Australia: Update On Recent Cases Concerning Approvals To Supply Medicine Under The Pharmaceutical Benefits Scheme

Public Law Report

In two recent Federal Court decisions, important principles of administrative law have been considered in the context of applications by pharmacists for approval to supply medicine under the Pharmaceutical Benefits Scheme (PBS). These include:

  • the time at which the Administrative Appeals Tribunal (AAT) is to take into account facts relevant to an application,
  • the application of the procedural fairness requirement that a person affected by a decision be given an adequate opportunity to be heard, and
  • the question of whether there is the power to "re-make" a decision to cancel an approval.

Commonwealth of Australia v Horsfall (2010) 115 ALD 344


Mr and Mrs Horsfall (the Horsfalls) applied for approval to operate a new pharmacy supplying medicines under the PBS in accordance with the National Health Act 1953 (Cth) (the Act). The Australian Community Pharmacy Authority (the Authority) recommended to Medicare (as the delegate of the Secretary of the Department of Health and Ageing) that the Horsfalls' application not be approved because it was not satisfied from information supplied by the Horsfalls that they had a legal right to occupy the proposed premises as at the date of lodgement of the application (the premises requirement).

AAT Decision

The Horsfalls applied to the AAT for a review of the Authority's decision and filed material to show that they in fact had a legal right to occupy the proposed premises.

However, before the AAT, the Authority argued that the Horsfalls' application no longer met another legislative requirement: that the proposed premises be at least 10km (by the shortest lawful access route) from the nearest approved premises (the distance requirement). The distance requirement had been met by the Horsfalls at the time of their application to the Authority. However, after recommending that the Horsfalls' application not be approved, the Authority recommended the approval of an application by another person (Ms Carter) relating to a nearby pharmacy.

In a document filed with the AAT, the Authority conceded that the Horsfalls did in fact satisfy the premises requirement at the time that the Horsfalls provided further supporting material.

The AAT therefore proceeded on the basis that the only question to be determined was whether or not the Horsfalls' application met the distance requirement. It ultimately determined that it was not required to take notice of the recommended approval of Ms Carter's application and that the Horsfalls' application should be assessed, in light of the concession by the Authority, by applying the facts as at the time that the Horsfalls initially made their application.

Decision of the Federal Court

The Authority appealed to the Federal Court which set aside the decision of the AAT and affirmed the decision of the Authority on the basis that, as a matter of law, the AAT was required to take into account the fact that the application by Ms Carter had been recommended for approval at the time it came to review the Authority's decision in relation to the Horsfalls' application. The effect of this was that the Horsfalls' application should not have been recommended for approval as it did not comply with the distance requirement.

The court applied the general rule, as stated in Shi v Migration Agents Registration Authority (2008) 235 CLR 286, that the AAT's function is to review an original decision-maker's decision using all the material available to it, not just the material that was before the original decision- maker, and on the basis of the facts as they stand at the time the AAT makes its decision, not at the time of the original decision. In doing so, the AAT does not have a discretion to disregard otherwise relevant material. The general rule is subject to any limitation imposed by the enabling legislation that empowers the primary decision-maker to act, which may in fact confine the AAT to the facts, and material bearing on those facts, as they stood at some earlier point in time, such as the date of the original decision. The court found that the relevant legislative provisions in the Act did not impose any such limitation.

Flaherty v Secretary, Department of Health and Ageing (2010) 115 ALD 315


Ms Hinde held an approval in respect of premises in NSW (the Premises). In late 2007, she pleaded guilty to a charge of dangerous driving occasioning death and was sentenced to a term of imprisonment.

Medicare, as the Secretary's delegate, had deactivated Ms Hinde's approval, at her request, on more than one occasion in 2008. Her approval remained deactivated until October 2008. After becoming aware of Ms Hinde's incarceration, the delegate corresponded with Ms Hinde at her prison address, noting that her approval had been deactivated for over 12 months and if she were not carrying on business as a pharmacist at the Premises then the delegate would be minded to cancel her approval. Ms Hinde was invited to make a written submission.

Further correspondence between Ms Hinde's solicitors and the delegate culminated in a letter from the delegate in March 2009 inviting Ms Hinde to provide further information within a set time period, failing which the delegate may cancel her approval on the information then available. That information was not supplied. The delegate was subsequently informed by a Pharmacy Guild that an offer had been made by a third party to purchase Ms Hinde's approval and the pharmacy.

In April 2009, the delegate purported to cancel Ms Hinde's approval under section 98(3) of the Act (the cancellation decision) and wrote to Ms Hinde notifying her of the decision.

In May 2009, the appellant, Mr Flaherty, applied for an approval in respect of the Premises including a copy of a lease of the Premises. On the basis that Ms Hinde may not have been afforded procedural fairness, the delegate reviewed the cancellation decision and reinstated Ms Hinde's approval.

Federal Court Proceedings

Mr Flaherty applied to the Federal Court under the Administrative Decisions (Judicial Review) Act 1977 (Cth) seeking orders that the revocation of the cancellation decision, and reinstatement of Ms Hinde's approval, be quashed or set aside.

At first instance, it was held that the cancellation decision was a nullity and the revocation and reinstatement was valid, because the cancellation had arisen in breach of the rules of procedural fairness. On appeal, the Full Court considered whether there had been a denial of procedural fairness and whether the delegate had power to "remake" the cancellation decision under section 33(3) of the Acts Interpretation Act 1901 (Cth) (AIA). That section provides that where an Act confers power to make, grant or issue any "instrument", the power, unless the contrary intention appears, is to be construed to also include the power to repeal, rescind, revoke, amend or vary the "instrument".

The Full Court held, on the facts, that the delegate had satisfied the obligation to afford procedural fairness and declared the cancellation decision to be valid. Ms Hinde had not availed herself of the opportunity to put her case by reference to matters that might have assisted her before the delegate within the time afforded to her to do so and before the cancellation decision was made.

The Full Court also held that the delegate did not have any power under the AIA to remake the cancellation decision. The power the delegate was exercising was a power to cancel an approval, not to "make, grant or issue any 'instrument'". The relevant provisions of the Act demonstrated a sufficient contrary intention to exclude the operation of section 33(3) of the AIA. The decision purporting to remake the cancellation decision and the decision to reinstate Ms Hinde's approval were both set aside.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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