Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 22
	OPINION OF LORD MALCOLM in the petition of LLOYDS PHARMACY LIMITED Petitioners; For judicial review of a decision of the National Appeal Panel for Entry to the Pharmaceutical Lists­­­ ________________

Petitioners: Lindsay; Dundas & William CS LLP

First respondent: Ellis QC; Ranald F Macdonald

Interested Party: Crawford QC; Archibald Campbell & Harley WS

3 March 2010

[1] In this application for judicial review the petitioners are Lloyds Pharmacy Limited. The first respondents are the National Appeal Panel for Entry to the Pharmaceutical Lists ("the Panel"). The second respondents are the Highland Health Board ("the Board"). The petitioners served the petition on Boots the Chemist Limited ("Boots") and the GP subcommittee of the area medical committee of the Board as parties with a potential interest. Answers to the petition were lodged on behalf of the Panel and Boots.

[2] The background circumstances to the petition are as follows. In April 2008 the petitioners applied to the Board for entry to their pharmaceutical list in respect of premises at the new Fort William health centre. In August 2008 that application was refused. The petitioners appealed to the Panel. That appeal was refused on 29 January 2009. By letter dated 21 April 2009 the petitioners were advised by the Panel that they considered their decision to be valid and final.

[3] At present the petitioners are included in the pharmaceutical list in respect of premises at Glenloy Street, Caol and High Street, Fort William. Boots operate a pharmacy at High Street, Fort William. Prior to May 2007 all three of the medical practices in the area were located in Fort William town centre. Thereafter a new health centre opened at Camaghael Loop Road, Caol, which is two and a half miles from Fort William town centre. All three of the surgeries relocated to the health centre. No medical practices remain in Fort William. There are no medical practices in Caol. In the course of the application the petitioners informed the Board that their existing pharmacies in Caol and Fort William would remain open even if the application was granted. At the appeal hearing before the Panel the petitioner's application was supported by the local doctors.

[4] In the original application of 10 April 2008 the petitioners stated:

"In May 2007 the Fort William health centre commenced provision of primary care services in Caol. The Health Board will be aware this is a large state of the art health centre development which provides a wide range of services to patients. The patient list is over 13,500. These patients however do not have adequate access to and provision of pharmaceutical services in the neighbourhood, particularly from the health centre site. While we accept the Health Board will be aware of a previous decision to refuse an application to the health centre; since that decision was made in 2007 there has been a change in circumstances. The GPs have now commenced medical services from the health centre and it is evident that patients are not finding it easy to access pharmaceutical services. This has been acknowledged both by patients and GPs. The nearest pharmacies are well over a mile away and these are not accessible by foot or public transport. The nearest pharmacy in Caol is also physically constrained by small premises, inadequate dispensary and poor consultation facilities."

The application continued by stressing the distance between the new health centre and existing pharmacies. It stated:

"There is support locally for the provision of pharmaceutical services at the health centre site and evidence that patients and residents do not consider the existing provision and access to pharmaceutical services to be adequate. Although the National Appeal Panel previously stated that access to pharmaceutical services was considered to be reasonable whether by public transport or by foot, we submit this statement was made without the presence of the doctors at the proposed site and therefore was not appreciative of the present difficulties that patients and residents face in accessing a pharmacy. We believe, therefore, the statement by the National Appeal Panel was misguided. Patients would not walk from the proposed site into Fort William (two miles away) or to Lloyds pharmacy over a mile away. The bus service is also not adequate and the bus stop from Lloyds pharmacy in Caol is 500 metres away. The relocation of the medical practice from Fort William to Caol has significantly changed the balance of primary care services in the neighbourhood. There is now a clear gap in pharmaceutical provision, primarily due to the distances involved in accessing existing pharmacies. For this reason this application is at the very least desirable in order to secure the adequate provision of services."

[5] The factors prayed in aid of the application included the relocation of all GP services in the area to the new health centre and the absence of pharmaceutical services at the centre, which had created a gap in existing pharmaceutical provision. In addition reference was made to accessibility issues, including allegations that the bus service from the health centre to the centres of population was inadequate. The Board required to consider the application in the context of the relevant provisions in the National Health Service (Pharmaceutical Services) (Scotland) Regulations 1995 (SI 1995/414). Regulation 5(10) provides that an application will be granted only if the Board "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."

