England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		26 June 2009

Mr Justice COLLINS :

1. I must start with an apology for the delay in producing this judgment. I had hoped that it would be available by the end of April, but I am afraid pressure of other cases has made that impossible. However, I am pleased to note that some of the urgency may have gone by virtue of the appeal by BAA against the Competition Commission's decision that it must dispose of Gatwick Airport.
2. The claim involved a considerable volume of paper, which the parties were able to reduce to four core bundles. Nonetheless, the argument covered 4 days and I was referred to many documents and authorities. I was assisted by the provision of all documentation in A5 format and by a running transcript, which I have been able to read and so remind myself of the arguments deployed. I do not propose to go through all the material to which I was referred. That would produce an unwieldy judgment. I intend so far as possible to summarise what is necessary to explain my conclusions rather than set out in the judgment lengthy extracts of statements or of the contemporaneous documents.
3. The claimant is a well-known airline. It is the largest single user of Gatwick Airport with some 8 million passenger movements in 2008. This represents about 25% of Gatwick's passengers. It endeavours to offer flights at the lowest possible price. Thus it is of the greatest concern to it to try to ensure that the amounts it has to pay for the use of the airport are kept as low as possible since any increase will inevitably have an immediate effect on the prices it charges. It may be said that the same applies to all airlines using an airport. That is no doubt so but the problem is more acute where the profit margins per passenger are, because of the need to provide the best possible price, not substantial.
4. In 1986, by the Airports Act 1986, BAA, which operates in particular Heathrow, Gatwick and Stansted, was privatised. It was recognised that it held a dominant position and would be able thereby to fix prices, unless some controls were in place, which might not be in the public interest inasmuch as they would discourage low fare flights. Thus the 1986 Act required the defendant, as Aviation Regulator, to set the maximum amounts payable. This is variously described as a cap or a charge control. The 1986 Act calls it a regulation of "the maximum amounts that may be levied by the airport operator by way of airport charges" (s.40(3)). The amounts are fixed for successive 5 year periods. The period with which this claim is concerned is the fifth, known as Q5. The amount in question fixed by the defendant for Gatwick for Q5 which is challenged in this claim is some £1300 million. This figure is then applied to a forecasted 184 million passengers. From this, an annual amount per passenger, which increases over the 5 years (the mean applicable for 2010/11, being £7.06) is calculated. It is obvious from these figures that variations of small amounts per passenger result in very large sums indeed over the period and annually for the claimant.
5. The main issue that has been raised relates to the cost of security measures. At a very late stage in the exercise being carried out to establish the appropriate cap, the interested party (which is the entity through which BAA operates Gatwick) indicated that, because of the proposed relaxation of the one bag only rule and other variations to security measures, there was a need to increase the amounts which had been put forward. This happened in November 2007 when the Q5 was due to commence in April 2008 and a final decision was needed by March 2008. In the result there was further consultation with the airlines and the Interested Party (IP) which ended on 31 January 2008. But after that the defendant sought and received further information from the IP and, assisted by that, reached its final decision. The claimant was not informed of this and complains that it was unfair and so unlawful for the defendant to have undertaken that exercise. In addition, it is said that there was an unlawful failure to follow the recommendations of the Competition Commission which had to be involved in the process.
6. I have had cited to me a number of authorities which consider what may be regarded as unfair so as to lead to a decision being unlawful. Mr Beloff Q.C. has submitted that it is important, indeed essential, before deciding whether the court should regard what was done as so unfair as to justify relief to understand the statutory obligations placed on the defendant.
7. These are contained in the 1986 Act and the Civil Aviation Authority (Economic Regulation of Airports) Regulations 1986. Gatwick is an airport designated by the Secretary of State under s.40(10) of the Act which means that the defendant must impose conditions which regulate the maximum amounts which may be levied by way of airport charges. In imposing any conditions (which extend to conditions as to accounts) the defendant is required by s.39(2) to act:-

" … in the manner which it considers is best calculated:-

(a) to further the reasonable interests of users of airports within the United Kingdom;

(b) to promote the efficient, economic and profitable operation of such airports;

(c) to encourage investment in new facilities at airports in time to satisfy anticipated demands by the users of such airports; and

(d) to impose the minimum restrictions that are consistent with the performance by the CAA of its functions …."

Users are defined in s.82 to include (inter alios) airlines and passengers.

8. S.40(3) I have already mentioned: it requires the imposition of "such conditions as the CAA considers appropriate" for regulating the maximum charges over successive 5 year periods. S.40(4) empowers the CAA to modify existing conditions for a succeeding 5 year period. S.40(5) provides:-

"(5) Without prejudice to the generality of subsections (3) and (4), conditions imposed or modified in pursuance of those provisions-

(a) may provide-

(i) for an overall limit on the amount that may be levied by the airport operator by way of all airport charges at the airport , or

(ii) for limits to apply to particular categories of charges, or

(iii) for a combination of any such limits;

(b) may operate to restrict increases in any such charges, or to require reductions in them, whether by reference to any formula or otherwise;

(c) may provide for different limits to apply in relation to different periods of time falling within the period of five years for which the conditions are in force."

S.40(9) requires the CAA to make a reference to the Competition Commission (CC) before imposing or modifying any condition.

9. S.43 provides for what a reference must cover. Broadly speaking, it will require the CC to investigate and report on what are the maximum amounts which should be capable of being levied by way of airport charges and whether the airport operator has since the last reference pursued a course of conduct which has or might be expected to have operated against the public interest. This case does not concern any issue other than the appropriate maximum charges. S.44 requires the CAA to cooperate with the CC and give it any information which may assist it in carrying out its investigation and enables it to specify any view it may have formed as to what the maximum amounts should be. In reporting, s.45 requires the CC to reach definite conclusions on the questions put to it, giving "such an account of their reasons for the conclusions as, in their opinion, is expedient for facilitating proper understanding of those questions and of their conclusions" (s.45(1)(a)).

S.45(2) provides:-

"The Commission's conclusions on a reference under s.43(1) so far as relating to the maximum amounts referred to in paragraph (a) of that provision shall take the form of recommendations as to what those maximum amounts should be during the five years in question; and any such recommendations may do any of the things referred to in paragraphs (a) to (c) of section 40(5)."

10. On receiving the report from the CC, which the CAA must publish (subject to questions of redaction if necessary to protect commercially sensitive information or information which it would not be in the public interest to disclose), the manner in which the CAA must deal with it are set out in s.46. S.46(1) requires the CAA, once it has the report, to impose conditions or modifications. S.46(4) and (5) indicate that the CAA is not bound to follow the recommendations of the CC. So far as material, they provide:-

"(4) before imposing any conditions or making any modifications … the CAA shall have regard to the recommendations [as to what the maximum amounts should be]

(5) Where the CAA has imposed any conditions or made any modifications … it shall publish the following matters, namely –

(a) particulars of the conditions or modifications in question, and

(b) insofar as those conditions or modifications do not accord with the recommendations [of the CC], a statement of the CAA's reasons for not implementing the Commission's report."

