Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 86
P432/09	OPINION OF LORD PENTLAND in the cause LLOYDS PHARMACY LIMITED Petitioners' For Judicial Review of the decision of Lanarkshire Health Board of 17 December 2009, as affirmed by their letter dated 26 February 2010, to refuse to grant the Petitioners' application for a minor relocation of a pharmaceutical contract form 17 to 76 High Street, Carluke ____________

Petitioner: Lindsay; Dundas & Wilson, CS, LLP

Respondent: C MacNeill, QC, Cowie; Central Legal Office

6 July 2010

Introduction

[1] The petitioners are Lloyds Pharmacy Limited. The respondents are Lanarkshire Health Board. Under and in terms of Regulation 5(1) of the National Health Service (Pharmaceutical Services) (Scotland) Regulations 2009 ("the 2009 Regulations"), the respondents are the health board with responsibility for preparing and maintaining the Pharmaceutical List of the names and addresses of persons providing pharmaceutical services within the Lanarkshire Health Board area. The town of Carluke lies within the respondents' geographical area. In the present petition for Judicial Review the petitioners seek declarator that the respondents' decision of 17 December 2009 (as affirmed and explained by their letter of 26 February 2010) to refuse the petitioners' application for a minor relocation of their pharmacy was unlawful et seperatim unreasonable. The petitioners also seek reduction of the decision. The case came before me at a First Hearing, at which the petitioners sought decree of declarator and reduction. The respondents moved for the petition to be dismissed.

The Statutory Framework

[2] In order to provide pharmaceutical services for the National Health Service, persons providing the services and the premises from which the services are to be provided both require to be entered in the Pharmaceutical List maintained by the relevant health board. Inclusion in the Pharmaceutical List is governed by the 2009 Regulations.

[3] Regulation 5(1) of the 2009 Regulations imposes a duty on health boards to prepare the Pharmaceutical List. It is in the following terms:

"5. Pharmaceutical List

(1)   The Board shall prepare a list to be called "the pharmaceutical list" of, subject to the provisions of regulation 26 (practitioners subject to inquiry) of the National Health Service (Tribunal) (Scotland) Regulations 2004, the names of persons, other than doctors and dentists, who undertake to provide pharmaceutical services and of the addresses of the premises within the Board's area from which these persons undertake to provide such services. The said list shall also state the nature of the pharmaceutical services to be provided, and the days and hours during which the premises are open, and show pharmacists as a separate category of persons within that list."

[4] Regulation 5(2) prescribes the procedure for obtaining a listing. It is in the following terms:

"5(2) A person (hereinafter referred to in this regulation as an "applicant") -

(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,

shall apply to the Board in accordance with whichever version of Form A set out in Schedule 2 is appropriate or, in the case of an application to which the applicant proposes that paragraph (4) should apply, Form A(MR) set out in that Schedule."

[5] Regulations 5(4) and 5(5) relate to applications by persons whose names are already included in the Pharmaceutical List but who propose to relocate to new premises. They provide as follows:

"(4) Where an application is made and -

(a)   the applicant intends to relocate to new premises, within the neighbourhood in which the applicant provides pharmaceutical services, from the premises already listed in relation to such applicant, and to provide from those new premises the same pharmaceutical services which such applicant is listed as providing from the applicant's existing premises;

(b)   the Board is satisfied that the relocation is a minor relocation; and

(c)   the condition specified in paragraph (5) is fulfilled, the board shall grant the application.

(5)   The condition referred to in paragraph ... (4)(c) is that ... the provision of the particular pharmaceutical services by the applicant will not be interrupted, except for any period during which, in terms of any scheme made under regulation 11(1) that applies to the applicant, or any such longer period as the Board may for good cause allow, the provision of such services is not required."

[6] Paragraph 5(6) of the Regulations explains what is meant by a minor relocation. It is in the following terms:

"(6) In this regulation the reference to a minor relocation is to one where there will be no significant change in the neighbourhood population in respect of which pharmaceutical services are provided by the applicant and other circumstances are such that there will be no appreciable effect on the pharmaceutical services provided by the applicant or any other person whose name is included in the pharmaceutical list of the Board."

[7] Regulations 5(7) and 5(8) set out how a health board must deal with an application for a minor relocation. They are in the following terms:

"(7) Before satisfying itself that a relocation is a minor relocation the Board shall seek and take into account the views of the Area Pharmaceutical Committee and of the most senior pharmaceutical adviser, or equivalent, of the Board.

