1. MR JUSTICE COLLINS: Viagra is the trade name of a drug developed by the applicants, Pfizer Ltd., called Sildenafil. It is the only drug licensed for the treatment of erectile dysfunction (ED) (that is to say a man’s inability to achieve or to maintain an erection so as to undertake satisfactory sexual activity) which is taken orally. There are many causes of ED. It may result from physical injury, for example trauma to the spinal cord, from surgery, such as that for prostate cancer, from disease, such as diabetes, from psychological problems or from natural causes such as ageing. There are a number of other treatments available, but all have material shortcomings, either because they have unpleasant side effects or are not particularly effective. Viagra is undoubtedly the most desirable treatment now available for ED, although some sufferers cannot use it, if, for example, they are receiving medication for heart trouble.

2. Sildenafil was discovered in the applicant’s laboratories in Sandwich, but Viagra itself is manufactured for the European market in France from bulk Sildenafil supplied from the Republic of Ireland. It attracted the attention of the media following its receipt of a marketing authorisation in the U.S.A. in March 1998. But in January 1998 a monograph was published by the National Prescribing Centre and issued to all NHS Trusts and Health Authorities putting them on notice that Sildenafil had the potential for considerable impact once it received its marketing authorisation within the European Union. That authorisation was expected in the Autumn of 1998. The potential financial impact was stated thus:-

3. The actual cost of the drug is somewhat less than was then anticipated, but the evidence before me suggests that some 1.8 million men suffer complete and some 8 million partial ED. Thus the cost to the NHS of Viagra will be tens of millions of pounds per annum unless some restrictions are placed on its use.

4. Viagra works by breaking down an enzyme one of whose effects is to inhibit blood flow to the penis. It thus enhances the body’s natural response to sexual stimulation and is effective regardless of the cause of the existing lack of response. ED itself can be highly distressing to those who suffer from it and may lead to depressive illness, loss of self esteem and loss of confidence and may have serious effects upon personal relations. It is not an aphrodisiac and according to the evidence presented on behalf of the applicants cannot enhance a man’s libido or sexual performance if he does not suffer from ED. The Department’s evidence has pointed to the lack of any clinical trials to confirm that, but has not sought to challenge the applicants’ expert medical evidence that that is indeed so. However, there were real and understandable fears that, once Viagra received the marketing authorisation which, following the U.S.A. licence in March 1998 and a favourable report by the European regulating body in May 1998, was inevitable, there would be an enormous pressure on G.P.s to prescribe it. Furthermore, it was feared, and the fear was reasonable, that the media interest and the resultant perception of the advantages and effect of Viagra would encourage a recreational use of the drug. Since G.P.s are usually dependent on the word of the patient that he is suffering from ED and there are no independent means of verifying the patient’s assertions, extensive prescribing and so considerable expenditure by the NHS on the drug to the detriment of other use of resources was feared.

5. In the summer of 1998, the Respondents began to take positive steps to prepare for the impact of Viagra when it was licensed as was then anticipated in the late autumn of that year. On 14 July 1998 there was a debate in the House of Commons in the course of which the Minister of State, Mr. Alan Milburn, stated that the Standing Medical Advisory Committee (SMAC) had been asked to develop guidance for the NHS on the role of Viagra. He went on: -

6. SMAC is a body set up under the provisions of the National Health Service Act 1977 as amended to advise the Secretary of State and the Central Health Services Council on medical matters. Its duties are set out under S.6(5) of the 1977 Act in these terms:-

7. There are at present 32 members of SMAC. All are distinguished and knowledgeable in their particular field of medicine and advice given by SMAC is and is regarded as authoritative, broad-based and independent. Professor Alan Johnson, M.Chir, F.R.C.S., is the present chairman of SMAC. In his affidavit sworn on behalf of the Respondents, he records that requests to consider the effect of new drugs upon the NHS and to advise thereon are relatively recent and there have been only four so far.

8. A formal request was made to SMAC when the then Minister in the Lords, Baroness Jay, wrote a letter to Professor Johnson dated 22 July 1998. In it, she said:-

9. At a meeting on 29 July, SMAC decided to set up a working group to consider the issue because it was agreed that the matter needed careful consideration. The group was to meet in August and September, but in the meantime interim recommendations would be made. It was not then certain when the marketing authorisation was likely to be granted (it being generally anticipated that an authorisation would be approved) and it was hoped that SMAC would be able to produce its final report before then. In fact, the authorisation was granted somewhat earlier then expected on 15 September 1998 by the European Medicines Evaluation Agency, on which the U.K. is represented, and that authorisation entitled the applicants to market Viagra throughout the European Union.

10. Following the meeting of 29 July, Professor Johnson wrote to Baroness Hayman, who by then had succeeded Baroness Jay as Minister, stating;-

11. On 8 September a meeting of the Working Party took place. By then it was apparent that Viagra was about to receive its marketing authorisation and SMAC had been requested by the Department to change the wording of the interim advice. The new wording, which Professor Johnson thought did not change the substance of the original advice, was promulgated in a Circular No. 1998/158 dated 16 September 1998, in these terms:-

12. The circular contains, under its title, the words “material which is for guidance only and aims to share good practice on a particular issue.” The new wording is clearly very much more positive than the original advice. The lawfulness of this Circular is challenged in these proceedings.

13. Since the working party records that the main reason for tightening the wording of the Circular was “to help [to] avoid NHS patients being treated now who might not meet any future eligibility criteria” and states that “Members also noted alternative means of achieving this, e.g. a temporary use of Schedule 10” it would be sensible at this juncture to refer to the relevant domestic legislation in order to explain the references to Schedules 10 and 11.

14. The governing Act is the National Health Services Act 1977. Section 1 lays upon the Secretary of State the general duty to continue to promote a comprehensive health service and effective services, which “shall be free of charge except insofar as the making and recovery of charges is expressly provided for by or under any enactment, whenever passed”: S.1(2). Section 3 enjoins the Secretary of State to provide inter alia medical services “to such extent as he considers necessary to meet all reasonable requirements”. There are powers to give directions to Health Authorities with respect to the exercise of any of their statutory functions, but these powers are not material in this case. Suffice it to say that there is no specific power in the Secretary of State to issue directions the effect of which is to prevent a drug from being prescribed either wholly or partially. Section 29(1) of the 1977 Act reads:-

15. The relevant regulations are the National Health Service (General Medical Services) Regulations 1992 (S.I. No 635). Regulation 3, so far as material, provides:-

16. Schedule 2 contains the following relevant Paragraphs:-

17. Paragraphs 40 and 42 prohibit a doctor from charging a patient of his for any prescription and requires him to ensure that no partner, deputy or assistant of his imposes any charge for treating his patients.

18. Schedule 10 contains a long list of drugs and substances for which the NHS will not pay. It is largely made up of items such as patent remedies, drugs which are no more effective than cheaper (often generic) alternatives, substances such as sun creams, hair tonics and vitamin supplements and the occasional drug, for example temazepam capsules, which has proved to have been misused and which has no unique positive benefits. Schedule 11 is designed for drugs which, for example, are needed for the treatment of particular conditions but which can be used for others where there are cheaper and equally effective alternatives. Alterations to the lists in the two Schedules require an amending Statutory Instrument.

19. The Regulations do not indicate the basis upon which drugs or substances should be ‘black listed’ in Schedules 10 or 11. One public announcement of criteria was by the then Secretary of State, Mr. Kenneth Clarke in March 1985 (dealing with a precursor to the 1992 Regulations) when he said this:-

20. There are no cheaper drugs which are equally effective and so those criteria do not apply to Viagra. However, Mr. Pannick, Q.C. rightly concedes that the Secretary of State is entitled to include Viagra in Schedule 11 because of resource implications following the likely cost of allowing it to be freely prescribed. On 7 May 1999, the Friday before the Monday on which this application came before me, the Secretary of State issued a circular indicating that he proposed to make regulations on 1 July 1999 to limit the prescription of all treatments for ED on the NHS to men who suffered it as a result of various specified causes or who were receiving treatment (which, of course, would have been other than by Viagra) before 14 September 1998. These proposals were anticipated following a consultation which commenced on 21 January 1999.