11. The CAA's duties once it has received the report from the CC are further spelt out in the 1986 regulations. Regulation 12 provides:-

"12(1). Where the CAA has received a report from the Commission and is required by sections 40(3), (4) or 46 of the Act to impose or modify a condition in relation to an airport, it shall publish notice of the conditions or modifications it intends to impose; and insofar as the proposed conditions or modifications do not accord with the recommendations made by the Commission as to what the conditions or modifications should be, the notice shall include a statement of the CAA's reasons for not implementing the Commission's report.

(2) The notice shall be published in such manner as the CAA considers most suitable for bringing it to the attention of the airport operator and other persons who, in the opinion of the CAA, would be affected by or be likely to have an interest in the proposed conditions or modifications.

(3) A decision as to the form of the conditions or modifications to be imposed shall be taken only by a member of the CAA after considering any written representations served on the CAA within 30 days of the date of publication of the notice given by the CAA pursuant to paragraph (1) of this regulation."

In the light of submissions made by Mr Beloff were I to find that there had been any procedural defects and so unfairness in the way in which the CAA had dealt with the capping, I should set out Regulation 18. This provides:-

"The failure of the CAA to give notice or publish any particulars in the time or manner provided for in the Act or in these Regulations or any other procedural irregularity shall not invalidate the action taken by the CAA, and the CAA may, and shall if it considers any person may have been prejudiced, take such steps as it thinks fit before reaching its decision to cure the irregularity, whether by the giving of notice or otherwise."

12. It is clear from the statutory provisions that the CAA has an investigatorial role in order to be able to decide what the appropriate cap should be in the public interest. Those particularly affected are obviously the airport operator and the airlines. It is in the operator's interest that the cap should be set at as high a level as reasonably possible to enable it to receive the maximum amount to meet its operating expenses (opex) and its capital expenses (capex). The public interest requires that airports should be run as efficiently as possible and should contain facilities necessary to achieve such efficiency. Passengers are concerned at delays if insufficient personnel are available to deal with security or baggage handling. But it is also important that airlines are able to provide a service for passengers which keeps the cost of travel to an acceptable level and the charges should not discourage airlines from providing as wide a service as possible. It is obvious that the amount of the charges will affect the airlines so that they have a real interest in being able to make meaningful representations to seek to persuade the CAA to set a cap at as modest a level as reasonably possible. Thus there is a rivalry between them and the operator. However, this does not mean that the CAA's role is to be equated to that of a decision maker who has to judge between rival parties. It is not an adversarial contest. The CAA has to reach a decision which it considers to be correct having regard to the matters that it must take into account under s.39(2).
13. In these circumstances, Mr Beloff submits that the CAA must be the judge of how it undertakes its task and obtains the necessary information to enable it to carry out its functions. It does not have to consult nor does it have to disclose to one person who may be affected by or interested in its decision what representations have been made by others. It is, he recognises, open to the court to impose upon a statutory procedure requirements which it considers necessary to produce fairness insofar as in given circumstances what has occurred is unfair and has resulted in a detriment to a particular person.
14. It seems to me that one has to consider the particular circumstances in an individual case. While the CAA can, provided it complies with what the statutory provisions set out, carry out its functions in the way it considers appropriate, it must not in so doing act unfairly. The court must, however, be careful not to impose upon it obligations which the statutory provisions do not impose or which it reasonably decides it need not carry out. It has a wide discretion as to how it should carry out its investigations, but that discretion is not unlimited. The court is entitled to intervene if satisfied that its procedure in a given case was clearly unfair to a person affected by its decision.
15. A number of authorities have been cited in this regard. Mr Béar relied on Bushell v Secretary of State of the Environment [1981] AC 75. The issue in that case was whether objectors to a motorway scheme ought to have been allowed to cross examine the Department witness to test the accuracy of traffic predictions contained in a publication known as the Red Book. There were then no rules governing the procedure before the inspector, who had ruled against the objectors, and so the House of Lords decided that the only requirement was that the procedure had to be fair. Reliance is placed on observations of Lord Diplock at pp. 94E to 96A:-

"The subject matter of the inquiry is the objections to the proposed scheme that have been received by the minister from local authorities and from private persons in the vicinity of the proposed stretch of motorway whose interests may be adversely affected, and in consequence of which he is required by Schedule 1, paragraph 9, to hold the inquiry. The purpose of the inquiry is to provide a minister with as much information about those objections as will ensure that in reaching his decision he will have weighed the harm to local interests and private persons who may be adversely affected by the scheme against the public benefit which the scheme is likely to achieve and will not have failed to take into consideration any matters which he ought to have taken into consideration.

Where rules regulating the procedure to be followed at a local inquiry held pursuant to a particular statutory provision have been made by the Lord Chancellor under section 11 of the Tribunals and Inquiries Act 1971, the minister and the inspector appointed to hold the inquiry must observe those rules; but no such rules were applicable in the instant case – they had not yet been made. The Highways Act 1959 being itself silent as to the procedure to be followed at the inquiry, that procedure, within such limits as are necessarily imposed by its qualifying for the description 'local inquiry', must necessarily be left to the discretion of the minister or the inspector appointed by him to hold the inquiry on his behalf, or partly to one and partly to the other. In exercising that discretion, as in exercising any other administrative function, they owe a constitutional duty to perform it fairly and honestly and to the best of their ability, as Lord Greene M.R. pointed out in his neglected but luminous analysis of the quasi-judicial and administrative functions of a minister as confirming authority of a compulsory purchase order made by a local authority, which is to be found in B Johnson & Co (Builders) Ltd v Minister of Health [1947] 2 All ER 395, 399-400. That judgment contains a salutary warning against applying to procedures involved in the making of administrative decisions concepts that are appropriate to the conduct of ordinary civil litigation between private parties. So rather than use such phrases as 'natural justice' which may suggest that the prototype is only to be found in procedures followed by English courts of law, I prefer to put it that in the absence of any rules made under the Tribunals and Inquiries Act 1971, the only requirement of the Highways Act 1959, as to the proceeding to be followed at a local inquiry held pursuant to Schedule 1, paragraph 9, is that it must be fair to all those who have an interest in the decision that will follow it whether they have been represented at the inquiry or not. What is a fair procedure to be adopted at a particular inquiry will depend upon the nature of its subject matter.