Current applications are governed by new regulations, but the relevant test for inclusion in the pharmaceutical list has not been altered. The application was supported by a number of interested organisations and parties which it was said "demonstrates quite clearly...the need for a pharmacy at the proposed site and the inadequacies in accessing the existing pharmaceutical services".

[6] By letter dated 1 September 2008 the Board intimated its refusal of the application, stating that the reasons could be seen in the detailed notes of the Pharmacy Practices Committee meeting of 12 August. When addressing the issue of the adequacy or otherwise of the existing provision, that committee followed the interpretation of the relevant regulation set out in a decision of the Second Division of the Inner House in Lloyds Pharmacy Limited v National Appeal Panel 2004 SC 703, which it described as "Lord Drummond Young's guidance." The relevant passage in the minute reads as follows:

"The committee having reached its decision on the neighbourhood then must turn its attention to the adequacy of the existing pharmaceutical services and whether the granting of the application was necessary or desirable in order to secure adequate provision of pharmaceutical services in that neighbourhood. Reference to the opinion of Lord Drummond Young guided the committee in relation to adequacy. Lord Drummond Young said that 'the fundamental criterion against which the application is to be judged is the adequacy of pharmaceutical services in the relevant neighbourhood. A deficiency must exist before an application can be granted...In relation to adequacy... 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 the neighbourhood are adequate or they are not.' The committee must consider the adequacy of pharmaceutical services as they exist at the time of its decision. Within the neighbourhood as defined there are three pharmacies with NHS contracts. The applicant had made much of the inadequacy of access to the existing service providers. The committee had much empathy for the views expressed by the applicant and other interested parties at the hearing and also from a number of other parties in writing. However the committee considered that these views were based on issues of convenience and not on ones relating to access. The pharmacies in the High Street, both Lloyds and Boots, are open at the same times and for the same number of hours as they were at the time of the first Lloyds application, and they both continue to provide a full range of services. The Lloyds pharmacy in Caol has recently (from 19 May 08) increased its opening hours ...... therefore it cannot be argued that there is difficulty accessing pharmaceutical services in the neighbourhood and that a full range of pharmaceutical services is provided. The committee consider that the pharmaceutical services in the neighbourhood are adequate. The three contract providers are open from 9 am to 6 pm Monday to Friday and close at 5.30 pm on Saturdays. Each pharmacy provides a full range of pharmaceutical services and jointly they provide a range of additional services to meet the needs of those patients requiring oxygen and patients with drug misuse problems.

As the committee considered the services in the neighbourhood as adequate it did not need to consider the issues of necessity and desirability. The committee wished the parties to accept that it empathised with the views presented and expressed by them with regard to the patients who had unplanned acute health issues where, because of transport issues, there may be some inconvenience in travelling from the health centre to a pharmacy for a prescription. However, most of these problems and concerns were as a consequence of unfortunate raised expectations and an unfulfilled promise, made by those who could not give this guarantee, that there would be a pharmacy at the new Fort William health centre".

[7] It can be seen from the above that the committee did not address itself to the main feature of the application, namely that in the absence of pharmaceutical services in the new health centre, to which all medical practices in the area had relocated, there was a gap and therefore an inadequacy in the existing pharmaceutical provision. In short, the applicants contended that the health centre should have a pharmacy. However the committee concentrated upon whether residents in the neighbourhood could obtain satisfactory services from the existing pharmaceutical providers, all of which are remote from the health centre. The committee appears to have been guided down this path by its interpretation of what was said by the Second Division in the case quoted in the minute.

[8] The petitioners appealed that decision to the National Appeal Panel. A hearing took place on 27 January 2009. On 3 February the refusal of the appeal was intimated. The reasoning on the issue of the adequacy of the existing provision of pharmaceutical services and necessity or desirability was as follows:

"Within the neighbourhood as defined by the Panel there are three contract pharmacies, two of which are located in the High Street of Fort William and the other in the village of Caol. In their totality these pharmacies provide a full range of services to meet the needs of the population of the neighbourhood including the elderly, the disabled, mothers with young children and those requiring addiction services. The Panel did find inadequacies in the service provided by the Caol pharmacy and were encouraged to hear of the plans to address these. The Panel gave particular consideration to the arguments put to them concerning accessibility. It found that many patients wishing face to face contact with a pharmacist would be able to travel on foot from their homes in Fort William or Caol. Others less mobile or living at a greater distance would be able to access services using the regular bus services or by car, with car parking available at the door in Caol and in nearby car parks in Fort William (with disabled spaces available outside the Boots pharmacy). In addition collection and delivery is available and the Panel further noted that prescriptions could be faxed from the health centre. The Panel identified no unmet need. For the reasons set out above the Panel considered that the existing pharmaceutical service in the neighbourhood was adequate. Accordingly the Panel was not satisfied that the granting of the application 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 refused".