21. I should add that, as the wording of Paragraph 44 makes clear, doctors can prescribe Viagra privately, provided that they do not breach Paragraphs 40 or 42.

22. There was, according to Professor Johnson, particular concern that it would prove extremely difficult, if not impossible, to claw back the position if SMAC’s eventual advice was to the effect that there should be some restrictions on prescribing Viagra. Patients might receive treatment which would have to cease. Further, SMAC felt there was a danger of different approaches by G.P.s and Health Authorities to the pressures on them and the resource implications stemming from the availability of Viagra which might lead to the undesirable practice of what is dubbed “post-code prescribing”, i.e. different treatment in different areas. There were also concerns that ED was a condition which relied upon self reporting by the men affected and often no objective criteria were available to test the existence or the severity of the condition. Furthermore, there were stories of misuse by young men who believed the drug could enhance their sexual performance.

23. In due course, SMAC gave its final advice, once the Working Party had concluded its deliberations, on 9 November 1998. Its conclusions were as follows:-

24. Thus there was in SMAC’s view no medical bar to the prescribing of Viagra and G.P.s were considered perfectly competent to decide whether a particular patient should be treated with it.

25. Mr. Pannick, Q.C. has attacked the lawfulness of the circular on the ground that, although couched in the terms of advice, its purpose and effect was to ban or to restrict the prescribing of Viagra to such an extent as to prevent G.P.s from carrying out their statutory obligations under the Terms of Service in Schedule 2 of the 1992 Regulations. G.P.s, submitted Mr. Pannick, have a legal and professional duty to exercise their clinical judgment and to give such treatment as they decide to be necessary for a particular patient. If they decide that a particular drug is needed, they can only refuse to prescribe it if it is included in Schedules 10 or 11. Miss Baxendale, Q.C. submits that in exercising his skill and judgment the G.P. must have regard to advice given by SMAC and by the Secretary of State and, if that advice suggests that a drug which might otherwise seem to be the right treatment should not be prescribed, the G.P. is entitled, but not bound, to act upon that advice. Furthermore, she submits that the circular clearly states that it contains advice only and does not amount to a direction; accordingly it cannot be held to be unlawful. The Secretary of State is perfectly entitled to take steps to deter G.P.s from prescribing Viagra having regard to the resource implications for the NHS.

26. Advice or guidance promulgated by a public authority may be the subject of judicial review if it contains an error of law. This is particularly so if it is likely to be acted upon by those it addresses: see Gillick v. West Norfolk Area Health Authority [1986] AC 112 at p.193G-H per Lord Bridge of Harwich. In R v. Worthing B.C. ex p. Burch (1985) 50 P &CR 53, Mann J granted judicial review of an opinion of the Secretary of State for the Environment given under a planning circular. The circular set out a procedure whereby the Minister could be asked to give an opinion whether or not he would have granted planning permission to resolve an issue between an applicant and the LPA in respect of what could be done on Government land which was being disposed of. The Secretary of State argued that the opinion was to be regarded only as a material consideration because it was not and did not purport to be binding. It was only advice. Mann, J said this:-

27. Mann, J therefore granted a declaration that the opinion was ultra vires the Secretary of State’s powers under the Town & Country Planning Act 1971 and of no effect. While that case can be distinguished from the present on the facts, it does make the point that advice can be struck down if its purpose and effect is to achieve what cannot lawfully be achieved in that way because safeguards are overridden. So Mr. Pannick submits that the circular was intended to and has achieved the same effect as if Viagra were placed in Schedule 11 and none of the safeguards or procedural requirements have been followed.

28. It is clear that, for very understandable and proper reasons, the Secretary of State was concerned that Viagra would prove to have a significantly adverse effect on the resources of the NHS. The Press Release which accompanied the circular quoted him as stating “doctors are advised not to prescribe Viagra nor Health Authorities support the provision by NHS Trusts of the drug at NHS expense, until further notice.” It was therefore hardly surprising that the press reported the circular as a ‘ban’ on Viagra. Indeed, Mr. Moran, the chairman and managing director of the applicants, deposes without contradiction that he understands that the Secretary of State had personally briefed one of the journalists who used the terminology ‘a ban’. Mr. Dobson is quoted in the press release in these words:-

29. The advice was initially very effective and its effect was exacerbated because, since Viagra was not ‘blacklisted’ in Schedule 11, it could not be prescribed privately to their patients by NHS G.P.s : see Paragraphs 40 and 42 of Schedule 2 to the 1992 Regulations. The respondent’s own evidence shows that between September and December 1998 an average of only 108 NHS prescriptions for Viagra were issued each week across the country. In the light of the feared rush to obtain the drug, that is a clear indication that the advice was largely effective. The ‘exceptional circumstances’ referred to in the circular were never specified, although no doubt the proposals put out to consultation on 21 January 1999 gave from that date some indication of when Viagra should be prescribed.

30. Some Health Authorities wrongly interpreted the circular as requiring them to indicate that G.P.s who prescribed Viagra would be penalised. At best, there was confusion as to the true effect of the circular, so much so that eventually, after much pressure, the Department issued a further circular on 22 February 1999 which reminded Health Authorities that the circular 1998/158 was “guidance only until such time as substantive proposals, which are currently being consulted upon, are put into effect.”

31. All this, which I have summarised very briefly, enables Mr. Pannick to submit that the purpose and effect of the circular was indeed to deter G.P.s from carrying out their statutory duties under their Terms of Service. He submitted that Paragraph 43 imposed a duty on a G.P. to prescribe a drug if he was satisfied the patient had a clinical need for it. Paragraph 43 in my judgment does not impose a duty to prescribe a drug. It is dealing with the mechanism to enable a patient to receive a drug if the doctor decides that that drug should be used to treat the patient. The doctor’s duty is contained in Paragraph 12(1), which really does no more than set out his professional obligations as a doctor and itself reflects the obligations referred to in Regulation 3(1). The doctor must give such treatment as he, exercising the professional judgment to be expected from an average G.P., considers necessary and appropriate. Miss Baxendale submits that ‘appropriate’ qualifies ‘necessary’ so that, if a G.P. considers a particular treatment to be necessary, he must go on to consider whether it is also appropriate. In reaching his final decision, he should have regard to the advice from SMAC and may therefore decide that the treatment is not appropriate. I find this suggested construction impossible. If a G.P. decides that a particular treatment is necessary, it must inevitably be appropriate. If it were not appropriate, a G.P. could not rationally decide that it was necessary. ‘Appropriate’ in Paragraph 12(1) is included so that G.P.s will provide services which go beyond those that are needed by their patients. Such services could include, for example, advice on various medical matters or family planning. Some treatment may be considered appropriate but not necessary. No doubt, if a G.P. in exercising his professional judgment decided that a particular treatment was not appropriate, he would conclude that that treatment was not necessary.

32. The very fact that the advice in the circular comes from SMAC is likely to make G.P.s respect it the more and thus to follow it. Mr. Pannick has attacked the reasons given for imparting it, castigating them as irrational. I do not think that attack succeeds. I should hesitate long before branding the views on medical matters of eminent practitioners to be irrational. In any event, whether the reasons be good or bad cannot affect the lawfulness of the circular if its purpose and effect is to cause G.P.s to act contrary to their professional obligations and contrary to their duty as reflected in Paragraph 12(1).