What is fair procedure is to be judged not in the light of constitutional fictions as to the relationship between the minister and the other servants of the Crown who serve in the government department of which he is the head, but in the light of the practical realities as to the way in which administrative decisions involving forming judgments based on technical considerations are reached. To treat the minister in his decision-making capacity as someone separate and distinct from the department of government of which he is the political head and for whose actions he alone in constitutional theory is accountable to Parliament is to ignore not only practical realities but also parliament's intention. Ministers come and go; departments, though their names may change from time to time, remain. Discretion in making administrative decisions is conferred upon a minister not as an individual but as the holder of an office in which he will have available to him in arriving at his decision the collective knowledge, experience and expertise of all those who serve the Crown in the department of which, for the time being, he is the political head. The collective knowledge, technical as well as factual, of the civil servants in the department and their collective expertise is to be treated as the minister's own knowledge, his own expertise. It is they who in reality will have prepared the draft scheme for his approval; it is they who will in the first instance consider the objections to the scheme and the report of the inspector by whom any local inquiry has been held and it is they who will give to the minister the benefit of their combined experience, technical knowledge and expert opinion on all matters raised in the objections and the report. This is an integral part of the decision-making process itself; it is not to be equiparated with the minister receiving evidence, expert opinion or advice from sources outside the department after the local inquiry has been closed."

16. While these are general observations, they were made in the context of a process which involved an inquiry held to enable opposing parties to put their own and test the rival case. No doubt the purpose of the inquiry is as indicated by Lord Diplock in the second sentence of the passage I have cited (at p.94G of the report), but the method by which the purpose was achieved was by means of an adversarial process. That is, certainly in the eyes of the common law, a satisfactory means of reaching the right result. But it is not the only way and Mr Beloff rightly submits that the procedures set out for the CAA do not include or encourage such a process.
17. Nevertheless, there is a judgment to be exercised by the CAA which must be based on a proper investigation which ensures that it gets all relevant information. The crucial point made by Mr Beloff is that the investigation by the CAA directed to the appropriate cap for Q5 commenced in 2005. In November 2007, a Regulation 12 notice was served. Because the likely increase in security costs was not put to and so not considered by the CC, there was further information needed so that consultations were to continue until 31 January 2008. I shall deal in more detail with the factual position and the specific arguments in due course. I am now only concerned with the correct approach. Regulation 12(3) requires 30 days to be given for written representations. The CAA in fact gave until 31 January for representations and set up a number of meetings attended by representatives of the airlines and the IP and made clear that no representations would be accepted after 31 January. However, because it considered that it had not had sufficient information to enable it to understand properly the basis upon which the IP had reached the amounts it was saying were needed for additional security measures, it held meetings with the IP in February 2008. Those meetings and the information obtained, which it took into account in reaching its conclusions in March 2008, were not known to the airlines. The claimant's case is that it was unfair to them not to have disclosed the information to enable the airlines to make their own representations to demonstrate that it was not reliable. Mr Beloff submits that Regulation 12 did not require this and in any event the airlines had had all necessary opportunity to make their points. The decision of the CAA to give more than Regulation 12 required did not mean that it had to continue beyond the consultation period to give more. It could lawfully have done no more than indicate that it would receive representations and it would not have been obliged to ensure that each interested person saw and so could comment on representations made by another.
18. Obligations to inform an interested party to enable him to know and so to deal with the matters raised against him will vary depending on what is in issue. Thus if the person affected is applying for or is to be deprived of something of benefit, the ability to deal with all relevant material is more obviously required. And many of the cases on fairness deal with that sort of situation. Here, the obligation is to reach a decision which meets the objectives set out in s.39(2). That is said to make all the difference. However, it is in my view not possible to ignore the fact that the claimant's financial situation is affected. The higher the charge, the more difficult it is to make a profit and keep the charges to passengers as low as possible. Equally, the IP's situation is similarly affected in that they are concerned to run an efficient airport which will attract as many users as possible and to make a reasonable profit. Thus, even though they are not to be regarded as parties to an adversial process with CAA as the arbiter, nonetheless there is in my judgment a need to consider whether on the facts they have been treated fairly even if the statutory provisions lay down no particular requirements. To that extent, the approach identified by Lord Diplock is relevant.
19. I was referred to the decision of the Court of Appeal in R(Eisai Ltd) v NICE [2008] EWCA Civ 438, (2008) 101 NMLR 26. The claimants held the U.K. marketing authorisation for a drug which could treat mild or moderate Alzheimer's disease. NICE decided to issue guidance within the NHS that the drug was not cost effective. The claimants challenged the procedure whereby NICE had reached its decision on the ground that it had failed to disclose the fully executable version of the model it had relied on. I recognise that it may be said that the claimant's interest was more directly affected by the guidance, since it would be difficult for it to market its product within the NHS. Nevertheless, NICE had to decide in the public interest whether the drug effectively provided value for money so that it was in the public interest that it should be readily available to sufferers from Alzheimer's. It had a specific duty pursuant to directions from the Secretary of State to arrange for appeals to be held on the application of persons aggrieved by a decision "on the grounds that [it] has failed to act fairly, has exceeded its powers or has formulated guidance which cannot reasonably be justified."
20. Thus the importance of recognising that persons such as the claimants had interests which needed to be protected so that they must be treated fairly was understood. Nevertheless, what was fair was not spelt out; that was for the court to determine. Richards LJ at paragraph 18 refers to counsel's submission that "consultees are entitled to check and comment on the evidence relied on by the decision-maker rather than to take the decision-maker's work on trust". That same approach is, if valid, just as applicable to persons affected if the decision has an adverse effect on them. In paragraph 45, Richards LJ said this:-

"[45] The appeal panel, as I have explained, took the view that it was for NICE to quality assure the model and that it was not for consultees to perform that function: and a similar point was made by Dobbs J. I accept, of course, that NICE, as the decision-maker, is responsible for checking the reliability of the model. But I agree with Mr Pannick that this does not answer the question whether fairness requires consultees to be given the opportunity to test the reliability of the model themselves, for the purpose of making informed representations on it. The Appraisal Committee has to rely on others to check that the model is robust (the fully executable version was provided in this case to only two out of 32 members of the committee). The checking is not something on which SHTAC and NICE's technical staff alone may have a relevant input. Whether the model has weaknesses is a matter on which consultees may properly have something to say. Indeed, they already do have things to say on the basis of the read-only version, and attention is properly paid to their representations. The carrying out of additional tests that are possible only with the fully executable version does not give rise to any difference of principle. On the face of it, to limit the extent to which consultees can engage in the legitimate task of testing such an important element in the appraisal process does seem to me to be unfair. Moreover, the possibility cannot be excluded that work done by them on the fully executable version would bring to light hitherto unrecognised weaknesses in the model."