[9] Once again the application was refused on the basis that the public can access a full range of services from the existing pharmacies. The Panel did not address the contention that the existing provision is inadequate because of the absence of pharmaceutical services at the new health centre. It is clear that this simple proposition was before the Panel. It recorded the submission that the health centre has a patient list of over 13,000 people from a wide area; that the services provided from the centre are extensive (some 26 separate services are listed); and that it is a "destination site with virtually every service except that of a pharmacy". It was submitted to the Panel that this is neither adequate nor acceptable. Previously pharmacies were located on the doorstep of the health centres in Fort William, whereas now this is not the case. "To simply argue that there are existing pharmacies in Lochaber is not sufficient." The appellants' representative did make submissions relating to congestion in the car parks at Fort William and infrequent bus services. However, whatever the merits of the evidence on journey times, parking difficulties, double journeys and the need to use public transport, in my view the nub of the appellants' case was that a pharmacy is required at the health centre. That was the gap which the appellants sought to fill. It was submitted that this would be justifiable even if the Panel considered that it would cause a degree of overprovision in the neighbourhood.

[10] At the hearing the appeal was supported by Dr Taylor on behalf of the local GPs. Dr Taylor said that the pharmaceutical services regulations required to be interpreted to allow the needs of a modern health service to be met and to move forward. GPs and their patients are of the opinion that the current provision of services is inadequate. According to Dr Taylor, patients attending the health centre deserve a community pharmacy where they can have face to face contact with a pharmacist, rather than rely on collection and delivery. In addition a pharmacy within the centre would have important benefits regarding training and education, and would make the provision of services sustainable for the future. The appellants' representative summed up the case for the new pharmacy on the basis that the health centre is located in a relatively isolated spot, and that it is important that a pharmacy is located in the centre to fill the existing gap in services. The residents of the neighbourhood are all proud of their health centre, however they miss an on-site pharmacy. In addition a pharmacy would enhance professional relationships. In short, whatever else, the Panel was presented with the argument that the existing provision is inadequate because the health centre does not have a pharmacy.

The Parties' Submissions

[11] At a first hearing the petitioners sought reduction of the Panel's refusal of the appeal on the basis that it was unlawful and unreasonable. The Panel erred in law in holding that the existing pharmaceutical provision in the neighbourhood was adequate. (A separate claim concerning the definition of the relevant neighbourhood was not pursued.) The Panel's reasoning is extremely brief. In the petition it is averred that the Panel failed to give any proper consideration to the consequences of the opening of the health centre at its current site and the implications of this for the provision of adequate pharmaceutical services in the neighbourhood. These were relevant and material considerations which the Panel were obliged to address. On behalf of the petitioners Mr Lindsay submitted that when dealing with the issue of adequacy of current provision the Panel erred in law by failing to address and consider the way in which health care is provided in the neighbourhood in the light of recent changes.

[12] For the Panel Mr Ellis QC stated that the health centre had been at its current location since late 2006. There had been an earlier decision of the Panel in 2007 relating to a previous application to relocate the petitioners' Caol Pharmacy to the centre, so this was not a new set of circumstances. It was submitted that it is too late to suggest that this is a new health centre. In any event the Panel required to address the adequacy of the provision for the neighbourhood. It was only if the provision was inadequate for the neighbourhood as a whole that the issue of the desirability of a proposed improvement would arise. Mr Ellis submitted that the appeal was not based on the absence of a pharmacy at the health centre, but rather on arguments concerning the accessibility or otherwise of the existing pharmacies. It is the health centre which is remote, not the current pharmaceutical services. The "real issues in the appeal" concerned matters such as problems of car parking, inadequate bus services, etc. That is what the Panel was asked to address and that is what it did. It was never suggested to the Panel that simply because there was a new health centre that was a reason for a new pharmacy at that location. In the absence of such a suggestion the Panel did not address this issue. It concentrated on questions concerning the accessibility of the other pharmacies. On those issues the Panel's reasoning was succinct but clear. Viewed in that regard the current provision is adequate.