33. In September 1998 the B.M.A. issued its own guidance on the circular. This included the advice that from a legal standpoint G.P.s could prescribe Viagra since it had not been blacklisted. Miss Baxendale relied on this to make the point that the medical profession could have been in no doubt that the circular was only advisory and could not and did not require G.P.s not to prescribe Viagra. But the B.M.A.’s advice continued that G.P.s should adhere to SMAC’s advice (“as a body representing the medical profession”) which was contained in the circular. Thus the B.M.A.’s advice does not serve to diminish the effect of the circular and, as it seems to me, the problem with the circular is that the advice was given in a manner which meant that G.P.s would inevitably regard it as overriding their professional judgement. Mr. Pannick accepted that advice could be given in strong terms to deter the prescribing of Viagra, but it must make clear that the G.P.s’ clinical judgment is supreme. In essence, the advice should have been reasoned, at least so that G.P.s knew why they should only prescribe Viagra sparingly. To state in bald terms that Viagra should not be prescribed save in (undefined) exceptional circumstances is tantamount to telling the recipients of the advice to follow it. They cannot know how their professional judgment should be influenced by the advice. In my judgment, the evidence confirms that this was and was intended to be acted upon by G.P.s independently of whether in their professional judgment a patient needed treatment for ED and so should have the better such treatment available, namely Viagra. Thus I am satisfied that the circular was and is unlawful in terms of domestic law.

34. Events have, of course, moved on since September 1998. The exact status of the circular has been questioned and attempts have been made to discover what any exceptional circumstances might be. Those attempts have, until very recently, proved ineffectual. However, it may be said that as more and more doctors have questioned the validity of the advice and begun to prescribe Viagra (the Respondents make the point that some 55% of G.P.s have now prescribed it), the unlawfulness of the circular has become less obvious. It would clearly have been lawful for the respondents to have advised that Viagra was likely to be blacklisted and so G.P.s should consider very carefully whether to prescribe it except in circumstances falling within the proposed permitted use. That is, since the announcement on 7 May, the position and has arguably been so since the proposals were put out to consultation. However, that does not affect the lawfulness of the circular; it may affect any remedy which might have been obtainable.

35. I must now turn to consider European law.

36. Mr Pannick submits that the circular is contrary to the law of the European Union in two respects. First, it amounts to a measure having equivalent effect to a quantitative restriction within the meaning of Article 28 (better known by its old number, Article 30) of the Treaty. That Article reads:-

37. Article 28 is qualified by Article 30 (the old Article 36), which, so far as material, reads:-

38. The submission is made possible because Viagra is the only remedy for ED which is singled out and has restrictions placed upon it. It is imported from another member state and so there is discrimination against it which amounts to a quantitative restriction upon it. As is well known, the European Court has given a very wide interpretation to Article 28 and it extends to prohibit all trading rules which are capable of hindering intra-community trade, whether directly or indirectly, actually or potentially: see Procureur du Roi v. Dassonville [1974] ECR 837.

39. The first question is whether the circular constitutes a ‘measure’ within the meaning of Article 28. In Commission of the European Communities v. Ireland [1982] ECR 4005 the Court was concerned with a ‘Buy Irish’ campaign promoted by the Irish Government. The measures taken included a free information service for consumers who wished to know which products in a particular category of goods were made in Ireland and where to obtain them, exhibition facilities exclusively for Irish products at a large exhibition centre in Dublin run by the Irish Goods Council, the encouragement of the use of a “Guaranteed Irish” symbol and the organisation of a big publicity campaign by the Irish Goods Council. The Irish Government argued that Article 28 was concerned only with trading provisions emanating from a public authority and the ‘Buy Irish’ campaign was limited to giving moral support and financial aid to the activities pursued by the Irish industries. The Court rejected that argument. It pointed out that the campaign was introduced by the Minister concerned as a carefully thought-out set of initiatives constituting an integrated programme for promoting domestic products. The whole programme, whatever its success, was designed to achieve the substitution of domestic for imported products and was liable to affect the volume of trade between Member States. The Court continued:-

40. I have already discussed the purpose of the circular and it undoubtedly has had a very considerable effect upon the sales of and the imports from another Member State of the product. Thus I have no doubt that the circular constitutes a measure within the meaning of Article 28, and if its effect is to restrict or to be capable of restricting Community trade, it is unlawful.

41. Miss Baxendale submits that, whether or not it is a measure, the circular cannot contravene Article 28 because the restriction of a particular product under a national health system is outside Article 28. For this proposition she relies on Criminal Proceedings against Keck and Mithouard [1993] ECR 1-6097. Keck and Mithouard concerned the lawfulness of a French measure which prohibited the resale at a loss of goods. The case arose from a prosecution at Strasbourg and the point was that no similar rule applied in Germany, where supermarkets were able to promote ‘ loss-leaders’ to the disadvantage of their French rivals over the border. In Paragraphs 15 – 17 of the judgment on page 1-6131 the Court said this:-

42. This amounted to a narrowing to some extent of the scope of Article 28 and established that, provided that the rule in question covered imported and domestic products alike and affected in the same manner “in law and in fact” the marketing of each, there was no transgression. Thus a measure that purported not to discriminate but in fact did would still be unlawful. In Commission v. Greece [1995] ECR 1-1621 the Court was concerned with a Greek measure which required the sale of processed milk for infants to be sold only through pharmacies. The measure applied to all processed milk whoever and by whomsoever it was manufactured. In fact, no such product was manufactured in Greece, but that did not prevent the Court following the principle set out in Keck and Mithouard (supra). At Paragraph 17 on p.1-1647 it said:-

43. The difficulty in the way of Miss Baxendale’s argument is that the circular does not concern all the products. The lack of discrimination must relate to all products which are available for a particular condition or purpose. There are other remedies for ED: indeed, the manufacturers of those are obviously very happy that Viagra has been restricted since that has meant their products have been sold to a greater extent than otherwise. Nor in my judgment do the cases cited overrule the case upon which Mr Pannick particularly relies, Duphar v. Netherlands [1984] ECR 523. That case concerned measures in the Netherlands which were akin to our Schedules 10 and 11 whereby restrictions were placed on the ability of some products to be paid for under the Dutch National Health Scheme. Such measures are prima facie discriminatory, but that will not render them unlawful under Article 28 provided that two conditions are fulfilled. The core of the judgment of the Court is contained in Paragraph 22 at p.542 which reads:-

44. The Court then goes on to make the point in Paragraph 23 that if the conditions set out in Paragraph 22 are not met, the measure in question cannot be justified within Article 36 if its primary objective is budgetary “inasmuch as it is intended to reduce the operating costs of a sickness insurance scheme.” It seems to me that it might be argued that the intention to reduce operating costs can itself be justified in non economic terms because of the effect on the ability to provide other treatment if Viagra costs too much. It is clear from what was said when the circular was introduced that the respondent was speaking in purely economic terms, but that was because of the effect on the ability of the Health Service to provide for others and so the health of the nation could be adversely affected. Thus, although there was discrimination against Viagra, I am persuaded that the measure was justified under Article 30.

45. The second transgression of European law lies, submits Mr. Pannick, in a breach of the Directive 89/105/EEC, which describes itself as “relating to the transparency of measures regulating the pricing of medicinal products for human use and this inclusion in the scope of national health insurance systems.” It is known, for obvious reasons, as ‘the transparency Directive’. It requires that there be publicity given to the criteria to be applied in measures to restrict or exclude any particular products for the obvious reason that manufacturers should know in advance what is the likely marketing fate of any product. As would be expected, the purpose behind the Directive is to ensure that there is no distortion or hindrance of intra-community trade in medicinal products which cannot be justified or falls outside the Duphar conditions. Article 1 reads:-

46. Articles 6 and 7 deal with positive and negative listing respectively. There is no Article which deals expressly with restrictions as opposed to exclusions despite the wording of Article 1. However, it is of interest to note that the respondent has accepted that the Directive applies to the proposed placing of Viagra in Schedule 11. In my judgment, that acceptance is correct because to restrict is to exclude pro tanto and in any event since Article 1 uses the word ‘restrict’ a purposive construction of Articles 6 and particularly 7 will mean that restrictions are covered.