21. It may not be necessary for the CAA to have entered upon a consultation exercise. However, it recognised, as was essential, that it should obtain information from all interested parties to enable it to reach the correct decision in the public interest. Thus in December 2005 it produced a consultation paper in which it explained how it proposed to undertake its task of fixing the appropriate cap. It said it would use what is called a Constructive Engagement process, which had come into being in May 2005. Constructive Engagement (CE) is a process by which the airport operator should disclose as much information as possible (having regard to commercial confidence and security concerns) to the airlines so that, where possible, a consensus could be reached and, where that was not possible, the difference would be known to the CAA. CE was to run in parallel with two other means of obtaining the necessary information. One involved CAA leading a working group comprising airline and airport representatives which considered work commissioned by the CAA from independent consultants. The other involved the CAA taking direct responsibility in its role as regulator for certain tasks. At Gatwick, it was agreed that CE should be conducted through a joint steering group (JSG). Mr Clayton, who has provided two statements on behalf of the claimant and is employed by it as Airport Regulatory Affairs Manager, was a member of the JSG.
22. No complaint is or could be made of the manner in which the CAA dealt with the process of reaching the right result for Q5 until the reference was made to the CC. The CAA consulted about the contents of that reference, which went to the CC in March 2007. The CC reported on 28 September 2007 and on 3 October 2007 the CAA published the report.
23. In its reference, the CAA indicated that since "a number of factors are still subject to further analysis and consultation with the interested parties", it had not at that stage reached a view on what the price controls should be. The Q5 exercise covered Heathrow as well as Gatwick, each of which airports had its own particular needs. However, the approach to price controls should be similar since in each case the principles set out in s.39(2) of the Act had to be applied. It concluded that, while regulation was a less than ideal proxy for effective competition in delivering cost effective services and capacity to airport users, there were further measures which could and should be taken to strengthen the regulatory incentives on BAA towards service quality and resilience, investment and cost efficiency. It looked forward to receiving the CC's report on these complex issues (Reference Paragraphs 26 and 27).
24. In its report the CC noted that the CE process had continued during the 6 months of its investigation and that there had been significant increases proposed in capex and in opex, principally in the latter to improve security service standards following significant increases in security requirements in 2006. It was critical of these increases having come at the end of a lengthy process of consultation and concluded (Paragraph 4 of the Summary):-

"The consequence is that a number of them will require further detailed examination by the CAA before it can put forward its final proposals. There are also a number of other outstanding issues for consideration by the CAA."

25. Since the claimant challenges the decision of the CAA not to follow some of the CC's recommendations, I need only refer to those which are material to such challenges. The first is construction price inflation (CPI). This is intended to reflect the allowance to be made in predicting the future cost of construction projects. BAA had put forward a figure of RPI plus 2%. The CC dealt with this in paragraph 4.29 of its report, stating:-

"4.29 Linking construction price inflation to RPI is a pragmatic approach, and we have seen no real evidence that the broad correlation between construction inflation and RPI is fading. In terms of the construction inflation uplift, there are two possible approaches:

(a) To try to anticipate what construction prices will do in the next five years. This approach was preferred by both BAA and the CAA, given the nature of airport investments, and is also the approach used by Ofgem. The RPI+2 proposal reflects an expectation that construction price inflation will increase in that period due to the large projects being undertaken in London and the price of raw materials. However, historically the construction market has been cyclical; but downturns are difficult to predict. In addition, in periods of downturn (e.g. the infrastructure price deflation at the junction of Q3 and Q4), there will clearly be no pressure from BAA to deflate the capex programme and little debate with the regulator on whether it should do so, with the consequence that over the long-run above average inflation may be built into BAA's capex programme.

(b) Alternatively, the long run rate may be more relevant for regulators (as the periods of volatility on the upside and downside broadly cancel each other out), with the long-term differential between RPI and construction costs being applied (which would be below RPI+1). This is the Ofwat approach.

We regard the latter as a preferable approach, particularly as some measure of inflation risk is already built into the 25 per cent project cost contingency. We commissioned a report from Experian on construction inflation over the next ten years, which also suggested an assumption of between 0.5 and 1 per cent would be sufficient. We also note that Ofwat applied a differential of 0.4 per cent in 2004. We therefore recommend and have adopted in our own projections an increase in construction prices of 0.75 per cent a year above RPI. We have applied this to all capex, although there would be a case, particularly were any higher increase in construction prices to be assumed, for applying it only to project costs and base costs: we recommend this should be considered further by the CAA. "

It thus suggested a figure of RPI plus 0.75%, but its recommendation was that the matter should be considered further by the CAA. It did not in terms recommend that RPI plus 0.75% should be applied.

26. Before going further, since it is convenient to deal with these separate challenges, I should indicate what is in my judgment the correct approach which the CAA should have applied in considering recommendations made by the CC. A number of authorities have been cited which are said to be relevant in giving guidance as to how the court should determine the issue. The statutory provisions require that the CAA shall have regard to the recommendations (s.46(4)) and that, if it decides not to follow any such recommendation, it must give reasons. Mr Béar suggested that that gave rise to a presumption that a recommendation should be followed unless there were cogent reasons for not doing so. I do not think that any presumption arises. The reality is that the CAA must have regard to a recommendation. This does not mean that it must follow it, but there is an obligation to give reasons for not doing so. An assertion that it believes another solution is better is not a reason. It must explain why a different solution is to be preferred. Provided its reasons are not irrational or otherwise vulnerable to attack on Wednesbury grounds, they cannot be regarded as unlawful so that the particular decision not to follow a recommendation is not liable to be impugned.
27. R(Munjaz) v Mersey Care NHS Trust [2006] 2 AC 148 concerned a code of practice by the Secretary of State under s.118(3) of the Mental Health Act 1983. The code was, as the statute stated, guidance to those concerned relating to admissions to hospitals and guardianship and after care of mental patients and their treatment. Lord Bingham indicated that it was guidance, but guidance which should be given great weight. As he said in paragraph 21 on p.189:-

"It is not instruction, but it is much more than mere advice which an addressee is free to follow or not as it chooses. It is guidance which any hospital should consider with great care and from which it should depart only if it has cogent reasons for doing so. "

