Scottish Court of Session Decisions

[1] Before October 1998 the petitioners were included on the list of persons kept by the Ayrshire and Arran Health Board as persons authorised to provide "pharmaceutical services", being those services described in section 27 of the National Health Service (Scotland) Act 1978. These services consist of the supplying to persons of drugs, medicines and listed appliances ordered for them by a registered medical practitioner in pursuance of his functions under the health service. They were permitted to provide such services from premises at 11 Ayr Street, Troon. In that month they applied to the Area Health Board for permission to relocate from their premises in Ayr Street to other nearby premises at 36-38 Portland Street, Troon. The application was made in terms of The National Health Service (Pharmaceutical Services)(Scotland) Regulations 1995 (1995 S.I. 414). These Regulations permit a person whose name is already included in the relevant pharmaceutical list, but who intends to relocate the premises from which he provides pharmaceutical services to other premises, to apply, in the appropriate form prescribed in the regulations, for relocation. Regulation 5(4) provides that the Board "shall grant" the application if satisfied that the proposed relocation is "a minor relocation". Regulation 5(6) provides:

Regulation 5(7) provides:

[2] After sundry procedure, the Respondents, to whom responsibility for the exercise of the Board's functions in this regard had been transferred in October 1999, decided not to grant the application made by the petitioners, and notified that decision to the petitioners by letter dated 18 January 2000. The decision letter of 18 January 2000, reprinted as item 9 in the petitioners' Appendix, narrated inter alia that having followed the procedures specified in the letter, the Trust Board had been satisfied as to certain matters, expressed as follows:-

Under reference to Regulation 5(6) the Respondents intimated that they had had to consider whether there were other circumstances such that there would be an appreciable effect on the pharmaceutical services provided by the petitioners or by any other pharmacy contractor in the neighbourhood. Having taken note of certain guidance contained in an NHS Circular, 1987(GEN) 14, the Respondents' letter continued,

The conclusion of the letter contained the decision in the following terms:

[3] The petitioners sought judicial review of the Respondents' decision. By interlocutor dated 26 April 2000 the Lord Ordinary refused the prayer of the petition. The submission in support of the reclaiming motion against that interlocutor raised one sharp issue only, namely the meaning and application to the instant case of the term 'minor relocation' in the Regulations referred to. No criticism of the procedures adopted by the Respondents was made to this court.

[4] Senior Counsel for the petitioners and reclaimers drew attention to the statutory background to the provision of pharmaceutical services and to the bureaucratic controls for the relocation of premises for the provision of such services. The relevant provisions are quoted in the Opinion of the Lord Ordinary. Counsel submitted that these provisions were designed to further the public interest, that is to say, the interest of the consumers of pharmaceutical services, namely patients and doctors. Accordingly, the emphasis was on the pharmaceutical services provided, not upon the private interests of the providers of those services. Insofar as the economic interests of pharmacists were protected, that was achieved by Regulation 5(10), which dealt with relocations which were not minor relocations. In terms of that regulation, it was submitted, the Board, when considering applications for relocations that were not "minor", had to be satisfied that "the provision of pharmaceutical services at the premises named in the application is necessary or desirable in order to secure adequate provision of pharmaceutical services in the neighbourhood in which the premises are located by persons whose names are included in the pharmaceutical list." The "necessary or desirable" test was not applicable to an application for a minor relocation. To introduce consideration of the possible effects upon the trade of commercial competitors of an applicant seeking a minor relocation was to take account of an irrelevant consideration; it was not legitimate to do so. He referred to the decision in R. v Yorkshire Regional Health Authority ex parte Suri (1995) 30 B.M.L.R. 78, and to various dicta in the judgments, in support of the argument that the words "minor relocation" - albeit that they were being construed in the differently worded Regulations applicable in England and Wales - were to be given their plain meaning. If they were so read, then "minor" qualified "relocation" and related to the geographical and topographical aspects of location, not to any commercial aspects. A scheme to protect the economic interests of persons affected by a minor relocation of a competitor's premises was not to be read into the Regulations. If there was any ambiguity in the matter, the construction should be one that favoured freedom of trade, not one that restrained commercial competition. Although the Regulations were different in Scotland, the legislation was effectively the same throughout the United Kingdom, and it would be surprising if a materially different type of control had been adopted in Scotland in respect of minor relocations: there was nothing to indicate any such intention. The advice contained in the NHS Circular referred to in the letter of 18 January 2000 was also indicative that the economic interests of a trade competitor (actual or potential) became relevant for consideration only if the change in the location of the applicant's premises might cause significant detriment to the competitor's business such that it might threaten his continuing ability to provide the NHS services that he was contracted (or was proposing) to provide. That was clearly relevant to the public interest, because the public interest could be harmed if the threat to the competitor's business was so significant that he might be driven out of business. In relation to the words "circumstances...such that there will be no appreciable effect on the pharmaceutical services provided....", in Regulation 5(6), it was submitted that they showed merely that there was an onus on any person applying for a minor relocation to satisfy the regulatory authority that the relocation was minor.