47. Miss Baxendale submits that the circular cannot be regarded as a ‘decision to exclude’ within the meaning of Article 7. She draws attention to the difference in wording between Articles 1 and 7. If she is correct, it seems to me that Article 1 is to a large extent beating the air. I appreciate that price controls may restrict; but Article 1 draws a clear distinction between price controls and measures to restrict the range of products available. Thus there is, if she is right, no requirement of the Directive which would be complied with if restriction rather than exclusion is effected. In my judgment, it is impossible to give effect to the clear intention of the Directive unless measures such as the circular (and again I refer back to its purpose and effect) are included within the scope of Article 7. Miss Baxendale has submitted that there is no authority and no European Court decision which supports that construction of the Directive and so I should refer the point under Article 234 (the old 177) of the Treaty. I am sufficiently confident that my construction is justified by the authorities to which I have referred, in particular Commission v. Ireland (supra), that I do not need to refer the point.

48. It seems to me that there has been a continuing breach of Article 7.2. No doubt, the criteria can be updated from time to time, but, so far as I am aware, has been no ‘publication in an appropriate publication’ (unless Mr. Clarke’s observations in Hansard can be relied on) and no communication to the Commission except in individual cases. However, more importantly, there was no compliance with Article 7.3. The applicants complained from the outset that they had been given no ‘reasons based on objective and verifiable criteria’ and no opinions or recommendations (save for the bold statement in the circular) were vouchsafed to them. The Directive sets out requirements (and domestic law is to the same effect) which are to be complied with before the blacklisting of a product can take place. It cannot be correct to bypass those requirements, which are there to safeguard the applicants’ rights, and to restrict the product’s marketing without complying with them.

49. It follows that I am satisfied that there was a breach of the transparency Directive.

50. I shall hear counsel on what relief I should grant in accordance with this judgement.

51. MR JUSTICE COLLINS: Mr Pannick, you have all seen the judgment, which I have handed down. May I first of all express my gratitude particularly to your learned junior, Mr Anderson, for the corrections? I am afraid it did show slight signs of midnight oil burning, I think. May I say there is one other correction? It is my experience that every time one reads through a judgment one finds something. It is on page 13, line 36, the word "thinking" should be "speaking": "the respondent was speaking in purely economic terms" rather than "thinking in purely economic terms". I think it perhaps makes more sense that way. Otherwise I think that all the various errors have been removed.

52. MR PANNICK: I am very grateful to your Lordship. Would your Lordship please make the declarations that we have set out in a draft?

53. MR PANNICK: The first is a declaration that the Health Circular 1998/158 is unlawful because it suggests that GPs should not prescribe Viagra on the NHS according to their professional judgment, whether a patient needs such treatment for erectile dysfunction; and the second is a declaration that the circular is unlawful because of breaches of article 7.2, publication of - and then would your Lordship add the word "relevant", Miss Baxendale has pointed out to me that the word 'relevant' should be added there - "publication of relevant criteria'.

54. MR PANNICK: And article 7.3: communication of reasons based on objective and verifiable criteria and the provision of expert opinions or recommendations of EC Directive 89/105. I hope that accurately encapsulates the substance of your Lordship's reasoning.

55. MR JUSTICE COLLINS: I was wondering whether you needed declarations in those elaborate terms. Why do you need any more than a declaration that the circular is unlawful? The reasons why it is unlawful are contained in the judgment.

56. MR PANNICK: I am happy with that. I thought it may assist those who have to report the matter, those who need to understand your Lordship's judgment, given the interest there is if we set out --

57. MR JUSTICE COLLINS: I take your point.

58. MR PANNICK: -- I hope in neutral terms, the substance of your Lordship's reasoning.

59. MR JUSTICE COLLINS: I take your point, Mr Pannick.

60. MR PANNICK: That is the only reason.

61. MR JUSTICE COLLINS: Miss Baxendale, any comments?

62. MISS BAXENDALE: My Lord, one or two points. First of all, picking up your Lordship's judgment, page 10, whether in fact there is any utility in granting a declaration in relation to domestic relief or in relation to the transparency directive, in the light of the comments of your Lordship. I am looking particularly at page 10 lines 25-35.

63. MISS BAXENDALE: As your Lordship has indicated, it would have been lawful for the respondent to have advised that Viagra was likely to be blacklisted and so GPs should consider very carefully whether to prescribe it, except in the particular circumstances identified.

64. MISS BAXENDALE: That is now the case, as your Lordship has said in your judgment, and it has been so since 7th May and arguably at least since January.

65. MR JUSTICE COLLINS: That is, I think, what I have said.

66. MISS BAXENDALE: My Lord, exactly. But following on from your Lordship's judgment one then wonders what is the purpose of a declaration in relation to a circular that has been entirely overtaken by events and your Lordship has said is now less -- it is now -- (inaudible) may no longer be unlawful because one has got to the position where 55% of GPs have prescribed Viagra.

67. MR JUSTICE COLLINS: Yes, but, as I said Miss Baxendale, I do not think that affects the lawfulness of it; it is just that because of what has happened since it has been appreciated, and partly, no doubt, as a result of these proceedings - or the bringing of these proceedings rather than their result - that the advice given need not be accepted in the bald terms in which it was given. As I say, I think that that probably affects any subsequent relief, if any, which the applicants may seek, but it does not affect the lawfulness of the circular, certainly at the time it was issued, and in its terms, it seems to me, throughout. I mean, if, for example, a subsequent circular had been issued explaining that the advice meant such and such and gave the reasons, then clearly from that moment, I would have thought, there would have been no unlawfulness, because the unlawfulness would have been cured. But I do not think subsequent events of the sort that we have had, namely external events rather than a fresh circular or fresh guidance from the Department can cure the unlawfulness of the original. On the other hand, I take Mr Pannick's point, but I was wondering whether in this case any relief at all was necessary because the judgment would speak for itself.

68. MISS BAXENDALE: That, my Lord, is the point. Your Lordship has made a judgment and the judgment speaks for itself, but in relation to relief, as I understand the position, one should only grant a declaration when it has a purpose. What is the purpose?

69. MR JUSTICE COLLINS: I should watch what I say, because I do not want to be offensive, but I think what Mr Pannick is really saying is that it is easier for those who report to have some peg to hang the report on, rather than having to look through the judgment.

70. MR JUSTICE COLLINS: I am not going to say laziness but...

71. MISS BAXENDALE: What concerns me is in fact it works both ways, in the sense that a report about a declaration made by your Lordship might not also carry with it the fact that your Lordship has found that since January/May in fact the position and indeed --

72. MR JUSTICE COLLINS: Perhaps one way of doing it is this. I have no doubt that the press have seen and, indeed, have heard the proposed declaration. It is perfectly proper to say that that is the effect of my judgment, that I have decided that, subject to Mr Pannick, it is not necessary to make any formal declaration because the judgment speaks for itself.

73. MISS BAXENDALE: My Lord, it would explain the effect, but it would also make the point of what has happened since, and actually the true effect of your Lordship's judgment on page 10.

74. MR JUSTICE COLLINS: I am not unsympathetic to that in a moment, but obviously I have not heard Mr Pannick on that point.

75. MISS BAXENDALE: I am particularly concerned. It is the obverse to it. It would deal with the fact that I am concerned about the obverse of Mr Pannick's point that otherwise one gets false reporting the other way because...

76. MR JUSTICE COLLINS: Because those who have not read the judgment and have not been here and have not appreciated - well, perhaps. But I think one can exaggerate all that, Miss Baxendale.