28. A recommendation is stronger than guidance, but the same approach as set out in Munjaz is, as it seems to me, appropriate. The adjective "cogent" recognises that any reasons must be sufficient to show that proper consideration has been given to the recommendation and that the reasons for not following it have demonstrated that the decision reached was sound.
29. On 20 November 2007 the CAA published what is described as its price control proposals for Gatwick and Heathrow. This document was published in accordance with Regulation 12 of the 1986 Regulations. It dealt with CPI in paragraphs 9.43 to 9.52. It made the point that the CAA's price control decision for each airport was very clearly focused on a single geographical site which distinguished it from other regulators who had to consider a number of companies operating in the U.K. There was thus "far more scope for the CAA, were it to choose to do so, to tailor its CPI projections to the specific inflationary pressure which may be relevant within fairly narrowly defined geographic markets". In its view, "the nature of capex programmes at each airport is more prone to vary substantially (in size, scope and nature of investment) between price control periods than the average investment programme for water and energy utility companies". (See paragraphs 9.44 & 9.45).
30. The CC had instructed a firm called Experian to carry out an analysis which was based on a model developed for a study on U.K. construction demand and supply over the period 2005 to 2015. While recognising the thoroughness of Experian's exercise, its conclusions had been criticised and in the CAA's view BAA (who was not alone in putting forward criticisms) had put forward its own reasons for indicating that the Experian and so the CC approach was not appropriate for Heathrow or Gatwick. The need to have regard to inflationary pressures which might bear particularly at Heathrow and Gatwick during Q5 and the evidence presented by BAA persuaded it that RPI plus 2% was to be adopted.
31. Mr Béar complains that the reasons do not deal with the point made by the CC that the CAA failed to deal with the element of 'double counting', namely that there was already a 25% contingency added to construction costs to allow for possible cost overruns. Within this 25% was an element which included inflation risks. Such double counting would, of course, be included in the CC's figure just as in the CAA's. However, Mr Storey, the head of Price Controls section of the Economic Regulation Group (ERG) of the CAA, has said that the question of double counting was taken into account and it was decided that it was not of such magnitude as to require the lower figure to be applied. Mr Béar submits that Mr Storey's evidence indicates that the calculations were made mistakenly and so irrationally compared to the effect of RPI plus 0.75% plus a 25% contingency (incidentally, the inflation element of the 25% was no more than 40% of the 25%) with an RPI plus 2% without the contingency. Despite the claimant's expert's view, I do not read the evidence of Mr Storey as indicating that this error (if so it should be described) was made. I am satisfied that the reasons given for not following the CC's figure, which, as I have said, was not put in the form of a recommendation that it should be applied, were adequate.
32. The second discrete challenge relates to the manner in which the CAA dealt with Business Rates. This is not strictly a failure to follow a recommendation but a failure to carry out the detailed scrutiny which the CC said should be carried out. The need for this scrutiny stemmed from a late submission of a number of further cost items including business rates. In July 2007 BAA had increased its estimate for Gatwick from £124 million for Q5 to £134 million. The result was that there had been no independent valuation of some of the costs including the business rates and so the CC had said (Paragraph 4.145):-

"… we consider that they need further detailed scrutiny by the CAA with the assistance of an accounting firm before being allowed for the final price determination. In future reviews, such claims for 'one off' items should be subject to similar detailed verification at an earlier stage of the process."

33. The CAA commissioned a firm Atisreal to give advice on the assessment. They reported that BAA's assumptions and methodology were fair and reasonable and so the CAA accepted BAA's figures. Atisreal, who reported on 5 November 2007, concentrated on BAA's projections for Heathrow and found them to be satisfactory. Its report concluded:-

"As stated we have not been able to look at the same level of detail for Gatwick but from the information we have we have no reason to consider that the approach has been any different from that adopted for Heathrow."

34. Mr Béar submits that this cannot be regarded as detailed scrutiny. I do not agree. There was the necessary scrutiny of BAA's methodology and assumptions in relation to Heathrow. Atisreal did not merely assume that the same applied for Gatwick. As it said, the information it had about Gatwick do not give it reason to believe that the approach had been any different. There is no evidence from any other source before me which casts any doubt on that view. The CAA was in my view clearly entitled to rely on Atisreal's conclusion and accept the amount put forward by BAA.
35. The third specific decision not to follow a recommendation of the CC relates to pension costs. The CC dealt with pension costs in some detail in Appendix H to its report. It had instructed the Government Actuary's Department (GAD) to review BAA's scheme including a proposed 25% cash contribution rate over Q5. GAD emphasised that its results were approximations and came up with an upper figure of 20% which the CC then applied, saying (Appendix H paragraph 41):-

"BAA argued that such a cap on pension costs effectively penalised BAA's pension trustees for excellent management of the scheme, and introduces an element of asymmetry. Our recommended cap is not targeted at BAA's pension scheme trustees. It seeks to limit the degree to which BAA can pass on all of the costs of a relatively generous pension scheme to airport users. Also, applying the high end of the range provided by GAD, we see our cap as being a generous estimate rather than asymmetric."

In Paragraph 4.47 of the report, the CC stated that it believed it important to cap cash contributions at an appropriate level to ensure that airport users were not disadvantaged by the relative generosity of the scheme or by the change of investment strategy following BAA's acquisition by ADI.

36. In its Regulation 12 notice, the CAA stated (paragraph 6.42) that it was intending to move away from the separate assessment of salary and pension costs towards a regulatory approach in which labour costs were evaluated holistically. But it considered that for Q5 BAA should, as an interim step, be remunerated for its own forecast of 25% but that at future reviews the methodology suggested by the CC would be applied. It pointed out that its proposals, while allowing more than the CC, produced less than the amounts being proposed by BAA (£58 million as opposed to £82 million).
37. While the notice does not in terms explain why the interim step was decided on, the evidence from the CAA witnesses states that the view was taken that BAA should be given time to change its arrangements and so the changes should take place for Q6 and beyond. It is said that there was thus a failure to consult on the decision reached since the reasons for it were not apparent from the reasons given. Again I disagree. It was obvious from what was said that the decision was made because of the commitments which existed. In any event, it is difficult to see that any further consultation could have produced anything of value to be taken into account of which the CAA was unaware.
38. I reject the arguments relating to the decisions not to accept particular recommendations. It is therefore necessary to focus on what is and has always been the main area of concern for the claimant, namely the increase in security costs. There is one element in this which relates to an alleged decision to apply an approach which differs from that recommended by the CC. But the main complaints are based on an alleged failure to engage in proper and adequate consultation in the period after the publication of the Regulation 12 notice and 31 January 2008 when it was said by the CAA that no further representations would be taken into account coupled with unfairness in holding meetings with and obtaining further information from BAA in February 2008 without informing the airlines that that was occurring or had occurred. The complaints relating to the alleged inadequacy of the process until 31 January 2008 cover all increases. Thus at a meeting held on 28 January 2008 one finds complaints being made by a representative of IATA as follows:-

"While constructive engagement has generally led to a much better working relationship between the airlines and the BAA, we are very disappointed at what we consider to be a misuse of the process through the very late submission of additional operational and capital expenditure, in addition to the revised traffic forecasts. We are very concerned that this is a moving of the goalposts, relatively late in this review process, which has made it very difficult to actually consult on time."