[5] In reply, Mr. Fitzpatrick, for the Respondents, invited the court to agree with the Lord Ordinary's reasoning and conclusions. He pointed out that the wording of the Regulations applicable in Scotland was different from that found in the Regulations for England and Wales. The Scottish Regulations contained a definition of "minor relocation" that was not found in the corresponding Regulations for England and Wales. The England and Wales model had not been followed in Scotland. The introduction into the Scottish Regulations of the concept of "appreciable effect" on other local pharmaceutical services was highly significant, and introduced an element for consideration that was not to be found, at least in that same form, in the Regulations for England and Wales. There was also an important structural difference between the two regimes for control. The Scottish system for dealing with an application for a minor relocation required consideration by the Area Board of the views of the Area Pharmaceutical Committee and of the Board's Chief Pharmaceutical Officer. However, the Regulations applicable to England and Wales (the National Health Service (Pharmaceutical Services) Regulations 1992) provided that in respect of a "minor relocation", under Regulations 4(2) & (3)(a), the decision was to be taken by the relevant Authority without any such input. However, the decision had then to be notified to any person in a pharmaceutical list whose interests might be affected: Regulation 7(1). That person was given a right of appeal to the Secretary of State under Regulation 8. This machinery was so significantly different that there was no valuable assistance to be obtained from the English cases interpreting those Regulations, or indeed from the Circular referred to, which predated the defining in the Scottish Regulations of "minor relocation" for Scotland. There was no ambiguity to be resolved by invoking a canon of construction of favour of freedom of trade.

[6] We agree with the Lord Ordinary, for the reasons he gives and which were adopted in the Respondents' submissions, that the term "minor relocation" is used quite differently in the two sets of Regulations applicable in the two jurisdictions. The methods for taking account of the possible economic interests of a competitor trading in the same locality as a person who applies for permission to relocate are different; but there is plainly machinery in both jurisdictions to allow those interests to be considered, even if they are not so severely threatened as to jeopardise the viability of the competitor. There is no reason, derived either from the Regulations applicable in England or from the cases interpreting such Regulations, to avoid giving the words in Regulation 5 of the Scottish Regulations their ordinary meaning. It is therefore the duty of the Respondents, as the Trust Board dealing with an application for what the applicant maintains is a minor relocation, to consider if what is proposed is a "minor relocation", in the ordinary sense of those words, and also if it is "one where there will be no significant change in either respect specified in Regulation 5(6). Their duty includes making an assessment, with the advice of those specified in Regulation 5(7), of whether of not there is any 'appreciable effect' on the pharmaceutical services provided by any person whose name is included in the pharmaceutical lists of the Board." In our opinion, that is precisely what was done here; cf. the conclusion of the Trust Board in paragraphs (i) to (vi) of the letter of 18 January 2000, quoted earlier. If the assessment shows that there may be such an effect then obviously the Board will not be satisfied "that there will be no appreciable effect". The use of the word "or" in Regulation 5(6) supports this reading as it imposes a duty to look at the services by the applicant or by any other listed supplier of N.H.S. drugs, medicines and listed appliances. The phrase in Regulation 5(6) "pharmaceutical services provided by the applicant or any other person whose name is included in the pharmaceutical list..." may be contrasted with the phrase in Regulation 5(16), "adequate provision of pharmaceutical services in the neighbourhood...by persons whose names are included in the pharmaceutical list." The latter words are more apt than those in Regulation 5(6) to impose a duty to examine the overall provision of pharmaceutical services.

[7] In the course of the debate a question was discussed as to how the Regulations would have to be applied if the finding were to be that there was an "effect" within the meaning of the Regulations, but the effect was judged to be "appreciable" only for the applicant, and to his benefit, not his detriment. We do not have to decide that question in the present case because of the facts found by the Respondents. However, it is perhaps worthy of note that the demand for "pharmaceutical services" (as defined in the National Health Service (Scotland) Act 1978) in any particular locality is determined not by ordinary market forces but by the decision of doctors prescribing remedies for patients. In that sense, the market could be said to be constant: for it cannot be increased overall by making the pharmacists' premises more attractive to customers or by other retail marketing techniques. Accordingly any significant and predictable transfer of patient loyalty or custom from one pharmacy to another, in respect of pharmaceutical services, is likely to produce a loss of trade for one pharmacy and a corresponding gain for the other. If the predicted switch in trade were judged by the Board to be "appreciable", the proposed relocation would not be minor. The judgment as to whether or not there will be any such effect is a judgment of fact for the Trust Board to make in the light of the material and advice that it is obliged to consider.

[8] Without having to consider whether or not the choice of wording in Regulation 5 in the 1995 Regulations was influenced by the English court decisions referred to by the Lord Ordinary, we agree with the Lord Ordinary's reasoning and conclusion. The appeal will therefore be refused.