[13] Even if there were certain valid criticisms of the transport systems in the area, that was not inconsistent with a finding of adequacy. The problems for the residents in the neighbourhood did not relate to journeying to and from a pharmacy, but to making their way to a remote health centre. It might be said that the health centre was inaccessible, but the same could not be said of the existing pharmacies. Most of the population lived in Fort William and Caol. In any event 80% of prescriptions are repeat prescriptions which can be faxed to the pharmacies.

[14] Mr Ellis indicated that there was a concern that a pharmacy at the health centre might dominate the market to the prejudice of pharmacies more local to the centres of populations. For example, would the Caol pharmacy close if Lloyds opened another outlet at the health centre? It was important not to allow a "free for all." Mr Ellis observed that while the statutory test may amount to a somewhat blunt weapon to control pharmaceutical companies, this is acceptable where there is adequate existing provision of pharmaceutical services in the neighbourhood. In summary Mr Ellis made it plain that the Panel did not consider that the appeal was presented on the basis of the absence of a pharmacy at the health centre. The reference to a gap in existing provision was interpreted in the context of alleged concerns as to access to existing services. He accepted that the Panel did not deal with any other substantive argument.

[15] Mr Ellis discussed the Second Division's decision in the Lloyds Pharmacy case in some detail. It "swept away" issues of desirability and also the earlier case law. He conceded that it describes a "restrictive regime". Parliament was content to lay down a system of control based solely on the adequacy of the existing provision, laying aside considerations such as possible improvements by allowing a pharmacy at a new health centre. The Panel's use of the phrase "no unmet need" was consistent with this approach. Mr Ellis acknowledged that if the Panel's restrictive interpretation of the petitioner's application and appeal was wrong, then the existing decision should be quashed and the appeal remitted to a reconstituted Panel.

[16] On behalf of Boots Miss Crawford QC adopted the submissions made by Mr Ellis. She analysed regulation 5(10) in the context of the relevant legislation. The underlying policy was a desire to ensure that existing provision is sufficient to maintain adequate services in the neighbourhood. The deliberate intention was to prevent improvements. She was unable to explain the rationale of this policy, however this was the result of the statutory test as interpreted by the Second Division. She ventured the possibility that the policy might be designed to limit the cost of drugs to the National Health Service.

[17] Miss Crawford submitted that the assessment of the adequacy of the provision of pharmaceutical services in a neighbourhood is a matter of fact and degree suitable for decision by an expert committee such as the Panel. The issue is not susceptible to sophisticated legal analysis. One requires to consider the actual current provision and judge it against the standard of adequacy, thereby exercising a value judgement and discretion. The value judgment is pragmatic, and because it is a value judgement there should be a wide margin of appreciation. The Panel will consider the needs of everyone in the neighbourhood as defined at any given time for any given purpose. It is important to appreciate that the adequacy of provision related to the greater Fort William area, not to any more local community, and certainly not to a neighbourhood defined by the health centre itself. 80% of prescriptions are likely to be repeat prescriptions and thus not involve a journey to a surgery. Indeed the experience is that visits to surgeries are becoming less important. The Panel will be aware of the way in which people in the neighbourhood use pharmacies. It might well be that everyone in the neighbourhood wanted a pharmacy in the health centre, but that did not mean that their desires should be fulfilled. The fact that they were promised a pharmacy in the centre is irrelevant.

[18] When considering the sufficiency of the Panel's reasoning, Ms Crawford invited the court to bear in mind that it required to give its decision within five days. The decision letter should be read as a whole. It is directed to informed parties who are well aware of the issues in dispute. In agreement with Mr Ellis, Miss Crawford submitted that the argument presented to the Panel simply related to the accessibility of the existing pharmacies. In respect of a value judgement as to the adequacy of existing provision, the reasoning can be shortly stated. The Panel concluded that those in the neighbourhood were able to receive pharmaceutical services. The issue is access to pharmaceutical services in the neighbourhood, not access to such services at the health centre. The committee decision records Dr Taylor as having observed that "it is blindingly obvious that having a pharmacy on site with the GPs was better for patients." She informed me that the Panel agreed with that, but the decision of the Second Division made it clear that such considerations were not relevant to an application of this nature.