(8) In the case of an application to which paragraph 4(a) applies, where the Board is not satisfied that the relocation is a minor relocation, it shall not grant the application but shall notify the applicant in writing of its decision and of its reasons."

[8] There is no right of appeal against a refusal of an application under and in terms of Regulation 5(8). Accordingly, where an applicant is dissatisfied with a decision made by a Health Board to refuse an application for a minor relocation, its only remedy is by way of a petition for judicial review.

The Factual Background

[9] The petitioners' pharmacy at 17 High Street, Carluke is included in the respondents' Pharmaceutical List. It is important to understand, for the purposes of the present case, that pharmaceutical premises operated by Boots UK Limited ("Boots") at 68-70 High Street, Carluke and by Cairns Chemists ("Cairns") at 26 Market Place, Carluke are also included in the respondents' Pharmaceutical List. The petition was served on Boots and Cairns as interested parties, but neither of them appeared at the First Hearing.

[10] For some time all of the general practitioner medical practices in Carluke have been located at Carluke Health Centre, 14 Market Place, Carluke. In or around March 2007 plans for a new community health centre to be located at 40 Chapel Street, Carluke were published. Planning permission was granted in June 2007. Construction work started in about October 2008. The intention is that all of the general practitioners will relocate to the new community health centre from the existing health centre. The new centre was due to open in June 2010, but I was informed that this has been put back until 16 August 2010. At the First Hearing maps were referred to showing the location of the new community health centre in relation to the existing one; they are not far apart, but the development has prompted Boots and the petitioners to take steps to attempt to relocate their respective pharmacies in order to get closer to the new facility.

[11] Boots made the first move. On 8 July 2008 they applied to the respondents for a minor relocation of their pharmacy from 33 High Street to 68-70 High Street. The new Boots premises were further away from the existing health centre, but closer to the new community health centre. By letter dated 11 December 2008 the respondents granted Boots' minor relocation application. According to the averments in the petition, this was to take effect from 23 March 2009.

[12] It was not until 18 August 2009 that the petitioners submitted an application to the respondents for a minor relocation of their pharmaceutical premises from 17 High Street to 76 High Street, Carluke. At the time when this application was made all of the general practitioner practices were, of course, still located in the existing health centre; construction work on the new community health centre was underway, but it had not been completed. By letter dated 17 December 2009 the respondents refused the petitioners' minor relocation application, stating that they were not fully satisfied that the relocation was minor. The respondents' letter explained that in reaching their decision "the location of your current premises and the proposed relocated premises were noted, and the planned changes to Carluke Health Centre and timescale for its relocation to a new site were also considered."

[13] The petitioners were dissatisfied with the refusal of their application; they instructed their solicitors to write to the Board requesting that the decision be reconsidered. The relative letter from Dundas & Wilson LLP was dated 16 February 2010. It questioned the refusal on a number of grounds. In particular, Dundas & Wilson made the point that the new community health centre would have an impact on the provision of pharmaceutical services. They observed that the premises at 76 High Street, to which the petitioners wished to relocate, were in the same parade of shops as the new Boots pharmacy; and that the two shops were only one unit apart from one another and "so neither should have a major competitive advantage from its position." Dundas & Wilson complained inter alia that inadequate reasons had been given for the refusal and that the inconsistent treatment of the petitioners as compared with Boots had not been explained.

[14] The respondents replied to Dundas & Wilson by letter dated 26 February 2010. They refused to reconsider the petitioners' application and advised that they considered matters to be closed. The respondents did, however, acknowledge that their letter dated 17 December 2009 refusing the petitioners' application could have been more detailed. Accordingly, they took the opportunity to provide fuller reasons for the refusal. Counsel for the petitioner accepted that it was legitimate for the respondents to expand upon their earlier reasoning in this way and he did not criticise them for doing so.

[15] In their letter dated 26 February 2010 the respondents set out their reasons for the decisions taken in relation to the minor relocation applications made firstly by Boots and then by the petitioners. They said this:

"For context, Carluke Health Centre (CHC) is currently located at 14 Market Place. There are three pharmacies in Carluke. Cairns Chemist at 26 Market Place (very close to the main door of the Health Centre), Lloyds pharmacy (Lloyds) at 17 High Street (approximately 1 minute walk away), and Boots UK Ltd. pharmacy (Boots) at 68-70 High Street (approximately 1 minute walk away). Boots used to be at 33 High Street (another few seconds walk from Lloyds), but was granted a minor relocation effective from 23 March 2009 to its present site at 68-70 High Street.

