Case No: C3/2004/1658
Neutral Citation Number: [2005] EWCA Civ 520
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
ADMINISTRATIVE COURT
MR JUSTICE COLLINS
[2004] EWHC 1726 (Admin)
Royal Courts of Justice
Strand, London, WC2A 2LL

Friday, 6 May 2005
Before :

LORD JUSTICE MUMMERY
LORD JUSTICE SEDLEY
and
LADY JUSTICE SMITH 
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Between :

	THE FIRST SECRETARY OF STATE & ANOTHER	Appellants	
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	SAINSBURY’S SUPERMARKETS LTD	Respondent	
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(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
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Nathalie Lieven (instructed by Treasury Solicitors) for the Appellants
Timothy Corner QC and Lisa Busch (instructed by Messrs Denton Wilde Sapte) for the Respondent

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Judgment
Lord Justice Sedley : 
This is the judgment of the court.
1.	Sainsburys have a successful out-of-town store at Kidlington in Oxfordshire which they want to expand. The local planning authority, Cherwell District Council, approved the necessary application, but the Secretary of State called it in. His inspector, following a full inquiry, supported the proposal, but after considering the inspector's report and obtaining supplementary information from him the Secretary of State decided that planning permission should be refused. On an appeal under s.288 of the Town and Country Planning Act 1990 Collins J quashed the refusal decision, and it is against his judgment that the Secretary of State now appeals with the permission of Buxton LJ. The district council takes no part in the appeal.
2.	The detailed history can be found in the full and careful judgment of Collins J at [2004] EWHC 1726 (Admin). We shall take it as read and will repeat only as much as is necessary to make this judgment intelligible.
3.	The single ground on which the Secretary of State concluded that planning permission should not be granted was that he was not satisfied that a quantitative need for the enlargement had been established. Quantitative need means, first, a demonstrated surplus of spending potential in the store's catchment area, and secondly that the proposed development will not injure existing retail provision in the town centre or on the edge of town. 
4.	The protection of town centres from evisceration by out-of-town supermarket developments has been policy since at latest the publication of PPG6 in 1996. In 1999 the minister, Mr Richard Caborn, spelt out a general requirement to establish a need for a development or extension at a particular location through a sequential approach to retail provision in the catchment area. In April 2003, just as the inspector was completing this inquiry, Mr Caborn's successor, Mr McNulty, reiterated the Caborn principles and added this:
"The First Secretary of State accepts that need can be expressed in quantitative and qualitative terms but considers that evidence presented on need is becoming increasingly and unnecessarily complicated. He therefore places greater weight on quantitative need for new retail provision to be defined in terms of additional floorspace for the types of retail development distinguished in PPG6, which are comparison and convenience shopping."
Convenience goods are short-life products; comparison goods are more durable products for which people can be expected to shop around.
5.	The conventional way of establishing quantitative need was explained to Collins J in a witness statement (the admissibility of which was unexplained but uncontested) made by Sainsburys' solicitor Mr Ashworth. It is to assess extant expenditure in the catchment area, usually at the date of the projected development, by aggregating the turnover (assumed to be each company's national average) of the existing stores; to quantify the local population's spending power from published figures; and to see how far, if at all, the latter exceeds the former.
6.	Sainsburys did not do this. They gave as their reasons that the Kidlington area was unusual in being close to the competing food stores in and around Oxford to which many local people had regular access, and that in the Kidlington catchment area there had been no significant food store development since Sainsburys' own development in 1991. They therefore took 1991 as their benchmark date and, making the assumption that demand and supply had been in equilibrium at that point of time, treated all growth in spending power since then as available money. 
7.	It is not difficult to see the difference in the probable outcomes of these two ways of quantifying consumer need, and not difficult to understand why the Secretary of State may have been cautious about the one Sainsburys had adopted and their reasons for doing so. The material passage of his decision letter is the following:
11. The Secretary of State notes that the applicant has put forward a case for retail need using quantitative and qualitative indicators.  He notes that the existing store is trading at a sales density some 50% above the company average [IR 14.20] and agrees with the applicant that this is an indicator of a qualitative need for the proposed extension.  However, he does not agree with the Inspector that this can be regarded as an indicator of a quantitative need for additional floor space; the fact that the store is trading better than other Sainsburys stores does not demonstrate quantitative retail need in this location [IR 14.24].  Overall, having regard to the Inspector’s conclusions in paragraphs 14.20 – 14.24, the Secretary of State considers that there is evidence demonstrating a qualitative need for the proposal.