77. MISS BAXENDALE: My Lord, those ultimates, we would submit, apply to both parts of the declaration, and I would be very grateful if your Lordship would bear those in mind in deciding whether to grant your Lordship's discretion.

78. Perhaps I should wait to hear any other comments my learned friend might make about costs or such points.

79. MR JUSTICE COLLINS: I assume he is going to apply for costs.

80. MR PANNICK: I am certainly applying for costs, my Lord. But can I say something more about my friend's comments?

81. MR JUSTICE COLLINS: Of course, Mr Pannick.

82. MR PANNICK: I am surprised at my friend's point because your Lordship makes it very clear on page 10 line 26 that the circular was and is unlawful in terms of domestic law. The circular remains valid. There is concurrently a proposal to amend schedule 11 which may or may not bear fruit, but the circular is and remains the current existing instrument that the Secretary of State is using.

83. My Lord, the normal practice is to make declarations in public law cases when the court finds illegality so that the order records the conclusions of the court.

84. MR JUSTICE COLLINS: Well, sometimes, Mr Pannick, not always.

85. MR PANNICK: It is very rare, my Lord, for the court to find illegality but to grant no order at all in relation to that. We would respectfully submit that if your Lordship feels it inappropriate to grant detailed declarations, then the appropriate solution is for your Lordship simply to say that the circular is declared to be unlawful, full stop, and the reasons are set out in detail in your Lordship's judgment. But at the very least, I would ask your Lordship to do that, otherwise there is left hanging in the air what your Lordship is saying, and that would be most unfortunate, in my submission.

86. MR JUSTICE COLLINS: Yes. Miss Baxendale, I think that there is some force in what Mr Pannick says. The fact is that I have decided that the circular was and is unlawful. Therefore, as it seems to me, if Mr Pannick and his clients wish to have a declaration to that effect, I should not deny it to them. The extent of the declaration seems to me to be a matter really between you. I mean, if you would prefer to have a declaration in the terms that Mr Pannick has set out, I am happy to do it; if a bald declaration, I am equally happy, and you can say the effect of it is as set out.

87. MISS BAXENDALE: My Lord, I think the course we would most prefer is no declaration.

88. MISS BAXENDALE: But if your Lordship were considering that there should be a declaration I think in the shortest terms, because then it would encourage those looking at it to actually look at the judgment and understand what your Lordship has said since January/May.

89. MR JUSTICE COLLINS: I have no doubt that the appropriate spin will be placed on the judgment in due course anyway.

90. MR PANNICK: I am content with that. If your Lordship just gives a short declaration that the Health circular is unlawful, full stop.

91. MR PANNICK: I hope I have accurately summarised however in 1 and 2 the substance of your Lordship's reasoning.

92. MR PANNICK: If I have not, then your Lordship will tell me and those listening will know.

93. MR JUSTICE COLLINS: No, you have, Mr Pannick.

94. I do apply for costs - the Secretary of State should pay the costs of these proceedings.

95. MR JUSTICE COLLINS: You do not have much to say on that, do you, Miss Baxendale?

96. MISS BAXENDALE: My Lord, unfortunately, I have a little bit. My Lord, I am sure your Lordship will recall that up to the skeleton argument in this case the applicants had based their case to a very great extent on legitimate expectation and breach of procedural fairness and, indeed, a great part of the affidavits, which we did not go through - your Lordship will recall there were a lot of affidavits which we did not even look at all - because my learned friend abandoned that part of the case. It was necessary for it to be looked at because when we got to the skeleton arguments those points were not continued with.

97. Secondly, my learned friends have not won on every point. They have not won on article 28. They have not won on irrationality, and I entirely accept my learned friend did not and I am not certainly suggesting he did spend a long time developing the irrationality.

98. MR JUSTICE COLLINS: He did not really pursue that at all.

99. MISS BAXENDALE: No, not at all. I mean, that is not my prime point. My prime point is article 28, however, he did pursue. It was, and I would submit is, the basis for his claim for damages and he has lost on that point.

100. My Lord, as I understand the CPR, in particular part 44 paragraphs 4, 5 and 6, your Lordship has been encouraged by the Master of the Rolls --

101. MR JUSTICE COLLINS: You had better just refer me to it.

102. MISS BAXENDALE: I am using the one that is now called the white book, page 431.

103. MR JUSTICE COLLINS: Yes, I mean, you have to watch this because they amend this every week.

104. MISS BAXENDALE: I have done my best. I have looked on a website that I hope was an up-to-date one, but please will everyone forgive me if I have it wrong?

105. MR JUSTICE COLLINS: I shall certainly forgive you.

106. MISS BAXENDALE: I am not promising it is the up-to-date one, but as I understand it, the parts I am referring to have not been amended in a significant way. My Lord, if you go to page 431 - if I could share it with my learned friend - part 44, and now if you go to 44.3 "the court's discretion" and "circumstances to be taken into account".

107. MR JUSTICE COLLINS: We are encouraged now to do what we used not to do, are we not, to divide issues?

108. MISS BAXENDALE: Absolutely. If you go to "comment", over the page 432, it identifies what you are being encouraged to do, which is, although it preserves the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, Lord Woolf is anxious to move away from the position that any success is sufficient to obtain an order for costs. He therefore envisages far more partial orders for costs which more accurately reflect the level of success achieved by the succeeding party.

109. My Lord, the paragraph paragraphs I noted as being relevant are 44.4, where the court must have regard to all the circumstances, including the conduct of the parties; whether a party has succeeded on part of his case, even if he has not been wholly successful. Payment is irrelevant. Then paragraph 5, again it is conduct during the proceedings. "Pre-action protocol" is not relevant. "Whether it was reasonable for a party to raise, pursue or contest a particular allegation." I am not saying it was unreasonable of my learned friend to drop legitimate expectation and procedural fairness, but what I am concerned about is all the costs that were incurred up to the point where he dropped it.

110. MR JUSTICE COLLINS: What proportion do you say of the costs would be a fair proportion to say were incurred in relation to that aspect? Because we are dealing here, as it seems to me, essentially with any extra material that was put in, not, I think, with arguments that were raised, because there was no time spent on the argument; it was not pursued. So the only question is whether there was extra evidence or extra material put in, and I am not very sympathetic to extra hours spent by counsel in the upper point, if that is going to be a basis.

111. MISS BAXENDALE: My Lord, that certainly is not. Because of my learned friend's skeleton argument we did not have to deal with the point.

112. MISS BAXENDALE: Does your Lordship still have volume 1 anywhere near to hand?

113. MR JUSTICE COLLINS: Yes, somewhere.

114. MISS BAXENDALE: I thought if I just showed you the relief sought, and then if your Lordship looks at the affidavits most briefly.

115. MISS BAXENDALE: If you go to page 2 of file 1, which is the relief sought.

116. MISS BAXENDALE: You have the declarations. We have succeeded on 1B. So my learned friend has succeeded in 1A and 1C, but he has not succeeded on 1B. Then over the page, D, you have set out the breach of legitimate expectations, E, the principle of procedural fairness. Then, my Lord, you have the affidavits - and if one goes -- I think I start --

117. MR JUSTICE COLLINS: Procedural fairness to a degree is coupled with the article 7 point, is it not?

118. MISS BAXENDALE: They put it on both the sense of article 7, but they were also saying they were not given an opportunity to comment. That was the procedural fairness at that time.

119. MR JUSTICE COLLINS: Yes, which they were not, but it did not matter for the purposes of the judgment because I have decided the thing was unlawful. I think there is a little bracket somewhere in the judgment which, dealing with this point, says procedurally in article 7 terms and in domestic law.

