose and effect of the instrument, if valid, was to limit the very wide discretion conferred on the Secretary by si237(1) so that, on the one hand, it might only be exercised in the restricted classes of case identified in the lettered paragraphs and, on the other, to require the discretion to be exercised so as to waive the debts in the cases falling within the schedule or, perhaps, in all the cases specified. The instrument will be valid only if the language of s1237(1) will support an instrument having that effect.

In our opinion, the language of s1237(3), when considered in its context and having regard to its legislative history, is not apt to have authorised the Minister to make the instrument of 8 July 1991. Section 1237(3) is not expressed in terms

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which authorise the Minister to circumscribe the wide discretion vested in the Secretary by s1237(1). The language used is more apt to describe a power in the Minister to give general guidance to the Secretary, whether by way of statements of policy or otherwise, in the exercise by him of the discretion vested in him but guidance which will leave the Secretary free, in any particular case, to depart from the guidance provided by the Minister's directions if the circumstances of the individual case warrant such a departure. ... When the determination purports to lay down quite precise rules dictating the result of all, or nearly all, applications, it departs radically from the statutory scheme because it is not giving guidance in the exercise of the power, but attempting to deny the exercise of the power."

The judgment then continued to discuss' the legislative history of s51237(1) which reinforced this

conclusion.

There are both similarities and differences between Riddell's case and the present case. On the one hand, the use of the word "Guidelines", rather than the use of the word "directions", points to the power of the Minister to give guidance rather than mandatory direction. However, the context and legislative history of the present provisions must

be considered to see if the same result follows as was arrived

at in Riddell.

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Unlike 81237, which the full court held conferred a broad discretion upon the Secretary to waive recovery, s99K is open to the construction that the function conferred upon the Authority to make recommendations is a function itself circumscribed by the requirement to act in accordance with the Guidelines. Section 99K is expressed in terms of function rather than power. It stands in contrast to the language of s90(1) which clearly confers upon the Secretary (but only in the case where a recommendation has been made by the Authority: s90(3B)) a discretionary power to determine whether or not to approve a pharmacist for the purpose of supplying pharmaceutical benefits at or from nominated premises. Reference may be made to the distinction drawn by Northrop and

Lockhart JJ in Edelsten v Health Insurance Commission (1990)

27 FCR 56 at 63 between functions and powers and see

e nsurance Co t. v Australian Securities Commission (1992) 40 FCR 409.

Reference to the legislative history, however, points, in the present case, strongly to the opposite

conclusion to that reached in Riddell.

As has already been noted, the provisions presently

under consideration and the Guidelines owed their origin to an agreement reached between the Minister and the Pharmacy Guild of Australia in relation to the implementation of a

restructure package for approved pharmacists in Australia.

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That agreement provided for amendments to be made to the Act, inter alia, to establish the Authority and empowering it to make recommendations. The agreement provided, amongst other things, for the making of Guidelines in respect of approvals under s90 of the Act. So far as is relevant the agreement

provided:

"8.1 To assist in the restructuring process, restrictions will apply from 9 August 1990 to 31 March 1995 on the issue of new approvals.

ooe

8.4 New approvals will only be issued where there is a demonstrated community need.

8.5 Subject to the guidelines issued under the Act not being disallowed by the Federal Parliament, the Authority will consider applications for approval based on the following guidelines:

(a) a new approval will not be granted

where there is an existing approved pharmacy operating within 5 kilometres by normal access routes from the proposed site;

(b) a new approval will require the demonstration of a definite unmet public need;

(c) a new approval will not be granted if a closure or amalgamation payment has been made with respect to a previous

approved site within 5 kilometres of the proposed new pharmacy;

(d) existing approvals can be relocated within their business centre, which is defined as the area within 500 metres of the existing approved site;

(e) existing approvals can be relocated to a new business centre where the new location is between 500 metres and 5 kilometres of the original site and a closure or amalgamation payment has not been made for a site within 5

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kilometres of the new site and a definite unmet public need can be demonstrated. 8.6 Nothing in this agreement will prevent the granting of a new approval number to a pharmacy which continues to operate on the.occasion of or following

its sale, amalgamation or change in ownership arrangements." (emphasis added)

As a perusal of the above provisions makes clear, the agreement contemplated the issue of mandatory rules which it called "Guidelines". Particularly the provisions of 8.5(a), (b) and (c) make clear that the discretion to make recommendations for approval was to be circumscribed by what the agreement referred to as the "Guidelines". The provisions of the agreement including, in part, its terminology were incorporated into the Act and the "Guidelines" ultimately

promulgated reflect largely the matters agreed with the

Pharmacy Guild.

It follows, in my mind, in these circumstances that the legislative history as well as the context in the present case points to an intention on the part of the legislature to authorise what are referred to as "Guidelines" but what more properly should be described as rules which in fact circumscribe the discretion which the Authority has. It follows, in my view, that the present case is distinguishable

from Riddell's case and that the so-called Guidelines in the

present case were validly made.

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I would therefore dismiss the appeal brought by Mr

Smoker with costs.

I certify that this and the preceding twenty-six (26) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Hill.

Date: 17 November 1994

Counsel and Solicitors SD Rares SC with A Hughes

for Applicant: instructed by Philip Gengos Counsel and Solicitors MJ Slattery OC with RM Henderson for Respondent: instructed by Australian

Government Solicitor Dates of Hearing: 29 September 1994

Date Judgment Delivered: 17 November 1994