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Cite as: [2004] ScotCS 140, 2004 SCLR 887

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Lloyds Pharmacy Ltd v. The National Appeal Panel & Anor [2004] ScotCS 140 (11 June 2004)

SECOND DIVISION, INNER HOUSE, COURT OF SESSION

Lord Justice Clerk

Lord Macfadyen

Lord Drummond Young

P65/03

OPINION OF THE COURT

delivered by LORD DRUMMOND YOUNG

RECLAIMING MOTION

LLOYDS PHARMACY LIMITED

Petitioner;

against

THE NATIONAL APPEAL PANEL

First Respondents;

and

E.A. BAIRD (N'ARDS) LIMITED

Second Respondent:

_______

Act: Morton, Solicitor; Dundas & Wilson CS (Petitioner)

Alt: Ellis QC, Crawford; R.F. McDonald, Solicitor (First respondent):

Collins; Balfour & Manson (Second Respondent)

11 June 2004

Legislation

[1] Under regulation 5 of the National Health Service (Pharmaceutical Services) (Scotland) Regulations 1995 (1995 SI 414) Health Boards and primary care NHS trusts are obliged to maintain a list, known as "the pharmaceutical list", containing the names of persons who undertake to provide pharmaceutical services and the addresses from which these persons undertake to provide such services. When a person entered on the pharmaceutical list for an area intends to relocate his business within the same Health Board's area, he must apply to the Board or primary care NHS trust for authority to do so. The relevant provision of the Regulations is regulation 5(2), the terms of which are as follows:

"A person ...-

(a) who wishes to be included in the pharmaceutical list for the provision

of pharmaceutical services; or

(b) whose name is already included in the pharmaceutical list, but who

intends-

(i) to open within the Board's area additional premises from which

to provide pharmaceutical services, or

(ii) to relocate within the Board's area the premises from which he

provides pharmaceutical services, or

(iii) to provide pharmaceutical services other than those already

listed in relation to him from premises which are already included in the pharmaceutical list,

shall apply to the Board or primary care NHS trust ... ".

If the Board or primary care NHS trust is satisfied that the relocation is minor, regulation 5(4) provides that the application shall be granted. In other cases, however, the provisions of regulation 5(10) apply. Regulation 5(10) is in the following terms:

"An application made in any case other than one to which paragraph (3) or (4) applies shall be granted by the Board or primary care NHS trust, after the procedures set out in Schedule 3 have been followed, only if it is 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 functions of the Board or primary care NHS Trust in relation to regulation 5(1) are exercised by its Pharmacy Practices Committee (1995 Regulations, Schedule 4, paragraphs 1 and 2). The present case involves a proposed relocation of a pharmacy by Lloyds Pharmacy Limited from the town centre of Stranraer to a new medical centre that has been built outside the town centre. It is accepted by all of the parties that the relocation is not minor. Consequently the critical test for determining whether the application to relocate should be granted is that set out in regulation 5(10).

[2] The statutory authority for regulation 5 is found in section 27 of the National Health Service (Scotland) Act 1978 (c. 29), as amended by the National Health Service (Amendment) Act 1986 (c. 66). That section imposes a duty on every Health Board to make, in accordance with regulations, arrangements as respects its area for the provision to persons who are in that area of proper and sufficient drugs and medicines and listed appliances which are ordered for those persons by a medical practitioner in pursuance of his functions in the health service. Section 27(3) provides that the regulations are to include provision for the preparation and publication by a Health Board of a pharmaceutical list for its area. That subsection further directs that the regulations are to include certain mandatory provisions. Some discussion took place as to whether those mandatory provisions applied to a major relocation of a person on the pharmaceutical list, as well as to the opening of additional premises by such a person. It was accepted by the parties, however, that regulation 5(10) of the 1995 Regulations could not be challenged on the ground that it was ultra vires of the 1978 Act, as amended. Consequently it is unnecessary for us to go beyond the terms of regulation 5(10).

Facts
[3] At the beginning of 2002 three persons were included on the pharmaceutical list maintained by Dumfries and Galloway Primary Care NHS Trust as undertaking to provide pharmaceutical services within Stranraer. These were Lloyds Pharmacy Limited, E.A. Baird (N'Ards) Limited, who traded under the name Kers, and Boots the Chemist Limited. All three traded from premises situated close to one another within the town centre. On 28 March 2002 Lloyds Pharmacy Limited applied to the Dumfries and Galloway Primary Care NHS Trust for permission to relocate from its existing premises to premises situated on the same site as a new health centre in Dalrymple Road, Stranraer. All of the town's general practitioners are now based in that health centre. Lloyds have agreed to a lease of a unit within the centre conditionally upon the grant of their application for relocation. It is said that within that unit Lloyds will be able to provide a modern pharmacy which is easily accessible to those with mobility problems and which provides a separate dispensary, an area for supervised consumption of methadone, a private consultation area and substantial parking. Lloyds' existing pharmacy was slightly closer to the new health centre than those operated by Kers and Boots, but it was nevertheless a substantial distance, approximately 490 metres, from the new health centre.