120. MISS BAXENDALE: But it is really, my Lord, it was the large parts of the affidavits.

121. MR JUSTICE COLLINS: Let us have a look.

122. MISS BAXENDALE: Would your Lordship like to go to Mr Moran's affidavit, one starts at page 221.

123. MISS BAXENDALE: Page 221. It is where Mr Moran's affidavit starts. What your Lordship will see is the first parts are setting out the story.

124. MR JUSTICE COLLINS: That is the background.

125. MISS BAXENDALE: Then one goes from 231 onwards, what in fact he is doing is giving a very detailed description of all the dealings between the Department and Pfizer.

126. MISS BAXENDALE: And that is on the basis of the legitimate expectation argument, and the legitimate expectation argument then has to be dealt with by my clients, and there are further --

127. MR JUSTICE COLLINS: Miss Baxendale, that is not entirely so, is it? Yes, of course it goes to legitimate expectation, but it is, is it not, seeking to make the point or underline the point of the effect of the Circular and the discussions that were had in that connection. So I do not think you can isolate out entirely in this part of the affidavit the legitimate expectation point. In fact it deals with both really, or at least it is the underlying substance for both.

128. MISS BAXENDALE: I think the first parts I would say were the legitimate expectation, but I would certainly take your Lordship's point. What happens next goes -- we both were doing with what GPs were doing next. But in the affidavits there was a degree of "then I said to him and he said to me and I believe". My Lord, I do not want to waste time going through it, but there was a lot of detail about "then I said to him and he said to me".

129. MR JUSTICE COLLINS: All right. Then where do you say that you spent extra time in dealing with those allegations?

130. MISS BAXENDALE: My Lord, you will find it in Mr Pearson's affidavit at page 12.

131. MISS BAXENDALE: You will find at page 16, paragraphs 10, the references to the meetings, paragraph 11. But, my Lord, I think in the light of what your Lordship has been saying, a lot of that we would be putting in in any event.

132. MR JUSTICE COLLINS: That is the point. And there really is not, is there, any substantial issue on the facts; it is the conclusions that should be drawn from those facts and what was behind what was said by either side, rather than any issue about what was actually said?

133. MISS BAXENDALE: My Lord, I accept what your Lordship is saying, that some of these points would have to be put in.

134. MISS BAXENDALE: It is the detail some of it and also the point that, particularly we succeeded -- the ones that were not argued obviously were not argued at all, but in relation to article 28, which was a major part of my learned friend's case -- my Lord, it is the basis for damages --

135. MR JUSTICE COLLINS: It is an important part, but it did not take up very much time, did it?

136. MISS BAXENDALE: I think particularly in reply it did.

137. MR JUSTICE COLLINS: A little, yes, all right.

138. MISS BAXENDALE: If your Lordship is looking at importance and the important points, that in relation to damages is an extremely significant claim.

139. MR JUSTICE COLLINS: I am well aware of that, Miss Baxendale.

140. MISS BAXENDALE: Also, my Lord, if we succeed on that point - it is a very short point, but as I understand CPR 44, I am entitled to say 'Look, we succeeded on the damages claim. This is extremely important and in those circumstances there should be a reflection of that in the costs order'.

141. MR JUSTICE COLLINS: Are you abandoning the first point?

142. MISS BAXENDALE: My Lord, no. It may be a small percentage, but I am not abandoning it. I think I would also like to draw the court's attention - although it may not necessarily be in my favour - to transitional arrangements, because this is a case that kind of bridges the gap. Could I go to page 531?

143. MISS BAXENDALE: Your Lordship will see under paragraph 18, which is part 51, paragraph 18.

144. MISS BAXENDALE: Exactly, my Lord. I wanted to draw that to your Lordship's attention. What I am saying is not so much disallow, but you should be, I would submit, awarding costs on a percentage basis, because if one actually looks at the end result, as you are now encouraged to do, it would not be right in this case to make an order that my client should be paying all of the costs because we have succeeded in a very significant, if not extremely lengthy, part of the case.

145. MR JUSTICE COLLINS: What percentage do you say is a reasonable one?

146. MISS BAXENDALE: 50%. Everyone laughs, but if you look at the actual importance of this case and what the case is about, I would say that does...

147. MR JUSTICE COLLINS: If you are right, it is so important for all, albeit a small part of the case, then you will get some good benefit later on, will you not, and that will be your compensation for having won on it, will it not?

148. MISS BAXENDALE: My Lord, if your Lordship is reflecting what has actually happened in the case, my Lord, the result of the case --

149. MR JUSTICE COLLINS: The major point of this case was whether or not that Circular was lawful or not; that is what this case was really about. True that they hope to obtain some redress hereafter, and they are in difficulties in domestic law because our system, some would say, has not caught up with what ought to be the law in this sort of regard; but there it is. They are rather dependent, as you rightly indicate, upon the European side of things for that. If you have knocked out article 28 and that survives, you may get a great advantage later, but for the purpose of this case I do not think it was a particularly major part. It may be a major part of what follows. That is a different point.

150. MISS BAXENDALE: My Lord, I have made the point on that. I would ask that there should only be a proportion of costs.

151. My Lord, would it also be appropriate at this moment to ask for leave to appeal. I think that probably while I am on my feet can I also...

152. MR JUSTICE COLLINS: Yes, I will hear Mr Pannick on that as well. You need not develop that at the moment. I will hear Mr Pannick on that aspect and come back to you if necessary.

153. MISS BAXENDALE: Again, overnight reading hard my CPR, I also noticed that I think there is an obligation now if I seek leave to appeal that I have to ask your Lordship - you may have it to hand - to fill in a form. Do you already have it?

154. MR JUSTICE COLLINS: They give it to me automatically. It is a considerable irritation, I am bound to say in most cases because it should be perfectly clear from what is said, but the Court of Appeal likes it and I will be good and do it.

155. MISS BAXENDALE: That was all. I am very glad if your Lordship has it already.

156. MR JUSTICE COLLINS: At least I assume they have one; I

157. MISS BAXENDALE: Those are my applications.

158. MR JUSTICE COLLINS: Mr Pannick, costs first.

159. MR PANNICK: In relation to costs, this is a transitional case so the CPR orders do not apply.

160. MR JUSTICE COLLINS: They do, do they not? 531.

161. MR PANNICK: 18.2: "The general presumption is that no costs for work undertaken before 26th April will be disallowed if those costs would have been allowed in a costs taxation before 26th April." So they do not apply to costs incurred before.

162. MR JUSTICE COLLINS: No, the affidavits and so on. That I agree, and I need not trouble you on that aspect. It is the article 28 point.

163. MR PANNICK: It is the level of success point that my learned friend is focusing on. What has happened is we have established to your Lordship's satisfaction that the Circular is unlawful, both as to domestic law and as to Community law, that is what your Lordship has found. We have won on the points which occupied the vast majority of time in your Lordship's court. My friend suggests that the fact that we have not also succeeded on a further basis for the Circular being unlawful may assist her if and when we pursue a claim for damages. I need to make it very clear that my clients may decide to pursue a claim for damages for the lost profits caused by the Circular. If we decide to pursue such a claim then any benefit that my friend has obtained by our failure also to persuade your Lordship that we are right on article 28 will assist her in those proceedings.

164. MR JUSTICE COLLINS: That is the point I was making to her.

165. MR PANNICK: I make it very clear to your Lordship that I was not arguing before your Lordship that we had a right to damages.

166. MR PANNICK: I was indicating that we may well pursue such a claim in the future, and that remains the position. So my friend cannot gain any assistance from her minor, with respect, victory in persuading your Lordship that we were only right on the directive on one basis for showing that the Circular was unlawful and we did not also persuade your Lordship that it was an unlawful Circular for a further Community Law reason. That is how I put the question of costs, my Lord.

167. MR JUSTICE COLLINS: If I were to be against you - I am not saying I am - then you would no doubt submit that the percentage would be a very, very small one.

