Appeal lost over “fraud” judgement

A Tasmanian pharmacy that had two concurrent premises has lost an appeal in the Federal Court, after a judge found it was trying to get around location rules

In March 2016, the sole director and shareholder of a discretionary trust applied for approval of pharmacy premises in a Hobart shopping centre.

These premises (T19) were beyond 500 metres from existing approved premises.

Then in September 2016, the appellant executed a lease for tenancy of separate premises (T4), and subsequently made an application to the Tasmanian Pharmacy Authority (TPA) for approval of these premises.

Despite two premises being held concurrently for pharmacy purposes, in November 2016 the Australian Community Pharmacy Authority [the Authority] recommended to the Secretary that approval be granted to supply pharmaceutical benefits from the temporary T19 premises. Following this, 10 days later, the TPA approved in principle the application in respect of tenancy T4.

It was later found out by a judge under cross-examination of the pharmacy’s director that T19 was only ever temporary, with the plan to transfer approval to T4, which was within 500 metres of existing approved premises.

Brought to court

On 1 December 2016, two other pharmacies that would have been affected by the decision brought the appellant to court over its attempt to circumvent the 500-metre rule.

The respondents sought to have the Authority’s November approval recommendation set aside on the grounds that the application “was not a bona fide application and was merely part of a scheme for it to obtain approval for it to operate a pharmacy from different premises in respect of which approval was prohibited”.

The respondents claimed the appellant had submitted misleading information to the Authority and in so doing disabled it from making a true assessment of the nature of the application.

In this initial hearing, the primary judge noted that the appellant held approvals for both premises concurrently, and that the pharmacy director’s true intention was to transfer any approval granted for tenancy T19 to tenancy T4, thereby avoiding the 500-metre distance restriction.

In addition, the judge found a statutory declaration organised by the director’s solicitor – who was authorised to act on the director’s behalf at the given time – which described tenancy T4’s usage of the premises as open and operating to supply “retail goods” provided “false and misleading information”.

He found that the effect of the false and misleading information in the statutory declaration was that if the Authority had been made aware of the “true facts”, it might have concluded that T19 was a “temporary selling point”.

As a result of this, the primary judge was satisfied that the “proven conduct” of the appellant was “within the meaning of ‘fraud’ as that concept applies in this specific public law context”.

The judge ordered the setting aside of the Authority’s recommendation for approval of the pharmacy premises to supply pharmaceutical benefits.

Appeal: decision overturned?

However in an appeal this month brought by the appellant before a Full Court in the Federal Court of Australia, the judges found the respondents had not identified any provision that directly or expressly rendered the appellant’s strategy illegal or in any way unlawful.

“The relevant aspect of the case for the respondents before the primary judge, as pleaded and argued, only appeared to take issue with the appellant’s strategy insofar as it was alleged that the correct characterisation of the appellant’s application was that there was no real application for approval for the temporary premises at all, and that this had been concealed,” Justices Griffiths, Mortimer and Bromwich found.

“The respondents’ pleaded case was therefore, at most, one of the appellant misleading the Authority by omitting reference to its strategy.”

The judges found the primary judge had not based his decision to set aside the Authority’s recommendation upon such an omission, but on his finding that the appellant had deliberately or recklessly provided false or misleading information.

The appellant denied all allegations of fraud.

In their appeal decision, the Federal Court judges found the appellant had not been provided an opportunity to properly defend himself against allegations of fraud based on the acts of his solicitor.

“These were grave findings to make against anyone who had not given evidence … or had not otherwise been put on notice that such a finding was under consideration,” they said.

“None of the findings made against [the solicitor], and through him the appellant, were safe to make in the absence of him being given a chance to be heard and to defend himself.”

Therefore the judges found the appellant had been denied procedural fairness and was entitled to have the primary judge’s order setting aside the Authority’s application recommendation overturned.

A turn of events…

But in a surprise turn of events, 10 days before the appeal hearing – on 27 October this year – the Pharmacy Authority decided to recommend to the Secretary that approval not be granted to the appellant after all.

This decision was made on reconsideration of the appellant’s application, based upon the Authority not being satisfied either that the proposed premises were in a small shopping centre, or that they were at least 500 metres in a straight line from the nearest approved premises.

Due to this development, the appeal judges exercised their discretion not the set aside the orders of the primary judge on the basis of futility.

Further, while the appellant contended that the respondents should be ordered to pay 50% of his costs, the judges  found the appellant had elected to continue the appeal despite knowing of the Authority’s recommendation decision not to grant approval at least a full week before the scheduled hearing of the appeal on 6 November 2017.

The appeal was therefore dismissed and the appellant was ordered to pay costs to the two pharmacies that had initially taken him to court.

*The original story failed to clarify that the legal case involved the Australian Community Pharmacy Authority rather than the Tasmanian Pharmacy Authority. This has now been amended. AJP apologises for the error

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  1. pagophilus

    Get rid of the location rules. They are a relic of times past and no longer relevant.

    • Cstreet Fchemist

      I agree, and change renumeration to a dispensing fee of $4.85 and 35% unrestricted mark up.

      • Gavin Mingay

        Increasing the pharmacist award rate to at least $35 per hour would be much better for the industry…

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