[4] Lloyds' application to relocate was heard by the Dumfries and Galloway Primary Care NHS Trust Pharmacy Practices Committee on 31 May 2002. The Committee decided unanimously to grant it. The minute of their meeting discloses that they considered the adequacy of existing services against the background of the implementation of the Disability Discrimination Act, the lack of parking facilities near the town centre pharmacies and the existence of the new medical centre outside the town centre. The Committee expressed the view that two of the town centre pharmacies were not located in ideal premises and were unable to provide modern facilities. On that basis, they concluded that the pharmaceutical services in the neighbourhood of Stranraer were not wholly adequate. They further concluded that the proposed relocation of Lloyds was desirable to secure adequate provision of such services.

[5] Boots and Kers appealed against that decision to the National Appeal Panel for entry to the Pharmaceutical Lists. The National Appeal Panel, which is the first respondent in the present proceedings, is a body set up under Schedule 4 to the 1995 Regulations to hear appeals from Pharmacy Practices Committees of primary care NHS trusts. The appeal was heard by the Panel on 19 November 2002. Lloyds, Boots and Kers were all represented, and all made submissions to the Panel. Those submissions covered the available evidence that was relevant to the Panel's decision; in addition, it is clear that considerable documentary evidence was available. The Panel also undertook a site visit at which it noted the locations of the health centre and the existing pharmacies. In its decision, which was issued on 25 November 2002, the Panel narrates that it took into account all relevant factors concerning the issues of neighbourhood and the adequacy of the provision of existing pharmaceutical services in that neighbourhood, including in particular whether provision of pharmaceutical services at the new premises was necessary or desirable in order to secure adequate provision of pharmaceutical services in the neighbourhood in which the premises were located. The Panel further narrates that it took into account all written representations and supporting documents submitted to it, and noted the decision that had been reached by the Pharmacy Practices Committee. In the Panel's decision document the evidence and submissions of each of the parties are narrated at considerable length. It is unnecessary for us to repeat the narrative, but we observe that the evidence and submissions appear to traverse in great detail the various arguments as to whether the proposed relocation was necessary or desirable in order to secure adequate provision of pharmaceutical services within Stranraer.

[6] The Panel then gives its decision. It begins by considering the issue of neighbourhood, and concludes that the appropriate neighbourhood that should be considered is the town of Stranraer. No issue has been taken with that part of the decision. The Panel then continues:

"Adequacy of existing provision of pharmaceutical services and necessity or desirability

Having reached their decision, the Panel was then required to consider the adequacy of existing pharmaceutical services in that neighbourhood, and whether the granting of the application was necessary or desirable in order to secure adequate provision of pharmaceutical services in that neighbourhood.
Within the neighbourhood, as defined by the Panel, it was considered that there was adequate provision of pharmaceutical services provided by the pharmacies located in the neighbourhood. There was a good collection and delivery service for the neighbourhood provided from the three existing pharmacies together with an adequate Methadone and oxygen service. There was no evidence available to the Panel that the present pharmaceutical services provided by the pharmacies within the neighbourhood were not adequate. There was no evidence to suggest that the pharmaceutical services in the neighbourhood would not remain adequate in the future. The pharmaceutical contractors in the neighbourhood adequately meet the existing requirement for pharmaceutical services.
For the reasons set out above, the Panel considered that the existing pharmaceutical service in the neighbourhood was adequate. Accordingly the Panel were not satisfied that the provision of pharmaceutical services at the premises of the Applicant was either necessary or desirable in order to secure adequate provision of pharmaceutical services in the neighbourhood in which the premises were located by persons whose names are included in the Pharmaceutical List. In the circumstances, it was the decision of the Panel that the appeal be upheld".