168. MR PANNICK: It would be very small indeed. It is completely unrealistic, with the greatest of respect, to suggest that 50% is an appropriate figure.

169. MR JUSTICE COLLINS: I agree with that, Mr Pannick.

170. MR PANNICK: If your Lordship feelings that to cut off a small proportion of our costs is appropriate, your Lordship will say so. In my submission the appropriate order is that which should get all of our costs because we have established that the Circular was unlawful, both in domestic law and in Community Law, for the reasons that I have identified.

171. I would, incidentally, ask your Lordship to give permission for these proceedings to be continued by way of a claim for damages if my clients --

172. MR JUSTICE COLLINS: Is there a claim at the moment?

173. MR PANNICK: It is mentioned in the Form 86A. In the old days you would ask for the claim by way --

174. MR JUSTICE COLLINS: You have claimed damages; that is all I wanted to check.

175. MR PANNICK: It seemed to us that my clients will want to consider whether to pursue such a claim. If they want to do so, they will set it out in writing so the Secretary of State will know precisely what we are saying.

176. MR JUSTICE COLLINS: I think what I should probably direct is that if the claim for damages is to be pursued then a claim form - whatever you now call it - must be served within - and I shall hear you on what, if any, period should be granted. It obviously is sensible to make a reasonably lengthy one so that you can all consider and no doubt enable you to have discussions. I do not think that this is a case where the new arrangements require me to say 'get on with it'.

177. MR PANNICK: I would ask for 28 days. I would have thought --

178. MR JUSTICE COLLINS: I would have given you longer than that if you wanted it. Miss Baxendale, perhaps you would like to take some instructions and see what...

179. MR PANNICK: If your Lordship thinks it appropriate, 56 days.

180. MR JUSTICE COLLINS: I am happy with that.

181. MR PANNICK: I am grateful, my Lord. That is the question of costs.

182. As to leave to appeal, my Lord, it is my submission that the general importance of the issues should not lead your Lordship automatically to grant leave to appeal --

183. MR PANNICK: -- where your Lordship has reached a clear view of the right answer. If the Court of Appeal is to be troubled on this matter, it should be because, and only because, it has decided that there is some substance to the arguments that the Secretary of State is advancing. My Lord, we are concerned that if your Lordship were to grant leave to appeal the Secretary of State would take it as an encouragement to appeal, whereas if your Lordship were to refuse leave --

184. MR JUSTICE COLLINS: You know that that is not the case, Mr Pannick.

185. MR PANNICK: We hope that he will consider carefully whether he really does wish to take this matter further in the light of your Lordship's judgment.

186. MR JUSTICE COLLINS: I am sure he will.

187. MR PANNICK: But we say that unless your Lordship thinks there is real doubt as to the right answer your Lordship should leave it to the Court of Appeal to decide whether it wishes to be troubled by the matter.

188. MR JUSTICE COLLINS: You do not want leave on the 28 point?

189. MR PANNICK: I say there should be no leave to appeal. If there is going to be leave to appeal then I would, of course, ask for leave to cross appeal.

190. MR JUSTICE COLLINS: And you would get it.

191. MR PANNICK: I say that if the matter is to go further let the Court of Appeal decide whether there is something in it in all the circumstances. That is how I put it.

192. MR JUSTICE COLLINS: Yes, Miss Baxendale, I think I had better ask you to deal with leave to appeal and also you can deal in reply with the costs apportionment point which you raised.

193. MISS BAXENDALE: Having been castigated as seeking far too high a figure of 50%, my Lord, I would submit that in relationship to what the case was really about it was a significant fact that my learned friend did not succeed on that part of their claim.

194. MR JUSTICE COLLINS: For the future that may well be so, but in the context of what the argument was about and what this part of the case was about, namely the lawfulness of the Circular, both, I am bound to say, in domestic and Community Law. I mean, one always talks in those terms, but the two actually cannot be separated in that way, but it is convenient to do so. I mean, that is what it really was about. True, you won on what may turn out to be a significant point. But I think there is some force in Mr Pannick's argument, is there not, that you are going to get the benefit of that in the future?

195. MISS BAXENDALE: My Lord, if we had lost on that point he would be saying 'Oh, well, it was very important and a significant part of it'.

196. MR JUSTICE COLLINS: If you had lost on that point you would have no argument about paying all the costs.

197. MISS BAXENDALE: My Lord, I am just dealing with the point 'Oh, well, it is only going to be important in the future.'

198. MISS BAXENDALE: It is not only important in the future: we actually won on this point here before your Lordship. It was argued. It is all very well for my friend now to say 'It was not really very important'. I think at the time he thought it was very important. He certainly gave - unlike the irrationality argument, which I am not basing my submissions on, I certainly did not get an impression from my learned friend's ultimate submissions to your Lordship that the article 28 point was really not very important at all. I would ask your Lordship to bear in mind that we did succeed on that point. Yes, we are very pleased that in the future we hope very much, if my learned friend were, in the light of not succeeding on that point, to try to pursue a claim for damages, it will be of great significance. But actually today, in front of your Lordship, it is an important point. My Lord, I would ask for that to be reflected in the costs.

199. On the leave point, my Lord, I am not going to go through all the judgment again, but certainly particularly in relation to the transparency directive, where your Lordship has already had my submissions about the fact that it has not been considered before. So far as I am aware there are no cases in, let alone domestic jurisdiction, in the wider European jurisdiction on this point.

200. MR JUSTICE COLLINS: I have stuck my neck out, you are saying.

201. MISS BAXENDALE: My Lord, I would not put it like that; but I would say it is an appropriate case, on that basis alone, let alone the other points, for the matter to go to the Court of Appeal. Again I think this does show how long I was looking at the CPR and Practice Directions, but, as I understand it -- I have the Practice Direction about leave to appeal and skeleton arguments - as I understand it, and I am summarising, I understand the Court of Appeal are asking judges to be less leaving it for them to decide. Have I understood that?

202. MR JUSTICE COLLINS: I was not quite sure.

203. MISS BAXENDALE: I cannot really understand, but I certainly...

204. MR JUSTICE COLLINS: You are not the only one, but the impression I got from that Practice Direction - and I think it is the same one you are referring to - was that the Court of Appeal was quite keen on judges not giving leave unless they really thought it was an appropriate case to do so. But perhaps we will need the Court of Appeal to construe the Practice Direction.

205. MISS BAXENDALE: As I understood it, before the Practice Direction the court were encouraged by the Court of Appeal very rarely to grant leave but to leave it to the Court of Appeal; but I understand the Practice Direction to be saying, 'in an appropriate case you can and could you spell out why'.

206. MR JUSTICE COLLINS: That is absolutely right. The reason for that, of course, is that added costs are incurred in seeking leave in a case where frankly leave is likely to be given.

207. MISS BAXENDALE: My Lord, that is why I am saying, if you look objectively, however long it would take us, which I am not sure now under the direction, I would submit this is a case where the Court of Appeal would grant leave.

208. MR JUSTICE COLLINS: I think you are probably right.

209. MISS BAXENDALE: And it is a complete waste of time and contrary to the new regime, looking at the overriding objective, to make us go to the Court of Appeal to seek leave when we were likely to get it.

210. MR JUSTICE COLLINS: Are you suggesting the new regime is there to save costs?

211. MISS BAXENDALE: My Lord, one lives in hope.

212. MR JUSTICE COLLINS: I hope you are right. I am bound to say I am not sure you are, judging by the satellite litigation that we can all see on the horizon; but there we are.

213. MISS BAXENDALE: And the amount of time it would take, I am trying to follow where the rules are at the moment is quite difficult. But on the basis that we are extremely likely to get leave in the Court of Appeal; but even basis it on the transparency directive point I would ask for leave to appeal.