Additional context is that Carluke Health Centre will soon be replaced by the new Carluke Community Health Centre (CCHC) located at 40 Chapel Street, Carluke, ML8 4BA (close to the bottom (high numbered addresses) of the High Street). This will open in June 2010 and was part of the Lanarkshire Health Board Capital Plan from the time of the application by Boots UK Ltd to minor relocate. Lanarkshire Health Board granted the application by Boots to minor relocate because both the APC and Chief Pharmacist - Primary Care advised that all of the necessary conditions at that time, for a minor relocation were met.

Prior to the Boots application to minor relocate, the rank order in terms of closeness of the pharmacies to the front door of the current CHC was:

Cairns Chemist

Lloyds

Boots

And to the proposed new CCHC:

Boots

Lloyds

Cairns Chemist

It was determined that the application by Boots to minor relocate did not change these rankings.

The Lloyds application to minor relocate was from 17 High Street to 76 High Street. The APC considered the application at its meeting on 4 November 2009, and determined that it could not be sure that the move would have a neutral effect on contractors in the area. Therefore it was not considered as minor. The Chief Pharmacist - Primary Care stated that "I cannot agree with the applicant that there will be no appreciable effect on the NHS Pharmaceutical Services provided by Lloyds or any other person on the Board's List"

The application was therefore rejected, and the views received formed the communication to Lloyds notifying them of the decision.

The rationale behind the Board's decision was that the rank order of the Pharmacies in proximity to the new Carluke Community Health Centre would change if the application were granted.

Currently the rank order is:

Boots

Lloyds

Cairns Chemist

Changing to:

Lloyds

Boots

Cairns Chemist

It is well known that the proximity of Pharmacies in relation to GP surgeries affects prescription flow and thus a change in the proximity order would have an appreciable effect on the applicant and other contractors. We grant, however, that this degree of detail behind the decision to reject the application was not communicated in the formal correspondence to Lloyds Pharmacy Ltd."

[16] Following that letter, the petitioners brought the present proceedings for judicial review.

The Grounds of Challenge

[17] The petitioners advanced three separate grounds of challenge to the respondents' decision to refuse their minor relocation application.

[18] Firstly, the petitioners contended that the respondents had erred in law by applying the wrong legal test when considering the application. As has been seen, regulation 5(6) provides that a minor relocation is one where there will be no significant change in the neighbourhood population and there will be "no appreciable effect" on the pharmaceutical services provided by the applicant or any other person whose name is included in the Pharmaceutical List, such as Boots or Cairns. It was accepted that no issue arose as to significant change in the neighbourhood population. The only live issue was whether the petitioners' proposed relocation would have an appreciable effect on the provision of pharmaceutical services by them and others also listed. The respondents were said to have erred in law to a material extent by equating the notion of "neutral effect" with the statutory test of "no appreciable effect". This was said to be made clear by the terms of the respondents' letter of 26 February 2010 which, as I have already explained, stated inter alia that:

"The APC considered the application at its meeting on 4 November 2009, and determined that it could not be sure that the move would have a neutral effect on contractors in the area. Therefore it was not considered as minor."

It was contended that the correct statutory test of "no appreciable effect" was not the same as the incorrect "neutral effect" test said to have been applied by the respondents when deciding the petitioners' minor relocation application. The argument was that a neutral effect is not the same as no appreciable effect. For example, the test of neutral effect would exclude applications with minor effects, whereas the correct legal test of no appreciable effect would permit applications with minor effects still to fall within the scope of a minor relocation. Equally, the test of neutral effect would permit applications that did have an appreciable effect so long as the appreciable effect applied equally to all those providing pharmaceutical services, thus resulting in a neutral effect overall. In other words, the application of these different legal tests could result in different outcomes. This was said to emphasise the materiality of the respondents' error of law in applying the incorrect legal test and to make clear that this was a point with real practical consequences.