39. The submission by BAA of increased figures for security costs came in November 2007. In its figures of July 2007, it had given a Q5 total of £259 million. The increases amounted to £226 million (almost doubling the total). This figure was reduced in December 2007 to £177 million. The main reason for this very large increase lay in the decision to allow passengers to carry two bags onto a plane instead of one. That decision, although under discussion for some time, had not been made final until November 2007. It has been suggested by the claimant that BAA was indulging in what was described as regulatory gaming, that is to say a deliberate exercise in raising extra items at the last minute to try to ensure that little time for detailed scrutiny existed. That is tantamount to an allegation of bad faith. There is in my judgment no basis on the material before me upon which I could find any element of gaming or bad faith. There has, it is true, been some criticism of the lateness of some submissions as is apparent from the CC report, but the security costs increase was understandably raised at a very late stage. And I do not think that any other failures to produce material at an earlier stage can properly be regarded as having occurred deliberately with a view to obtaining some benefit as a result.
40. In the Regulation 12 notice, the CAA in the introductory summary said (Paragraph 20):-

"The CAA proposes that maximum airport charges … for Gatwick … rise to £6.07 per passenger in 2008/9, with charges subsequently increasing annually by no more than RPI inflation plus 2%."

In Paragraphs 6.30 and 6.31, the CAA explained its approach to dealing with the increased security costs. It said:-

"6.30 The CAA is concerned about the scale of BAA's revised security cost estimates and the fact that it has not had the opportunity to consider BAA's projections in detail nor to discuss these with airlines or other interested parties. Airlines have also expressed concerns, in particular around the extent of the cost increases proposed and the lack of transparency over BAA's cost modelling of these standards. For these reasons, the CAA intends to initiate a work programme over the next two months through which it will scrutinise these costs thoroughly and will work closely with BAA and with airlines to ensure that all parties have a clear understanding of the costs associated with delivering higher levels of queuing standards.

6.31 The CAA will ensure that any additional costs allowed for in price caps are consistent with the service standards agreed through the service quality regime and with the CAA's statutory duties, in particular the duties to further the reasonable interests of airport users and to promote the efficient, economic and profitable operation of airports. As a holding position, the CAA has adopted the Commission's projections of security costs (net of pension costs) in the modelling for this document."

41. There is no question but that the exercise to be carried out was regarded as a continuation of CE. Thus there is an internal memorandum from Mr Storey of CAA of December 2007 which is headed 'Update on Heathrow and Gatwick consultation process and constructive engagement'. Mr Béar has sought to rely on what was said in Paragraph 6.30 of the Regulation 12 notice as an unqualified representation that there would be a continuing consultation exercise which meant, he suggested, that the meetings in February were inevitably to be regarded as a breach of that representation. I do not think any particular representation can be read into what is said, save that an exercise could be carried out to reach an understanding of the relevant costs. The question to be determined is whether what occurred has to be struck down because it was unfair or because no proper opportunity was given for the airlines to make informed representations. However, it is apparent that the exercise was regarded as consultation or, more accurately, an opportunity for the airlines to make representations based on discussions with and information provided by BAA together with any material they wished to submit from their own sources.
42. In this context, my attention was drawn to observations of Schiemann J in R v Shropshire Health Authority ex p Duffus [1990] 1 Med LR 119 at 223 in which he made the point that if the court was too liberal in its use of judicial review powers to compel any proposed change to be put to consultees at every stage, there was a risk that no change could ever be made since consultation would become a never ending exercise. That may with respect be something of an exaggeration, but the concern is a real one. There must be an end at some point. Whether any new material needs to be put to consultation will depend on the circumstances of any particular case. And of greater importance in the context of the matters relied on by the claimant in this case is whether the obtaining of information from BAA after the close of the consultative period was unfair.
43. I did at one stage wonder whether the notice was indeed within Regulation 12 on the basis that there were no firm proposals in a number of respects. Regulation 12 requires that the notice should contain the conditions or modifications the CAA intends to impose. The lateness of the increased security costs made it impossible to reach a firm view on this major issue and there were other investigations to be made as a result of the CC's recommendations. It would have been open to the CAA to defer the imposition of Q5 for up to 12 months, but in the end the claimant has not submitted that that course should have been adopted. Suffice to say that there were good reasons not to do that. But, as was made clear in Paragraph 20 which I have referred to, the intention to reach a particular figure was expressed albeit it might change as a result of the further consultation or CE to be carried out. Thus I am satisfied that the notice did comply with Regulation 12.
44. Mr Beloff relied on regulation 12(3) which, he submitted, only required the CAA to consider representations. Thus CAA did not have to extend the consultation period or to continue CE and could, he submitted, bring that exercise to an end when it wished. Further, it had no obligation to acquaint any person affected with a representation made by any other person. It was not open to the court to imply into the exercise to be carried out by CAA any extra obligations in the interests of fairness since the legislation did not require it. However, in my view if the CAA chose to adopt a particular process of consultation or CE and all those affected relied on that, it could not when it chose seek to revert to another less open process. No doubt it could have made clear that it reserved the right to seek further information if it felt it necessary after the CE period came to an end and that, if it did so, it would not involve any other person. It did not do this and, as will become apparent, failed to inform the claimant that it had obtained the further information. It was only when the IP served its summary grounds of defence that what had happened was disclosed. It is therefore open to the claimant to argue that, notwithstanding the wording of Regulation 12, what occurred was unfair.
45. If I were persuaded that there was what amounted to a procedural impropriety and so unfairness, Mr Beloff relied on Regulation 18. That is a somewhat ill-drafted provision, but I do not think it prevails where there is unfairness. It enables errors in procedure to be cured before a final decision is reached and may protect steps which were taken in the course of the investigation. But if the court were satisfied that the final decision was tainted because there was unfairness in the overall manner in which it was reached and so a claimant was prejudiced, it would not prevent relief being given.
46. On 3 December 2007 there was a seminar which could be attended by all those interested in which broad indications of the security costs were given. The airlines decided to operate through the JSG and it was further decided that BA, because it had the greater resources, should take the lead on behalf of all the airlines. There was what was described as a tripartite meeting on 19 December 2007. This was described by the BAA representative in an e-mail to inter alios those in the JSG as 'a key part of Constructive Engagement'. A Mr Strambi of Virgin, the joint chairman of the JSG, is recorded as having stated that the airlines felt that CE was flawed for a number of reasons because in particular BAA had all the information and resources and there was insufficient time particularly in the light of difficulties in understanding what was put to them to respond. Some studies were presented by BAA but these, Mr Strambi said, were hard to follow since the airlines did not have access to the source data. It was agreed at the meeting that representatives of BAA and BA would "continue the work to collectively understand and jointly critique the modelling and resource implications work, and to provide a technical report to the CAA by 14 January. The financial implications of this work should also be provided at this time." It was noted that the CAA would be happy to attend more meetings of the airlines and BAA if their presence would help the situation. Mr Storey expressed concern that estimates had been provided to the CAA which had not been discussed within CE, but noted that the information was now being provided.
47. There was a further meeting on 15 January 2008 between the JSG and BAA. This was attended by Mr Storey. Mr Clayton observed that he had made his own analysis of the information provided by BAA on the various options in respect of security costs but he could not understand some conflicting figures on cost per lane. Ms Hunter on behalf of BAA said that the cost information and what was described as the road-map of costs was shared at the meeting on 19 December 2007. Ms Knox, who was acting for BA, provided an update on the joint BA/BAA modelling work but noted that there was still a significant difference in respective results. She did not in terms complain that BAA had failed to provide all necessary information.
48. On 21 January 2008 the claimant made its written submissions in response to the Regulation 12 notice proposals. It gave detailed reasons for asserting that the charges proposed by BAA were too high. There had been, it said, a lack of transparency on the increased security costs. While it had not been possible to reconstruct BAA's demand tables for security arrangements, the figures put forward suggested that what it described as precedent figures had been manufactured in order to deliver the required outcome.
49. On 25 January, a joint paper was submitted by BA and BAA as a 'response on behalf of Gatwick Airlines to CAA regarding the modelling of Central Search infrastructure and staffing requirements at Gatwick in Q5'. This recorded inter alia that the models produced by BA and BAA both produced a similar infrastructure requirement if the same inputs were used, but noted confusion over the data BAA had used to model staffing requirements. The areas of disagreement were identified and BA believed that BAA's model added contingencies at all stages so that an inflated figure resulted. BA had produced its own model and the specific resulting differences were identified. But it was said by BA that there remained a number of outstanding questions. Indeed, Mr Clayton records that Ms Knox had informed him that BA had not received a copy of BAA's security demand model but only of the outputs, although she had seen the model on a screen.
50. On 29 January 2008 there was a meeting before the relevant CAA committee attended by representatives of BAA and, on behalf of the airlines, of Virgin, BA and easyJet. In addition, one of those appearing for easyJet (Mr Clayton) and Virgin were present as representatives of LACC and AOC Gatwick. Ms Knox stated that, although it had not been possible to replicate what BAA had done on opex, the increase on security costs was unsupportable. She recognised and indicated support for an increase, but not of the magnitude sought by BAA. Virgin's representative said that the data provided was inconsistent and 'we have all had a crack at trying to interpret BAA's presentations, without avail really'. This was a general complaint.
51. Towards the end of the meeting, Mr Bush, head of the ERG and chairman of the meeting, observed that BAA must endeavour to get the maximum level of agreement and get issues sorted out before the deadline of 31 January.
52. At the outset of the meeting on 28 January, Mr Bush said:-