214. MR JUSTICE COLLINS: If this case had been heard before 26th April I have no doubt they I would have made an order for costs against the respondent and I very much doubt if Miss Baxendale would have felt able to raise any argument against; but times have changed, and I now have to have regard to part 44 of the new Civil Procedure Rules because paragraph 18 of the Transitional Arrangements requires me to assess costs in accordance with the Civil Procedure Rules, parts 43-48, which deal with costs. However, paragraph 18.2 of the Transitional Arrangements Practice Direction reads:

215. That covers a separate point that was made by Miss Baxendale that one of the arguments which had been raised in the 86A based on legitimate expectation was not pursued before me and some evidence had been put in to deal with it. Assuming that to be a valid point - and I am not entirely sure it is, because the evidence that was put in was general evidence covering relevant matters - it seems to me that it falls fairly and squarely within 18.2, and since costs would have been awarded generally if the new rules had not been in force, it would be wrong to disallow any costs in respect of that.

216. But essentially the claim was about the lawfulness of the Circular. Mr Pannick submitted on behalf of the applicants that it was unlawful both in domestic and Community Law. There were two grounds for the alleged unlawfulness in Community law. The first, which I have found in his favour, was based upon the Transparency Directive. The second - and this I have not found established - was based upon a breach of article 28 of the Treaty (the old article 30).

217. That, Miss Baxendale submits, is an important part of the case presented by the applicants, because the declaration that I have given is or may be a preliminary to a claim for damages, that is to say, compensation for the loss of sales which have been caused by the Circular. For various reasons which I do not need to go into, it is probable that the applicants need a breach of Community law in order to found a claim for damages, because domestic law is unlikely to provide them (certainly easily) with any compensation. Any compensation can only be given by the court through a private law remedy since that is needed in order to found a claim for damages in domestic law. Thus, Miss Baxendale makes the point that the applicants' failure to establish a breach of article 28 may have very important knock-on effects in relation to their claim for damages. If that is so (I am not deciding that it is - I have no material to enable me so to decide and Mr Pannick made it clear from the outset of these proceedings that he was not pursuing before me any claim for damages but was merely concerned with the unlawfulness of the Circular) then the benefit of that finding will inure to the respondent in due course. But I do not take that into account in considering whether the costs should be apportioned.

218. However, because the applicants have failed on one part of their claim, I have to apply rule 44.3 in part 44 of the costs rules. The general rule is set out in 44.3.2 in similar terms to the rule which we have all been applying hitherto, namely that the unsuccessful party will be ordered to pay the costs of the successful party. But by paragraph 4 the rule states:

219. That does not apply:

220. That is the paragraph that Miss Baxendale submits bites in the circumstances of this case.

221. The comment to 44.3 states this:

222. It is now necessary for the court to take a more critical approach to the case before it and to try, as I see it, to assess the proportion of costs that is attributable to the individual issues which have been put before the court. I suppose the ultimate purpose of this new rule is to make the parties think in advance precisely what points they really are going to take, and abandon those which they feel are perhaps less likely to succeed or which are not necessary for them to take.

223. In fact the article 28 point did not add a great deal to the length of the hearing, although it added something. Miss Baxendale rightly makes the point that she dealt with it in some detail in the course of her submissions, and, indeed, I was referred to the authorities upon it, which I have referred to in the judgment. It seems to me that, looked at overall in the context of the hearing before me, the article 28 point played a relatively small part. As Mr Pannick has submitted, and correctly, what this case was about was essentially the lawfulness of the Circular, both in domestic and in Community law, and on both aspects the Secretary of State has lost, but he has won on one part of Community law.

224. Miss Baxendale submitted in the course of argument that the proportion should be 50%, but that was having regard to the end result, if I may put it that way, what I described as the possible knock-on effect of the finding on article 28. As I have said, I do not think in the circumstances of this case that that is a proper approach.

225. Having regard to the new duty that is placed upon me to look more critically at the issues, it seems to me that the encouragement is there in the rules to apportion if, generally speaking, there is a failure on one and a success on another point, provided that time has been taken which otherwise might not have been taken on the other point.

226. On the other hand, I have to look at this realistically and look at the time taken overall. The simple answer is, in my judgment, that looked at in that way the extra time taken can properly be described as minimal. Therefore it would be wrong in the circumstances of this case to apportion. It seems to me that the just result here is to apply the general rule, namely that the unsuccessful party will be ordered to pay the costs. Accordingly I propose to order that the respondent pay the applicant's costs of the proceedings before me.

227. The other application that is made by Miss Baxendale is for leave to appeal to the Court of Appeal. That is resisted by Mr Pannick on the basis that the decision I have reached is one which was a clear one and I have certainly not expressed any doubt about it. That is true. On the other hand, I do have to recognise the force of Miss Baxendale's submission that if she were to apply for leave to appeal it is highly unlikely that the Court of Appeal would not grant leave. The point is an important one. Although there is substantial precedent for judicial review of a circular and of guidance given in a circular, nevertheless it is fair to say that it is approaching perhaps the boundaries of judicial review.

228. Similarly the point that was made in relation to the Transparency Directive is that there is no European Court decision in point, and I do bear in mind Miss Baxendale's submission to me that I ought to have referred the matter if I was going to construe the Directive in a way which was certainly not in accordance with its language as it would normally be construed by an English judge, that is to say, if he did not apply a purposive construction. It is clear to me that those are points which I think would properly persuade the Court of Appeal to grant leave if an application were made. In those circumstances it seems to me that it would be pointless for me to say 'I refuse leave to appeal' because that would only be an encouragement to incur extra and unnecessary costs.

229. Having said that, of course, this is not an encouragement to appeal. I know Miss Baxendale appreciates that, but it is as well that it is said, because sometimes it is construed by outsiders as the court encouraging an appeal. It is no such thing. It is merely the court recognising that it is a case where the Court of Appeal, if application were made to it, would almost certainly grant leave. I make it clear that I am not in any way encouraging the Secretary of State to appeal. It is a matter that he will decide upon advice given him by those whom he has instructed.

230. If he does appeal and if Mr Pannick needs it, he has leave to cross appeal on the article 28 point, and I do not think Miss Baxendale has sought to resist that. If she had, it would have got her nowhere.

231. In those circumstances, Mr Pannick, costs to you and leave to appeal.

232. MR PANNICK: I am very grateful to your Lordship. Could I mention one other matter - I am not asking your Lordship to make any order - can I mention that Pfizer is also considering bringing a judicial review claim in relation to the new decision of the Secretary of State announced on 7th May, that is the decision to include Viagra in schedule 11 of the regulations. A decision will be taken shortly and the Secretary of State will be informed.

233. MR JUSTICE COLLINS: Mr Pannick, I think you are up against very considerable time limits there. I will fire this warning shot if I may, because we know that it is proposed that draft regulations be laid with a view to being put before the House and passed on 1st July.

234. MR PANNICK: Indeed, that is why a speedy decision is going to be taken.

235. MR JUSTICE COLLINS: It would obviously be detrimental to good administration - I put it no higher - if you did not move very quickly. For my part I would think that you may find yourselves in delay problems if you delay for more than seven days.

236. MR PANNICK: I understand that. We obviously thought it right to wait to see your Lordship's judgment.

237. MR JUSTICE COLLINS: That I understand and I do not think it unreasonable.

238. MR PANNICK: In the light of your Lordship's judgment, I simply mention that very urgent consideration is now going to be given to precisely that matter; but I thought it right to mention it.

239. MR JUSTICE COLLINS: Mr Pannick, I am grateful that you did. Obviously I cannot bind and will not bind the single judge if you do seek to, but I thought it right, because you understand and Miss Baxendale can hear, that it seems to me that this is really a case where the three months means nothing and you have to move very quickly indeed if you decide to do so.

240. MR PANNICK: I understand that, my Lord.

241. Can I thank your Lordship for producing a judgment so speedily. Thank you, my Lord.