[19] In my opinion, the petitioners' first ground of challenge cannot succeed. The respondents' letter of 26 February 2010 expanded on the reasons for the refusal of the petitioners' application previously given by the respondents in their letter of 17 December 2009. Accordingly, the two letters must be read together when it comes to examining the contention that the respondents have applied the wrong test. It seems to me that when the letters are read in that way it is perfectly clear that the respondents correctly understood the test that they had to apply. This can be seen from the terms of the letter of 17 December 2009, in which the respondents say that they have been advised that members of the Area Pharmaceutical Committee and the Chief Pharmacist (Primary Care) are of the opinion that the petitioners' application "does not satisfy the test criteria contained within regulation 5(6) of (the 2009 regulations)." Then the letter goes on to say that taking all factors into account "it could not be agreed that there would be no appreciable effect on the NHS pharmaceutical services provided by (the petitioners) as the applicant and (the) other contractors." From the specific reference to the relevant regulation and the express mention of the criterion of no appreciable effect it is clear, in my view, that the respondents must have correctly understood the test they had to apply. The point becomes even clearer, in my view, when one has regard to the penultimate paragraph on page 2 of the letter of 26 February 2010 because there the respondents say, by way of a conclusion, that a change in the proximity order "would have an appreciable effect on the applicants and other contractors". Again, it is obvious that they have properly understood the applicable statutory criterion.

[20] While it may be correct to say that neutral effect differs (at least in theory) from no appreciable effect, a fair and realistic reading of the two letters in which the respondents explain their reasoning seems to me to show that they did not base their refusal of the petitioners' application on the notion of neutral effect. In this connection, it should, I think, not be forgotten that the letter of 26 February 2010 sought merely to enlarge upon the reasons for refusal already given. In so doing, the letter (understandably) recorded the view expressed by the APC, but it does not follow that the respondents must be taken as having themselves adopted that view in the sense that it led them to misunderstand the correct statutory test. The flaw in the petitioners' argument, in my opinion, is that it assumes that because the respondents have made reference to the view conveyed to them by the APC in the same terms as that view was expressed, the respondents must themselves have adopted and approved that particular formulation of matters. That, as it seems to me, is a non sequitur. As I have already said, when the two relevant letters are read together, it is clear that the respondents have correctly directed themselves as to the applicable statutory test. The first ground of challenge must, therefore, fail.

[21] In their second ground of challenge the petitioners argued that the respondents had erred in law by failing to have regard to a relevant and material consideration, namely the actual distances of the pharmacies from the new community health centre. What the respondents had done was merely to direct themselves to a ranking of the order of closeness to the new community health centre, although they noted at the foot of page 2 of the letter dated 26 February 2010 "that the proximity of Pharmacies in relation to GP's surgeries affects prescription flow...". The approach taken by the respondents, as was evident from the letter, was that any change in the order of proximity automatically had an appreciable effect. Whilst this was no doubt a relevant factor, it was wrong to regard it as determinative. What the respondents should have done was to look at all the relevant circumstances, including actual distances between the new community health centre and the premises of Boots, and between the new facility and the proposed new premises of the petitioners. The petitioners' proposed minor relocation to 76 High Street would mean that they and Boots were only one unit apart from one another; that had been specifically highlighted by Dundas & Wilson. With such a small difference in distance from the new community health centre it could not be said that a change in ranking on its own had to mean that there would be an appreciable effect on the provision of pharmaceutical services. The respondents should have taken account of other relevant considerations, including the nature of the petitioners' proposed new premises, their configuration, their layout and the facilities that would have been available at them.

[22] In Boots the Chemists v Ayrshire and Arran Primary Care NHS Trust 2001 SC 479, the Inner House held that it was the duty of a Board dealing with an application for a minor relocation to consider if what was proposed was a "minor relocation" in the ordinary sense of those words, and also if it was one in which there would be no significant change in respect of the provision of pharmaceutical services.

[23] Senior Counsel for the respondents relied on this authority for the proposition that the judgment which had to be made was, in the final analysis, one of fact and that it should not be lightly interfered with by the court. He stressed that it was for the respondents to decide what facts they considered to be important (and indeed determinative) in assessing whether a proposed minor relocation would have an appreciable effect.