12. The McNulty Statement acknowledged that need can be expressed both in quantitative and qualitative terms.  However, it also states that greater weight will be placed on quantitative need for new retail provision to be defined in terms of additional floorspace for the types of retail development, meaning comparison and convenience shopping.  The Secretary of State notes that the application has used both a business based and a class of goods approach to calculating quantitative need.  Following the McNulty Statement, the Secretary of State considers that more weight should be attached to the evidence contained within the good-based approach, and he has considered the issue of quantitative need in this case in that way.
13. The Secretary of State notes that the applicant has assessed quantitative need based on  the estimated increase of expenditure on convenience and comparison goods in the Primary Catchment Area between 1991 and 2006, compared to the estimated turnover of the proposed extension [IR 14.18 – 14.19].
14. For the reasons given in paragraphs 14.15 – 14.16, the Secretary of State agrees with the Inspector that the three postcodes zones identified by the applicant represent a reasonable assessment of the Primary Catchment Area [IR 14.16].  For the reasons given in paragraph 14.17, he also agrees that the population increase figures presented by the applicant form a reasonable basis on which to assess an increase in expenditure in the Primary Catchment Area [IR 14.17].  On this basis, the Secretary of State is satisfied that there has been a growth in estimated expenditure of £8.5 million on convenience goods in the Primary Catchment Area in the period from 1991 to 2003, and that this is likely to grow by a further £2.3 million in the period to 2006.
15. However, the Secretary of State disagrees with the Inspector that the estimated growth in convenience expenditure in the Primary Catchment Area is a demonstration of a quantitative need.  This is because the applicant has not compared this estimated or potential growth in expenditure with actual existing expenditure.  The Applicant has submitted an assessment of a growth in expenditure, not evidence of a quantitative need for additional floorspace, over and above the existing floorspace, to satisfy an unmet demand in Kidlington.  The applicant has not therefore demonstrated that there is expenditure in the catchment area that has not been, or is not being, met and that there is available capacity to justify a need for additional retail facilities [IR 14.25].  The Secretary of State does not agree, therefore that the applicant had demonstrated a quantitative need for the proposal.
16. In conclusion, while the Secretary of State considers that qualitative need has been established, quantitative need has not been demonstrated.  The Secretary of State has borne in mind that the McNulty Statement indicates that greater weight will be placed on quantitative rather that qualitative need and overall, he does not consider that the applicant has demonstrated a convincing need for the proposed extension to the store.  For these reasons, he does not agree with the Inspector’s overall conclusion on need [IR 14.25].  In reaching this view, the Secretary of State has taken full account of paragraphs 5 – 12 of the Inspector’s addendum report but considers that this does not provide any further evidence of a quantitative need for the proposed extension.

8.	The reference in §11 to "trading … above the company average" is a reference to what is called overtrading. For present purposes, it relates to the performance of the individual store within the performance of its company as a whole. If a Sainsburys' store's turnover exceeds Sainsburys' national average, it is overtrading; if below the average, it is undertrading.
9.	The inspector's reasoning on need included the following:
14.18.	The increase in convenience goods based expenditure in the Primary Catchment Area in the period 1991 to 2003 is estimated to be £8.5m [7.20].  It is forecast to increase by a further £2.3m by 2006 [7.20].  The equivalent convenience business based figures are £28.6m and £8m.  Allowing for the only significant foodstore development in the Primary Catchment Area since 1991, the Marks & Spencer food hall in Summertown (£6.5), this would leave an increase in capacity of £4.3m on convenience goods based basis or £30.1m on convenience business based basis.
14.19.	In estimating the turnover of the extended store, it has been assumed that the proposed additional floorspace would trade at a lower sales density than the existing store.  It has been assumed that this would be 33% of the existing sales density [7.19].  The estimated additional turnover would be £7.09m.  That is accepted by all parties and appears to me to be reasonable figure.  The convenience goods based capacity estimate would just be sufficient to accommodate the proposed extension if allowance is made for 15% of the £7.9m turnover of the store extension to be on comparison goods and assuming only 70% of the turnover comes from the Primary Catchment Area [7.30].  It is evident that on the business based expenditure figures, more than sufficient capacity exists for the proposed extension.
14.20.	I was told that the existing store is trading at a sales density some 50% above the company average even after the opening of the Marks & Spencer store in Summertown [7.10].  Accepting that the turnover of that store might increase slightly from its present level, it is not expected to alter the overtrading situation at the Kidlington Sainsbury’s store [7.10].  Although put forward as part of the qualitative need for the proposed extension, I consider that this degree of overtrading can also be regarded as an indicator of a quantitative need for additional floorspace.