[7] Lloyds have applied for judicial review of the Panel's decision, on the ground that the Panel misdirected itself in law in applying the statutory test contained in regulation 5(10) of the 1995 Regulations. The primary respondent to the petition for judicial review is the Panel, but E.A. Baird (N'Ards) Limited, the proprietors of Ker's shop, were also represented as interested parties. The Lord Ordinary held that the Panel had misdirected itself. Having considered several cases on the point, she held that it was not enough for the decision-maker, the Panel, to look at the existing pharmaceutical provision, ask whether it was "adequate" and, if that question was answered in the affirmative, go no further. Regulation 5(10) gave rise to a composite question, namely whether granting the application was necessary or desirable to secure the adequate provision of pharmaceutical services. In order to answer that question, it was necessary for the Panel to look at the whole circumstances, including what would be achieved if the proposed changes were effected and the question of whether, if that happened, it was necessary or desirable to effect those changes in the interests of the provision of adequate pharmaceutical services, recognizing the fluidity of the concept of adequate service provision in a changing society (at paragraph [47]). The Panel had failed to look beyond the question of whether in its assessment the existing provision was adequate. It should instead have considered what would be achieved if the application were granted and in particular how the adequacy of the existing provision of pharmaceutical services appeared once the possibility of the proposed changes had been taken into account. At that stage it should have considered the question whether it was desirable to grant the application to secure the adequate provision of pharmaceutical services (at paragraphs [48] - [49]). Because the Panel had not taken those steps, its decision fell to be reduced. The Panel has now reclaimed against the Lord Ordinary's decision.

Construction of regulation 5(10)
[8] The statutory test that must be satisfied if Lloyds' application to relocate is to be granted is that set out in regulation 5(10) of the 1995 Regulations. Regulation 5(10) provides that an application to relocate, other than a minor relocation, shall be granted "only if [the decision-maker] is 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". In applying that test, the first step that the decision-maker must take is clearly to identify the relevant neighbourhood; that was not in dispute. Thereafter, in our opinion, the decision-maker must approach an application in two stages. First, it must consider whether the existing provision of pharmaceutical services in the relevant neighbourhood is adequate. If it decides that such provision is adequate, that is the end of the matter and the application must fail. If it decides that such provision is not adequate, it must go on to consider a second question: whether the provision of pharmaceutical services at the premises named in the application is "necessary or desirable" in order to secure adequate provision. We consider that such a two-stage approach is inherent in the logical structure of regulation 5(10). The fundamental criterion against which the application is to be judged is the adequacy of pharmaceutical services in the relevant neighbourhood. A deficiency in those services must exist before an application can be granted. Consequently the existence of such a deficiency must be identified before it is necessary to consider what may be done to provide a remedy. The second question relates to the manner in which an identified deficiency is remedied.

[9] In relation to the first question, we are of opinion that "adequacy" is a simple concept, in the sense that there is no room for different degrees of adequacy, or a spectrum of adequacy. Either the pharmaceutical services available in a neighbourhood are adequate or they are not. That seems to us to be inherent in the ordinary meaning of the word, which denotes a sufficiency for a particular purpose, in this case the provision of pharmaceutical services in the relevant neighbourhood. The standard of adequacy is a matter for the decision-maker, whether that is the Pharmacy Practice Committee or the National Appeal Panel. In either case, the decision-maker is a specialist tribunal, and can be expected to apply its knowledge of the pharmaceutical business to the task of determining the appropriate standard.

[10] The question that the decision-maker must address is the adequacy of the existing provision to serve the neighbourhood in question. In addressing that question, however, it is in our opinion proper to have regard to probable future developments, for two reasons. First, the standard of adequacy in a particular neighbourhood will obviously change with time. The relevant neighbourhood may change, for example through the construction of new housing developments or the movement of population out of inner-city areas. Likewise, changes inevitably occur in pharmaceutical practice, and the standard of "adequate" pharmaceutical provision must accordingly develop over time. The proposal under consideration may well provide an illustration of how pharmaceutical practice is developing, and may be relevant to show what sort of provision is possible in the neighbourhood. We are in full agreement with the Lord Ordinary that changes in pharmaceutical practice should be taken into account by the decision-maker. Secondly, regulation 5(10) uses the word "secure" in relation to the adequate provision of pharmaceutical services. That word seems to us to indicate that the decision-maker can look to more than merely achieving a bare present adequacy of pharmaceutical provision. "Secure" suggests that it should be possible to maintain a state of adequacy of provision into the future. That indicates that the decision-maker must have some regard to future developments, in order to ensure that an adequate provision can be maintained. The decision-maker must, however, determine the adequacy of the existing provision of pharmaceutical services at a specific time, the time of its decision. It must accordingly reach its conclusion on the adequacy of the existing provision on the basis of what is known at that time, together with future developments that can be considered probable rather than speculative. The decision-maker must also bear in mind that the critical question at this stage of its reasoning is the adequacy of the existing provision, not the adequacy or desirability of some other possible configuration of pharmaceutical services in the neighbourhood.