[19] In a short reply Mr Lindsay submitted that the gap in the existing provision relied upon by the petitioners was the absence of a pharmacy at the health centre. All the other arguments were in the nature of additional strings to the bow. Similar concerns were raised at the appeal hearing on behalf of the local GPs. At the heart of the application is the simple proposition that there is a need for a pharmacy at the new health centre close to all the GP practices in the neighbourhood. It was incumbent on the Panel to address that issue. Paragraph 10 of the Second Division's decision made it clear that the Panel should take into account relevant developments in the neighbourhood when assessing the question of adequacy. This would include the recent changes in the provision of pharmaceutical services discussed at the appeal hearing.

Discussion and Decision

[20] It is clear that the Panel's approach was heavily influenced by the decision in Lloyds Pharmacy Limited v National Appeal Panel 2004 SC 703. The circumstances of that case bear similarities to the present. All the GPs in Stranraer moved to a new health centre. Lloyds wanted to open a pharmacy within the centre, but its application under regulation 5(10) was refused. The Panel decided that there was adequate provision in the neighbourhood. The Lord Ordinary (Lady Smith) held that the Panel had misdirected itself in that it was not sufficient to simply look at the existing provision. Regard had to be given to the desirability of proposed changes and to "the fluidity of the concept of adequate service provision in a changing society". This approach was similar to that set out by Lord Carloway in Sainsbury's Supermarkets Limited v National Appeal Panel 2003 SLT 688. In paragraph 19 of his opinion his Lordship said:

"The terms of reg 5(10), at least if looked at in isolation, might suggest that once adequate provision exists in a neighbourhood, no new pharmacies can be permitted. After all, provision must be either adequate or not and adequacy is not a word which is easily qualified. However, a construction of this type could potentially hinder the improvement of pharmaceutical services in a given area by preventing the creation of better services where bare adequacy has been achieved. That is not a construction that should readily be reached. Rather, the use of the term "desirable" in conjunction with the securing of adequacy suggests that, even if adequacy is achieved, measures to improve pharmaceutical services in an area must nevertheless be permitted under the guise of such measures being desirable to secure adequacy. If, however, new proposals might improve services in part of an area, yet be detrimental to them in another part, then they would not be permissible if they resulted in pharmaceutical services in the neighbourhood as a whole being characterised as something less than adequate."

[21] Lord Carloway may have been influenced by the approach of the Second Division in the case of Safeway Stores Plc v National Appeal Panel 1997 SC 189. In the Opinion of the Court (delivered by Lord Justice Clerk Ross) their Lordships said:

"We do not find it necessary to consider all the criticisms which counsel for the appellant directed against the statement of reasons of the Panel. It is his principal point of criticism which appears to us to be crucial. At no stage in the statement of reasons is there any indication that the Panel ever applied its mind to the question of whether the provision of a further pharmacy was desirable. The conclusion at which it arrived was that a further pharmacy was not necessary, but we agree with counsel for the appellant that even if something is not necessary, it may yet be desirable.

We are not persuaded that it is implicit in the statement of reasons that the Panel concluded that a further pharmacy was not desirable. On the contrary there is nothing to indicate that the Panel reached any conclusion upon this issue. It clearly was an issue to which it ought to have directed its mind. (The relevant regulation) makes it plain that the test which requires to be satisfied is that the provision of a further pharmacy in the area is necessary or desirable. It is clear from the terms of the decision being appealed against, that the decision was that a further pharmacy there was desirable. The Notes of Hearing of 4 February 1994 show that the contention put forward on behalf of Lanarkshire Health Board was that the application was both necessary and desirable. The Notes of Hearing also reveal that the petitioners' representative explained that the petitioners had continued to submit applications 'because they considered the pharmacy in Stewartfield was desirable'.

In these circumstances it is surprising to find the Panel in the statement of reasons confining its decision to the conclusion that a further pharmacy was not necessary. Since in the statement of reasons nothing is said as to whether a further pharmacy is desirable it follows that the decision of the Pharmacy Practices Committee to the effect that an additional pharmacy was desirable has never been displaced, and that no good reason has been put forward by the Panel for differing from the Pharmacy Practices Committee and for upholding the appeal against their decision."

[22] At this stage it would be useful to repeat the terms of regulation 5(10). It provides that an application of this nature should be granted 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...". Reverting to the more recent decision of the Second Division in Lloyds Pharmacy 2004 SC 703, the Opinion of the Court was delivered by Lord Drummond Young. After quoting the statutory test in regulation 5(10), at paragraph 8, his Lordship said:

".....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. The 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 the 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 practices are developing, and may be relevant to show what sort of provision in possible is 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 overprovision. 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 overprovision, 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, namely, 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 overprovision. 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."