"… what we have set out in a note we put on the web I think last week … was that there are some continuing constructive engagement discussions going on. The last dates for submission for anything is the 31^st. If at the end of these sessions parties feel there are points where they need to add some further clarification to what they have said, then they may put something further in, but everything has to be in by the 31^st and that is the final deadline."

53. The CAA panel was due to meet on 5 February. The report prepared for that meeting stated that BAA had shared its analysis of the factors which led to the increases with the airlines through various powerpoint presentations and had 'also provided airlines with the modelling it has used to forecast increases in central search and the assumptions which underpin the modelling.' In paragraph 40, it was noted that 'Airlines have spent more than two months considering these issues in detail with BAA and have struggled to get to the bottom of BAA's proposal. Nevertheless, airlines have been able to identify enough shortcomings in BAA's modelling of central search costs to cast doubt over the rigour of BAA's modelling of other elements e.g. the additional costs of compliance and staff/transfer search where BAA has failed to provide much support for or validation of its proposals.'
54. Four possible options were then set out in paragraph 41 as follows:-

"In order to facilitate debate at the Panel ERG has set out four potential options for dealing with this:

Option 1 – accept BAA's proposal in full. This option does not seem credible given the scale of the increases proposed, the lack of detailed explanation from BAA and the modelling issues that have been identified by airlines.

Option 2 – retain the current (Nov 07) numbers in price caps with an undertaking to carry out a systematic audit and review of BAA's projections over the spring with a view to adjusting prices in 2009/10 if BAA is able to provide robust evidence to support its projections. The advantage of this approach is that it signals publicly to BAA that we take a very dim view of BAA's approach and that BAA must go much further in justifying and explaining cost increases of this magnitude to both the CAA and to airlines. This would also reverse the perverse situation in which the CAA and airlines are seeking to justify reducing BAA's projections and would instead place the onus on BAA to properly substantiate and validate its proposals. The disadvantage is that this approach creates uncertainty over the settlement as a whole and is likely to have wider implications for the implementation of the service quality regime in particular.

Option 3 – present our misgivings to BAA and give them the opportunity to present a more robust case for including these costs. However, it seems unlikely that BAA would be able to provide much more evidence in the timescales available than it has already exhibited.

Option 4 – apply judgment to reach a view on the appropriate level of costs on the basis of the material that BAA has provided.

(a) one approach would be to accept the airlines proposed reduction to central search costs (i.e. £16m p.a.) and apply an aggressive efficiency factor (e.g. 3% p.a.) to the remainder of security costs;

(b) an alternative would be to base the settlement on a one-bag scenario and effectively disallow the costs BAA has identified for moving back to a more than one-bag approach."

55. It was decided that none of the four options should be followed but that consideration of security costs should be postponed to a subsequent meeting and that in the meantime CAA staff should carry out a further analysis. In the circumstances, as Mr Storey says, it was considered necessary to engage with BAA on its projections and a meeting with BAA was arranged for 8 February. Mr Storey e-mailed BAA an agenda which contained the following introduction:-

"The CAA's main concern with GAL's submissions on security costs is that while BAA's roadmap (BAA/Q5/586) is a helpful summary of how BAA's projections have evolved from the 2006/07 base to the current estimates, it does not provide adequate evidence to justify the proposed opex increases which are very material to the overall price cap assessment. It is not sufficiently clear what degree of confidence BAA is building in to its opex projections (i.e. for what percentage of measurement periods in each month is BAA planning to meet the 5 minutes central queue target). In addition, the CAA needs to see much more evidence (e.g. contracts with third parties, tender documents, internal BAA reports, reports from DfT etc) to substantiate the forecasts that BAA is now putting forward. The CAA also wishes to obtain a greater understanding of how the Summer 2006 base level of cost was built up between central search costs and other security costs and how these proportions have changed as BAA's cost projections have evolved.

In order to inform these two points we have set out a number of questions and requests for additional information which can be categorised into

General.

Questions on the joint BAA / airlines submissions to the CAA; and

Questions on BAA's roadmap."