[11] If the decision-maker determines that the existing provision of pharmaceutical services in the relevant neighbourhood is inadequate to meet the needs of that neighbourhood, it must go on to consider the question of how the deficiency can be remedied. It is at this point that it must consider whether the proposal in the application is "necessary or desirable in order to secure adequate provision of pharmaceutical services in the neighbourhood". In this context, two expressions used in the regulation call for comment. First, the words "necessary or desirable" are intended in our opinion to give flexibility in the manner in which a shortfall in provision is remedied. If the proposal under consideration does no more than make up the shortfall, that proposal will obviously be "necessary" to secure adequate provision of pharmaceutical services in the neighbourhood. In some cases, however, the proposal may go further, and result in a degree of over-provision. The use of the word "desirable" is in our view intended to permit the approval of such a proposal, if the decision-maker is satisfied that, notwithstanding the over-provision, the proposal is still "desirable" in order to secure adequacy. It should be noted, however, that the expression "necessary or desirable" is only relevant to the second question that the decision-maker must consider, namely how an identified inadequacy is to be remedied. It is not in our opinion relevant to the first question, whether such an inadequacy exists in the first place. Secondly, as we have already noted, the use of the word "secure" seems to us to indicate that it should be possible to maintain a state of adequacy of provision into the future. That could in some cases result in some degree of present over-provision. Subject to these comments, however, the question of whether a proposal is necessary or desirable in order to secure an adequate provision of pharmaceutical services is a matter for the Pharmacy Practice Committee or the National Appeal Panel as a specialist tribunal.

Decision of the National Appeal Panel
[12] In our opinion the decision of the Panel is in accordance with regulation 5(10). After considering the definition of the relevant neighbourhood, the Panel addressed the two questions set out in paragraph 17 of its decision: the adequacy of existing pharmaceutical services in the neighbourhood, and whether the granting of the application was necessary or desirable in order to secure adequate provision of pharmaceutical services in the neighbourhood. For the reasons explained above, we are of opinion that these are the two questions that the Panel required to address, although the second was only relevant if an inadequacy of existing services was identified. In paragraph 18 the Panel considered the first question. It held that there was adequate provision of pharmaceutical services provided by the existing pharmacies in Stranraer. It noted that there was a good collection and delivery service, and an adequate methadone and oxygen service. It stated that there was no evidence that the present pharmaceutical services were not adequate; nor was there evidence to suggest that the pharmaceutical services in the neighbourhood would not remain adequate in the future. Those findings are in our opinion of critical importance. They represent the conclusions of the Panel, as a specialist decision-maker, on the evidence and submissions adduced by the parties on the question of adequacy and its own inspection. As we have already mentioned, that evidence is covered by the parties' submissions and accompanying documents. It is set out at considerable length by the Panel, and there is no reason to think either that the issues between the parties were not fully discussed in the proceedings before the Panel or that the Panel failed to have regard to the submissions and evidence put before it. It was not suggested to us by the solicitor for Lloyds that the narrative of proceedings contained in the Panel's decision document did not justify the conclusions in paragraph 18 that there was no evidence of inadequacy in the present pharmaceutical services or that such services would not remain adequate in future.

[13] It is accordingly clear that the Panel addressed the question of the adequacy of the existing pharmaceutical services in Stranraer, and in doing so gave consideration to the adequacy of those services for the future. In our opinion that is sufficient to satisfy the considerations discussed in paragraph [10] above. In particular, it appears to us that the Panel gave full consideration to the critical question of whether the existing pharmacies in Stranraer secured adequate provision of pharmaceutical services to the neighbourhood, in the sense that an adequate provision could be maintained into the future.

[14] The Panel went on to hold that the pharmaceutical contractors in the neighbourhood adequately met the existing requirement for pharmaceutical services, and that accordingly the existing pharmaceutical services were adequate. It then stated that it was not satisfied that the provision of pharmaceutical services at the premises to which Lloyds wanted to relocate was either necessary or desirable in order to secure adequate provision of pharmaceutical services in the neighbourhood. For the reasons explained above, we are of opinion that, once the Panel held that the existing services in the neighbourhood were adequate, having due regard to the maintenance of those services into the future, it was unnecessary for it to consider whether the granting of Lloyds' application was necessary or desirable in order to secure the provision of adequate pharmaceutical services in the neighbourhood. That second question simply did not arise. We are accordingly of opinion that the approach of the Panel cannot be faulted.