[24] In my opinion, the respondents were entitled to take the view that an alteration in the rankings of relative closeness to the new community health centre would have an appreciable effect on the petitioner and other contractors. In Boots the Chemists (supra), the Inner House observed, at 484D-F, that any significant and predictable transfer of patient loyalty or custom from one pharmacy to another is likely to produce a loss of trade for one pharmacy and a corresponding gain for the other. If the Board judges the predicted trade to be appreciable, the proposed relocation would not be minor. A judgment as to whether or not there will be any such effect is a judgment of fact for the Board to make in the light of the material and advice that it is obliged to consider. In the present case the respondents have evidently made a judgment that if the petitioners are permitted to open a new pharmacy which would be closer to the new community health centre than Boots' pharmacy at 68-70 High Street, that will be bound to have an appreciable effect on the level of trade of both companies. It seems to me that not only is this a judgment that the respondents were entitled to come to, it is one which as a matter of common sense is very likely to be correct. If the petitioners' application was granted the result would be that they would be allowed to move significantly closer to the new community health centre than their current premises at 17 High Street. Such a move would be very likely to increase the level of the petitioners' trade and correspondingly to reduce that of Boots. The effect, in other words, would be appreciable. When matters are analysed in that way, it seems to me that it does not matter that the petitioners' proposed new pharmacy would be very close to the one operated by Boots. The point is that the petitioners would be moving significantly closer to the new medical facility; that would be bound to affect the levels of trade as compared to what they would have been if no such move took place. In the circumstances, I consider that the respondents' focus on the effect which the petitioners' proposed relocation would have on the ranking order is not erroneous. On the contrary, it appears to me to be in line with the analysis approved by the Inner House in Boots the Chemists (supra). Accordingly, the second ground of challenge must, in my view, fail.

[25] I turn finally to the third ground of challenge advanced on behalf of the petitioners. This was to the effect that the respondents had failed to treat the Boots application and the petitioners' application, each of which was for a minor relocation, on the same basis and in the same way. The respondents, it was said, had treated Boots' minor relocation application more favourably than that made by the petitioners because they had failed to take account of the planned move from the existing to the new community health centre when considering whether the Boots' application would have no appreciable effect. At the time when Boots' application was under consideration by the respondents it was clear that all the GP practices would in due course move to the new community health centre, yet this had been ignored by the respondents, who had proceeded only on the basis of the relationship between the new Boots' premises and the existing health centre. This was said to be evident from the terms of an email sent by Mr George Lindsay, the respondents' chief pharmacist, on 13 November 2008. The email contained his advice on the Boots' application. In it Mr Lindsay stated inter alia that the proposed relocation was "literally right across the street and slightly further away from the current pharmacies and health centre." From this it was clear that he (and it could be inferred the respondents) had given no consideration to the new community health centre; the focus had been exclusively on the existing health centre. Such a differential approach to taking account of the planned move meant that the petitioners' and Boots' minor relocation applications had been treated differently; this approach was irrational and vitiated the respondents' decision to refuse the petitioners' application.

[26] In my opinion, this ground of challenge also fails. In their letter of 26 February 2010 the respondents explained the grounds on which the Boots' application had been decided. They referred to the ranking order "in terms of closeness of the pharmacies to the front door of the current CHC" and then to the new proposed CCHC. They then said this:

"It was determined that the application by Boots to minor relocate did not change these rankings."

In my view, this amounts to a clear explanation of the respondents' approach at the time they considered the Boots' application. It makes plain that the respondents considered the issue of proximity to the new community health centre at the time when they were evaluating the Boots application. This is the same as the approach they took when they came, in due course, to consider the petitioners' application. Accordingly, there was no difference in treatment as between Boots and the petitioners, as it seems to me.

[27] Counsel for the petitioners argued that the sentence I have just quoted from the respondents' letter of 26 February 2010 was ambiguous, although he was unable to explain what the nature of the supposed ambiguity was. For myself, I can identify no ambiguity; the sentence is perfectly clear I think. Then the petitioner's counsel submitted that the explanation given in the letter of 26 February 2010 had to be seen as an ex post facto rationalisation of the respondents' position in response to the representations made by Dundas & Wilson. He eschewed any implication of bad faith, however. I do not see why the explanation should be seen in that way. It appears to me that it should be understood simply as an elucidation by the respondents of their reasoning in relation to the Boots' application. Finally, counsel argued that the explanation could not be squared with Mr Lindsay's email and this too called into question whether it could be relied upon. Again, I do not see why this should be so. It is true, of course, that the respondents took account of Mr Lindsay's views, as they were bound to do, but they still had to come to their own decision as to whether the proposed relocation was minor. To do that, as the letter of 26 February 2010 explains, they looked at the ranking effects, decided that granting the Boots' application would not alter these, and accordingly came to the view that the proposed relocation by Boots was minor.

[28] There was some discussion at the First Hearing as to whether it might be helpful to obtain an affidavit from the author of the letter of 26 February 2010 for the purpose of amplifying the explanation about the approach taken towards the Boots' application. On reflection, I do not consider that this is necessary. In my opinion, the letter is perfectly clear on the point in issue.

[29] In my opinion, the third ground of challenge is misconceived and must fail.

[30] In the result, I shall sustain the respondents' third plea-in-law and dismiss the petition.