56. At that meeting, as the CAA's member who attended it records, 'BAA made a reasonably robust defence of their forecasts and we are expecting more data from them today which I will analyse a process for the panel meeting on Tuesday'. Information was also sought from other airports. This, insofar as it showed that others had coped with less resources than BAA was demanding, assisted CAA to reduce the charges claimed.
57. It seems that BAA did not provide the models until 12 February. Having now seen them, Mr Clayton asserts (Paragraph 54 of his second statement):-

"If airlines had had access to BAA's model, they could have run a variety of alternative service options though it, or through any improvements to that model, and seen what difference it made to resource requirements. Our perspective on such data might have been very different from that of BAA, which was concerned to achieve the maximum earnings from any hours and secure the maximum cushion on its levels of staffing."

In paragraph 55 he observes that CAA was 'entirely correct to obtain a copy of the security demand models from BAA (albeit very late).' His complaint is that it was unfair for this to occur without disclosure to the airlines, particularly as the CAA was informed on 8 February that the airlines had not seen the model but only the outputs.

58. It is important to bear in mind the court's reluctance to exercise judicial review powers over expert regulatory bodies. Equally, the court will exercise restraint in overseeing the manner in which such a body goes about reaching its decision. The CAA is not deciding an issue between those interested, in particular the airlines on the one hand and BAA on the other. Inevitably, their interests are at variance, but the CAA has to decide on a charge which has regard to the overall public interest. Thus it is obliged if it feels that it does not have all the information it needs to obtain it from whatever source is appropriate. If the charge is set too low, users of the airport will suffer. In particular in relation to security lack of sufficient funds will create delays and queues which will put passengers off. Thus, as Mr Clayton himself properly recognises, it was correct to obtain the necessary information from BAA.
59. What was obtained was information so that the CAA could exercise its functions properly. It is important to bear in mind that the airlines had appointed BA to act on their behalf in dealing with BAA and obtaining information to enable representations to be made. BA said it was not satisfied with the figures provided, but it was content to act on what BAA provided together with its own model. While Mr Clayton asserts that he would have run alternative options, there is no specific evidence before me that further or better representations could have been made which might have affected the final result. The CAA itself was concerned to ensure that the cap was not set at too high a level and there is no reason to believe that it did not conscientiously reach what it regarded a proper figure which was, in fact, to allow 70% of what BAA had asked for.
60. It is understandable that the claimant has felt that what was done was unfair. However, in the circumstances I do not think that the CAA's actions were in reality so unfair as to require the court to intervene. The other airlines which use Gatwick have not joined in this claim, although three have sent letters of support. That is in no way determinative, but it does suggest that there has been a recognition that the figure reached is not one which could in the end be regarded as wrong. Nor do I think that the exercise which was carried out between November and January was itself flawed. The CAA was not obliged to do more than seek and receive representations. For good reasons it choose to pursue CE to try to ensure the maximum opportunity to reach a consensus. It received detailed representations from the airlines and was aware of the concerns. If it felt that there was a need to seek further representations after February, it could have done so. It did not and in my view the claimant has not as a result been faced with a figure which was unfairly reached or which was erroneous.
61. In its decision of 11 March 2008, the CAA correctly identified the approach which it had to adopt. I need not go into detail. In relation to security costs it stated in paragraph 5.22:-

"In light of BAA's proposals, the CAA initiated a joint work programme with BAA and airlines to undertake a detailed scrutiny of BAA's projections through constructive engagement. This involved BAA and airlines working closely together to understand the nature of the increase being proposed and the modelling assumptions made by BAA. As part of this assessment, British Airways, on behalf of the airline community, carried out its own modelling of security costs based on operational research simulation tools that it used to plan its own business requirements. However, no consensus view was reached, and both sides provided their own detailed submissions to the CAA setting out how the new security requirements should be reflected in operating costs. A summary of these submissions and the CAA's assessment is set out below. "

And in paragraph 5.31, it stated:-

"The CAA has carefully listened to the arguments advanced by both sides in bilateral and tri-lateral meetings to discuss these complex issues in some detail. In parallel, the CAA has undertaken its own detailed review of BAA's analysis and modelling assumptions. Having weighed up the evidence, the CAA considers that the extended scope of the SQR is likely to lead to BAA incurring additional costs as it introduces new processes for measuring and maintaining a queue standard for staff search and transfer search and applies queuing standards across the whole day rather than part of the day. Further resources would also be needed to maintain the new higher service standards with the restoration of the 'more than one hand baggage' allowance at each airport. (This is a particular issue at Gatwick.) However, the CAA considers that in a number of areas BAA has been too cautious in its modelling assumptions."

In 5.40 it made some criticisms of the airlines' projections, notably in their failure to provide substantive evidence to support their assumptions of lower wage costs. The conclusion is set out in paragraph 5.46:-

"The CAA considers that the detailed programme of work that was established following publication of the November 2007 document provided ample opportunity for interested parties to raise concerns with the CAA and for airlines to understand better BAA's assumptions on modelling and vice versa. In establishing the projections set out above, the CAA considers that it has taken into account all of the evidence and views put forward by airlines and by BAA and has undertaken considerable analysis of its own to inform its assessment. Looking forward to the Q6 price control review, given the increased salience of security costs in overall airport operating expenditure, the CAA would seek to understand BAA's actual performance on security costs during Q5 compared to the assumptions made at the time of setting price caps, in order to inform the analysis and consultation leading to the Q6 price caps. The CAA will scrutinise carefully any claim within Q5 for additional security costs, arising from changes in DfT security directions, to be reflected in an upward adjustment to airport charge caps."

62. It is, I think, unfortunate that no reference was made to the fact that some information was obtained after 31 January. But it is clear that the CAA as regulator gave careful consideration to all relevant material and it is equally clear that it concluded that it could not have been assisted by further representations from the airlines. That conclusion was one which as the expert it was entitled to reach and I am not persuaded that the claimant was prejudiced by the manner in which the CAA chose to carry out its functions.
63. I should mention one final criticism raised by Mr Béar. He says that the CC stated that there should be what is called a 'bottom up' approach and he submitted that the CAA had not carried out a sufficiently adequate scrutiny of BAA's figures. It should not have approached its task by considering a discount from BAA's figures but should have attempted its own estimate. As Mr Beloff observes in his skeleton, the details given in paragraphs 5.16 to 5.46 of the March decision demonstrate the care with which the CAA dealt with the issue. Furthermore, the CC did not criticise the method used, namely the establishment of a broad 'baseline' level for 2005/6, the estimation of corresponding costs needed for future years by rolling this baseline forward and by adding any additional costs excluded from the baseline – see paragraph 4.127 of the CC report. There is nothing in this complaint.
64. For the reasons I have set out, this claim is dismissed.