14.21.	Set against those indicators of quantitative need is the evident underperformance of the existing supermarkets in Kidlington shopping centre.  The reported sales figures for the stores accepted by all parties at the inquiry, when compared with those in the earlier MVM report which based the estimated turnover figures for Tesco and the Co-op on company average sales density figures, indicate £4.5m under-trading by Tesco and £1.5m under-trading by the Co-op [7.47].  It is agreed between the parties that the figures for Iceland in the original MVM report were based on an erroneous estimate of the floorspace of the store and that at £1.5m the store is trading slightly above the company average. 
14.22.	It is common ground between the parties that a qualitative need for the proposed extension can be demonstrated [7.12-7.17].  The overtrading referred to above leads to cramped conditions for customers and the need for frequent restocking of shelves [7.13, 7.17].  It is also claimed that the inability to carry as wide a range of products as other company stores also represents an element of qualitative need [7.13-7.15].
14.25.	The growth in convenience expenditure in the Primary Catchment Area has given rise to a quantitative need, whether it is assessed on the lower convenience goods basis or the higher convenience business basis.  The 2 under-trading stores in Kidlington shopping centre are not meeting that need and the evidence points to that situation continuing.  I conclude therefore that there is a substantive quantitative need for the proposed development on the Sainsbury’s site, whether that is assessed on a convenience goods or convenience business basis.  Moreover qualitative considerations further strengthen the case for the proposed development on grounds of need.
10.	Collins J accepted Sainsburys' argument that the Secretary of State's decision to reject his inspector's advice was vitiated by error. A summary cannot do full justice to his judgment, but its upshot was that paragraph 11 of the decision letter had wrongly excluded overtrading as an indicator of quantitative need, compounding the error by appearing unaccountably to confine the exclusion to the Kidlington site, and that paragraph 15 was so jejune as to be unintelligible and, so far as it was intelligible, was wrong. He held in particular that if Sainsburys' methodology was to be rejected it was incumbent on the Secretary of State to explain why. He concluded:
The combination of the error in paragraph 11, that is to say the failure to regard the overtrading as a possible indicator of quantitative need, coupled with the lack of proper reasoning in paragraph 15, does lead to a need to quash this decision because it has those errors of law.
11.	Before this court, Natalie Lieven on the Secretary of State's behalf has submitted that the decision letter is sound in law. She has advanced some rather broad grounds, not all of them in our judgment correct in law; but the issues for us have been helpfully narrowed by Timothy Corner QC and Lisa Busch in their skeleton argument for Sainsburys to the following propositions:
(1)	The Secretary of State failed to give reasons in §11 for finding that overtrading at the existing store could not be treated as an indicator of quantitative need in the circumstances of the case.
(2)	The Secretary of State's reasoning in §15 was unintelligible; if, however, it was that Sainsburys' approach to quantitative need overlooked where it was that the new purchasing capacity was or would be spent, it was wrong.
12.	It will be useful, first, to deal with those of Miss Lieven's written submissions which we consider too wide - and which, with her customary candour, she agreed called for modification.
13.	First, if evidence is capable of affecting the assessment both of quantitative and of qualitative need, it is not open to the Secretary of State (or for that matter any other decision-maker in the planning process) to allocate it to one category and exclude it from the other. It must be considered, for what it may be worth, under each head to which it is potentially material.
14.	Secondly, it is not open to the Secretary of State, in deciding whether to accept an inspector's report on a called-in application, to decide what evidence he will accept. That is the inspector's job, itself subject to well-established legal constraints and requirements. The Secretary of State's power is to decide for himself what to make of the inspector's findings and advice, and his duty is to do it rationally and to explain his decision intelligibly. 
15.	What an intelligible explanation involves in this context - and in most other contexts too - is now valuably summarised by Lord Brown in South Buckinghamshire DC v Porter (No 2) [2004] UKHL 33, §36, (though, as his Lordship begins by stressing, it is neither definitive nor exhaustive):
The reasons for a decision must be intelligible and they must be adequate.  They must enable the reader to understand why the matter was decided as it was and what conclusions were reached on the “principal important controversial issues”, disclosing how any issue of law or fact was resolved. Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision.  The reasoning must not give rise to a substantial doubt as to whether the decision-maker erred in law, for example by misunderstanding some relevant policy or some other important matter or by failing to reach a rational decision on relevant grounds.  But such adverse inference will not readily be drawn.  The reason need refer only to the main issues in the dispute, not to every material consideration.  They should enable disappointed developers to assess their prospects of obtaining some alternative development permission, or, as the case may be, their unsuccessful opponents to understand how the policy or approach underlying the grant of permission may impact upon future such applications.  Decision letters must be read in a straightforward manner, recognising that they are addressed to parties well aware of the issues involved and the arguments advanced.  A reasons challenge will only succeed if the party aggrieved can satisfy the court that he has genuinely been substantially prejudiced  by the failure to provide an adequately reasoned decision.