[23] Pausing there, the striking feature of this judgement is the introduction of what is described as a two stage approach to the proper consideration of regulation 5(10), with the necessity or the desirability of the proposal being relevant only to the second stage. This approach may carry the risk that when assessing the adequacy of the existing provision the decision maker will ignore or leave aside the particular circumstances which prompted the application in the first place. Of the several decisions cited to me from both north and south of the border, some dating after the Lloyds Pharmacy decision, no other court has identified such a two stage approach as being "inherent in the logical structure of the regulation". Indeed the opposite seems to be the case, not least in the earlier decision of the Second Division. Those other cases are to the effect that the necessary implication is that the wording of the regulation implies a degree of flexibility, and that a proposal can be approved on the grounds of either necessity or desirability.

[24] In the present case, notwithstanding the terms of and the reasons underpinning the petitioners' application for a new pharmacy at the health centre, the Panel has considered it appropriate to assess only the accessibility or otherwise of the existing pharmacies in Fort William and Caol. It has not asked itself whether it is necessary or desirable for the provision of adequate services in the neighbourhood that there be a pharmacy at the new health centre, to which all GPs in the area have relocated. To be fair to the Panel, it may have thought that the terms of paragraph 14 of the Opinion of the Court in Lloyds Pharmacy justified this approach.

"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 the 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 the opinion that the approach of the Panel cannot be faulted."

[25] The difficulty is that if an application is presented on the basis of a significant gap in the existing provision, such as the absence of a pharmacy at a new health centre, the application cannot be judged simply by assessing the accessibility of the existing pharmacies. That is to miss the point of the proposal. Unfortunately the two stage approach identified in the Lloyds Pharmacy case may have encouraged this error. It can be noted from the terms of paragraph 14 quoted above that the Panel in the Lloyds Pharmacy case had indeed asked itself whether the proposal was necessary or desirable in order to secure adequate provision in the neighbourhood, a question which simply echoes the wording of the regulation. In the present case the Panel did not consider whether the provision of pharmaceutical services in the neighbourhood could be described as adequate when all the GPs were located at a relatively remote health centre which offered all health and medical facilities other than a pharmacy. In other words, even if one is following the two stage approach, the essential nature of and justification for the proposal has to be properly addressed when deciding whether there is adequate provision in the neighbourhood. One cannot simply ignore the new situation which has prompted and which underpins the application before the Panel.

[26] Various English cases are noted in the Lloyds Pharmacy decision, including R v Family Health Services Appeal Authority, ex p. Lowe [2001] EWCA Civ 128. In paragraph 16 the court observes:

"The facts of that case (ex p. Lowe) 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 that what is 'adequate' is a question of degree; there is a spectrum or 'continuum' of adequacy. For the reasons stated at para 9, we are of the 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 reg 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 para 11, 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."

[27] As already mentioned, the key feature of the Lloyds Pharmacy decision is the identification of a two stage test, which was said to be inherent in the regulation. I suspect that it was an overly rigid application of this approach which prevented the original Committee and then the Panel from from assessing the adequacy of the current provision in the context of the alleged gap. Instead the focus was on whether the necessary services can be obtained from existing pharmacies. Recently in R (On the Application of Assura Pharmacy Limited) [2008] EWCA Civ 1356, the Court of Appeal rejected the two stage approach when considering the same statutory formula south of the border. In the leading judgment Lawrence Collins LJ quoted with approval Laws LJ's approach to the statutory test in the earlier case of Lowe, namely:

"2. What is 'adequate' is a question of degree. There is, as it has been described, a spectrum or 'continuum' of adequacy.

3. That is, I think, ordinarily a feature of the term 'adequate' as a matter of language. But it is in any case a necessary feature of the term as it is used in regulation 4(4) since if it were otherwise - if 'adequate' were to denote a single sharp edge, such that any given set of facts would plainly fall upon one or other side of it - then it would be impossible to arrive at any construction of the earlier phrase, 'necessary or desirable', other than one in which the word 'desirable' were otiose. If the provision were inadequate, it would simply be necessary to make it up by granting the application. If it were adequate, the application would have to be refused.

4. It follows that, while on the surface the first question for the decision maker is simply whether existing provision is adequate, the real question is where on the sliding scale or spectrum of adequacy does this case on its facts belong?