Conclusion
[15] That is sufficient for our decision. We should, however, comment on certain cases that were cited to us in the course of the argument. Two Scottish cases were referred to. In Safeway Stores PLC v National Appeal Panel, 1997 SC 189, the Panel rejected an application for inclusion in the pharmaceutical list in relation to supermarket premises. In its statement of reasons it found that a further pharmacy to serve the area was not necessary. It did not, however, consider whether such a pharmacy was desirable. The Second Division held that the Panel had been in error in failing to consider the question of desirability. It seems clear that this decision was based on the nature of the Panel's findings in the particular case, and was concerned with the second rather than the first of the questions that we have identified in paragraph [8] above. It was accordingly not of assistance in the present case. Sainsbury's Supermarkets Limited v National Appeal Panel, 2003 SLT 688, was concerned primarily with the definition of the relevant neighbourhood. The issue of the adequacy of the pharmaceutical services within that neighbourhood is, however, touched upon in Lord Carloway's opinion. He held that the issue of adequacy of services within an area is primarily a question of fact for the decision-maker, and that the Panel had adopted the correct overall approach to the question of adequacy. The facts of that case were, however, markedly different from those of the present case.

[16] Three English cases were also cited to us. The most significant of these is R v Family Health Services Appeal Authority, ex p. Lowe, [2001] EWCA Civ 128. The facts of that case were quite different from those of the present case. The main importance of the case lies in the views expressed by Laws LJ, who delivered the leading opinion, on the construction of the English regulation that corresponds to regulation 5(10). Central to his approach to the regulation is the view (expressed at paragraph 14) that what is "adequate" is a question of degree; there is a spectrum or "continuum" of adequacy. For the reasons stated at paragraph [9] above, we are of opinion that this is not the correct construction of regulation 5(10); instead, the test of adequacy for the purposes of the regulation is a simple one, in the sense that either the existing provision is adequate or it is not. In support of his construction of "adequate", Laws LJ suggested that, if the word denoted a sharp edge, such that any given set of facts would fall plainly upon one or other side of it, it would be impossible to arrive at any construction of the earlier phrase "necessary or desirable" other than one in which the word "desirable" was otiose. In our opinion that does not follow. The logical structure of regulation 5(10) requires the decision-maker to address two questions, whether there is an existing adequacy and, if not, whether the proposal is necessary or desirable in order to secure adequacy. "Necessary or desirable" relates to the second question, in the manner described in paragraph [11] above, and the word "desirable" can be given content in the manner described in that paragraph. It follows that we do not consider that it is appropriate to consider degrees of adequacy. In this connection, we note that Buxton LJ delivered a concurring opinion in which he pointed out that the Regulations speak of adequacy, not of whole adequacy. He held, accordingly, that the decision-maker had been in error in applying a test that was formulated around the concept of whole adequacy rather than merely adequacy. We respectfully agree.

[17] The second English case cited to us was R v Yorkshire Regional Health Authority, ex parte Baker, (1996) 35 BMLR 118, a decision of Sir Louis Blom-Cooper QC sitting as a Deputy Judge of the High Court. This case was relied upon to some extent by Laws LJ in R v Family Health Services Appeal Authority, ex p. Lowe, although the wording used by the Deputy Judge was criticized. The Deputy Judge expressed the view that the regulation under consideration involved a value judgment on the part of the decision-maker. Value judgments of their nature were intuitive rather than made according to fixed standards, and accordingly they might range from the seriously inadequate to the entirely adequate (at pages 128-129). It is no doubt true to say that the question of whether existing pharmaceutical services are adequate involves a value judgment; nevertheless, for the reasons already explained we consider that the result of the value judgment must be a decision either that those services are adequate or that they are not. There is nothing remarkable about a value judgment of that nature. We are accordingly of opinion that the Deputy Judge was not correct in analyzing the relevant regulation in terms of degrees of adequacy.

[18] The third English case cited was R v The Family Health Services Appeal Authority, ex parte Tesco Stores Limited, [1999] EWHC Admin 714, a decision of Maurice Kay J. This case was referred to for two reasons. First, it was a used as a convenient means of quoting from an explanatory memorandum of guidance that has been published by the Secretary of State in England. That memorandum is of some use in explaining the thinking underlying the legislation of 1987, but it does not have force in Scotland and accordingly we do not consider it further. Secondly, the case was referred to for an argument that the test in the English regulation corresponding to regulation 5(10) was a one of adequacy or inadequacy, and not "improvement". The judge expressed the view that there was much force in that submission. He further rejected the view that a finding of adequate provision of services in the neighbourhood must lead inexorably to a consideration of whether it is "desirable" to grant the application. We respectfully agree with both of those views.

[19] In the result, for the reasons stated above, we will allow the reclaiming motion, sustain the first and second pleas-in-law for the National Appeal Panel, repel the pleas-in-law for the petitioners and refuse the prayer of the petition.