16.	Thirdly, the interpretation of policy is not a matter for the Secretary of State. What a policy means is what it says. Except in the occasional case where a policy has been ambiguously or unclearly expressed (see R v Derbyshire CC, ex p. Woods [1997] JPL 958), so that its maker has to amplify rather than interpret it, ministers are not entitled to thwart legitimate expectations by putting a strained or unconventional meaning on it. But what ministers do have both the power and the obligation to do - and Miss Lieven readily acknowledged that this is her real point - is to apply their policy from case to case, keeping in balance the countervailing principles (a) that a policy is not a rule but a guide and (b) that like cases ought to be treated alike.
17.	Fourthly, and consequently, it is not open to the Secretary of State, in deciding whether an application conforms to his policy, to insist on one mode of proof. He must look at whatever has been tendered to and accepted by his inspector and decide whether it passes muster under his policy.
18.	Turning in this light to the Secretary of State's decision letter, we have found ourselves unable in the end to endorse, although we sympathise with, Collins J's critique of it.
19.	Paragraph 11 of the decision letter does not appear to us to be deficient in reasoning (which is how Mr Corner has put it) nor (as the judge held) to err in law by excluding overtrading as an indicator of quantitative need. What it says is that the fact that a store is trading at above the company's average per square metre indicates a qualitative need for expansion but not, by itself, a surplus of local purchasing power over retail provision on the Kidlington site. This, it seems to us, is self-evidently so. The paragraph is in fact devoted to qualitative rather than quantitative need, but it does not make the mistake of allocating overtrading solely to the former, and it is in the succeeding paragraphs that the latter is addressed.
20.	There is an apparent problem with the use of the words "can be" in the sentence of §11 which begins "However, he [the Secretary of State] does not agree with the Inspector that this [overtrading] can be regarded as an indicator of quantitative need for additional floorspace; …". Read by itself, it looks like a proposition of law, or possibly of logic, and if so - we would agree with Collins J - an erroneous one. But the remainder of the sentence makes it clear that what the Secretary of State is concerned about is the fact that trading markedly better than other Sainsburys stores throughout the country does not necessarily mean that there is an unmet quantitative retail need in Kidlington. Before Collins J, Miss Lieven was apologetic about the inclusion of the words "in this location"; but it seems to us for the reason we have given that they are part of a legitimate point being made by the Secretary of State. We consider that the paragraph as a whole is logical and untainted by error.
21.	Paragraph 15 has of course to be read in the light not only of the paragraphs which immediately precede it but of the evidence which we have cited from, in particular, §14.18 and 14.19 of the inspector's report. So read, in our judgment the paragraph is intelligible, although perhaps not very readily so.
22.	Its thrust is that what the Secretary of State was looking for, pursuant to the policy set out by Mr McNulty, was quantitative evidence of the kind which a conventional analysis, of the kind described above, might provide. He has not rejected Sainsburys' evidence simply because it takes a different form, but he does not accept that it fills the necessary space. Extrapolating as it does from an assumed equilibrium of provision and purchasing power in 1991, it fails in his view to establish a present disequilibrium. What it shows is an estimated growth over the intervening period in convenience spending in the catchment area; but unless that estimate is matched with up-to date evidence of local spending power it does not satisfy the Secretary of State that there is unmet demand calling for more floorspace in Kidlington.
23.	This is in our view the sense of the paragraph. It does not exactly leap from the page. A first reaction to the opening sentence of the paragraph might very well be that an estimated growth in local demand is, if not a demonstration, at least an important step in demonstrating a quantitative need for more floorspace. A first reaction to the second sentence might well be that an estimate of growth in spending between date A and date B necessarily includes the actual level of expenditure at date B. It is when one stands back and asks what paragraph 15 is driving at in the light of the material known both to Sainsburys and to the Secretary of State that it becomes apparent - not, we accept, very readily - that the Secretary of State is expressing the view we have paraphrased above. 
24.	We understand very well in these circumstances why Collins J accepted Mr Corner's challenge to the decision letter. We bear in mind, too, that it is not the court's task to rescue executive government by reading into its decisions something more coherent or less legally vulnerable than, on a fair reading, is there. Equally it is not for the courts to strike down a decision which, while it could and probably should have been better expressed, is intelligible and free of the kinds of error and deficiency instanced in Porter. In this light, and not without the measure of initial doubt which will have become evident in the course of oral argument, we conclude that this decision is sustainable.
25.	The Secretary of State's appeal therefore succeeds. Just as Mr Corner was careful to stress that his argument was not that Sainsburys were bound, on a proper approach, to obtain planning permission, we for our part note that there is nothing to stop them trying again, taking account of the Secretary of State's reasons for rejecting their present application.