5. To this, the logically available answers are:

(a) Wholly adequate. There is no magic in the word 'wholly': it simply refers to a state of affairs in which there is no question that the existing provision suffices.

(b) Wholly inadequate. Again there is no magic in the adverb. This looks at a state of affairs where further provision must necessarily be made.

(c) Marginal, or somewhere between (a) and (b). There the decision maker may conclude that it is desirable to grant the application in order to secure adequate provisions. But

(d) There may be some slippage between what is marginal and the extremes, wholly adequate or wholly inadequate. To that extent there may be slippage also between what is necessary and desirable. The judgment to be made is emphatically pragmatic."

Having quoted this analysis, Lawrence LJ continues at paragraph 50:

"The Inner House of the Scottish Court of Session has taken a different approach when it considered the construction of the English equivalent statutory provision in Scotland,: Lloyds Pharmacy Limited v National Appeal Panel 2004 SC 703. The court took the view that 'adequacy' connoted an absolute concept. But the difference makes little or no practical difference because the Court of Session recognised (para 10) that the decision maker could properly have regard to probable future developments, because the standard of adequacy in a particular neighbourhood would obviously change with time, and the regulation used the word 'secure' in relation to the adequate provision of pharmaceutical services. The decision maker had to determine adequacy of the existing provision of pharmaceutical services at the time of its decision, based on the adequacy of the existing provision on the basis of what was known at that time, together with future developments that could be considered probable rather than speculative.

51. But despite the extensive discussion of the point in this case, in the end nothing turned in these appeals on the meaning of 'adequate provision'.....consequently I will say no more on this point than that, quite apart from the fact that this court is bound by its previous decision (since the meaning of adequacy was part of the ratio), I would have preferred Laws LJ's analysis."

[28] The matter can be resolved if one recognises that if the existing provision is missing a desirable feature, then it may not be adequate. That is wholly consistent with the statutory formula. Indeed otherwise one would come close to an assumption that Parliament was out to ensure that the population of a neighbourhood was deprived of all desirable improvements; a proposition for which no one at the hearing in the present case could offer any sensible explanation. The above suggestion would allow for the application of a two stage approach as set out in the Scottish decision, but in a manner which is consistent with the likely outcome of a similar application south of the border. Thus the differences in statutory construction demonstrated in the recent decisions on either side of the border can be reconciled, at least in terms of how they will operate in practice. Likewise the earlier interpretation as explained by the Second Division in Safeway Stores can be adopted without arbitrarily causing a different end result. As I understand the decision in Lloyds Pharmacy, the second stage is designed to deal with the question, does the proposal address the identified deficiency in provision? Thus, for example, if a Panel identified a gap in the northern part of a neighbourhood, a new pharmacy in the southern section would fail the second stage. However, the first stage adequacy test will turn on whether a deficiency in the neighbourhood has been identified; and of course in the present case the health centre is in the neighbourhood and it serves the population in the neighbourhood. Even if the public can obtain all necessary services from the existing pharmacies in Fort William and Caol, there is nothing to stop the Panel from concluding that the existing provision is inadequate because of the absence of a pharmacy in the health centre. Whether or not it takes that view is a matter for the Panel.

[29] The overall result is that I hold that the present decision should be quashed, essentially because the Panel failed to apply its mind to a central feature of the application, namely that, unless there is a pharmacy in the new health centre, the existing provision is inadequate, and this even if the population in the neighbourhood can obtain all necessary pharmaceutical services from the pharmacies in Fort William and Caol. As was suggested by Lawrence Collins LJ, it may be that there is no real practical importance in the apparent differences of statutory construction recently adopted on either side of the border. This would be a wholly desirable outcome, not least since there seems little logic in a system which grants an application catering for anticipated changes, but refuses permission for one which addresses a recently completed development. In other words, properly construed the Lloyds Pharmacy case does not automatically rule out the present application simply because existing pharmacies are accessible and provide a full range of services.

[30] I consider that the issue which the Panel has not answered can be expressed as follows: Is there adequate provision of pharmaceutical services in the neighbourhood when all the GP practices are located in a relatively remote health centre which offers more or less all possible health and related services other than a pharmacy? I shall grant the application for judicial review and quash the Panel's decision and the subsequent letter confirming it. It was agreed at the hearing that in this event a new Panel should be constituted for the purpose of determining the petitioners' appeal.