In R (on the application of (1) Pharmaceutical Services Negotiating Committee ("PSNC") (2) Susan Sharpe) v Secretary of State for Health (the "SoS") and National Pharmacy Association ("NPA")NPA v SoS [2018] EWCA Civ 1925, the Court of Appeal dismissed the challenges to an earlier decision of the Administrative Court, which rejected the claim that a package of changes to the system for remuneration of community pharmacies introduced by the SoS in 2016 was unlawful.

Key points

The duty of sufficient enquiry, arising from Secretary of State for Education & Science v Tameside Metropolitan Borough Council [1977] AC 1014, is subject to a Wednesbury unreasonableness challenge only. It is for the decision-maker, not the courts, to conclude what is relevant and the nature and extent of any inquiry to be undertaken. Where legislation sets out factors to which a decision maker must have regard when exercising his functions and those factors are wide-ranging, complex and potentially conflicting, the decision maker's functions involve the exercise of substantial discretion and any consideration by the courts of his compliance with the duty to "have regard" to a particular factor will involve a review of the process, not the merits.

Background

On 20 October 2016, following a consultation process, the SoS announced a package of changes to the system for the remuneration of community pharmacies (the "Changes"). The Changes would result in a significant reduction in the overall amount of funding for pharmacies and formed part of a wider funding reallocation process within the NHS.

During the consultation and at the time the Changes were announced, it was anticipated that they would result in the closure of a number of pharmacies. In response to a question in Parliament, the SoS indicated that it would not be possible to give a reliable indication as to how many pharmacies would close. In doing so, he referred to the average operating profit margin of a pharmacy being 15%. This figure (the "15% Figure") had been calculated by the Department of Health (the "Department") on the basis of a set of the accounts of only 52 pharmacies obtained from Companies House.

The PSNC and NPA (together, the "Appellants"), both bodies representing community pharmacies, brought judicial reviews against the SoS. Collins J in the Administrative Court found against them and the Appellants appealed his decision. 

Appeal grounds

On appeal, the PSNC argued that Collins J:

(1) ought to have concluded that the SoS had breached the duty of sufficient enquiry ("the Tameside challenge");

(2) erred in his treatment of the 15% Figure ("the 15% challenge"); and

(3) ought to have concluded that the SoS had unlawfully misused statutory provisions for the payment of pharmacies to fundamentally restructure the pharmacy system without legislating ("the statutory purpose challenge").

The PSNC made it clear that they were not seeking to challenge the high level policy decision that savings were necessary, but rather the means by which those were achieved.

The NPA supported the PSNC's case and relied on one further discrete ground, namely that in adopting the Changes the SoS breached his statutory obligation to have regard to the need to reduce inequalities between the people of England with respect to the benefits they can obtain from the NHS ("the equality ground").

Decision

The Court of Appeal dismissed the appeal in its entirety.

The Tameside challenge

The Appellants submitted that the SoS was required to consider the Changes in the context of the overarching statutory duties, particularly the duty to "secure continuous improvement" in the quality of NHS services and that this was material to the duty of sufficient enquiry. They argued that the SoS should have obtained reliable and cogent information rather than simply relying on the 15% Figure.

The Court of Appeal held that the SoS' duty of sufficient enquiry was subject to a Wednesbury unreasonableness challenge only and that it was for the SoS, not the Court, to conclude what was relevant and the nature and extent of any inquiry (per R (on the application of Khatun) v Newham LBC [2004] EWCA Civ 55). Further, the Court of Appeal agreed with Collins J that it was clear from the evidence that the SoS' decision had not in fact been taken in reliance on the 15% Figure. Rather, the SoS recognised the figure's limitations and proceeded on the basis that it was not possible to achieve a more reliable estimate of how many pharmacies might close. This conclusion was not irrational and it was one which the SoS was entitled to reach.

It was noted by Collins J, in a passage with which the Court of Appeal agreed, that PSNC had the experience and opportunity to obtain more information itself and present that to the SoS.

The 15% challenge

On Ground 2, the Applicants argued that Collins J had wrongly assessed the significance of a failure by the Department to disclose and consult on the 15% Figure, and that he erred in concluding that the non-disclosure did not render the consultation process unlawful.

The Court of Appeal noted that it was regrettable that the Department had not been more open as to the 15% Figure during the consultation process. However, since the 15% Figure was not a critical point in the SoS' decision, the non-disclosure did not render the process unfair.

The statutory purpose challenge

The Appellants alleged that there was a settled intention to reduce the number of pharmacies and the SoS was unlawfully achieving that purpose through the Changes. The Court of Appeal held that whilst it was clear from the evidence that a reduction in the number of pharmacies was regarded by the Department and ministers as desirable, the Changes were not made with that intention. Rather, they were made to save cost. The fact that the Changes could result in the closure of a number of pharmacies did not mean that they were for an improper purpose, or that they were unlawful.

The equality ground

On the equality ground, the Court noted that the relevant legislation imposed numerous high level duties upon the SoS to have regard to a range of factors and aims in exercising his functions. Those factors were complex and potentially conflicting, particularly given that the exercise of the SoS' functions would inevitably involve the allocation of limited resources between competing needs. The functions involved the exercise of substantial discretion.

The Court noted that any consideration by the courts of compliance with the SoS' duty to "have regard" to a particular factor would involve a review of the process, not the merits. The weight to be attributed to relevant factors was a matter for the public body assigned by Parliament to make the decision. The courts had previously emphasised the importance of not imposing too high a burden on decision-makers.

On the evidence, the Court held that it could not be said that the SoS had paid no regard to the relevant duty. The Department had produced a number of documents which showed regard to the need to: reduce existing inequalities; avoid potential new inequalities that could arise because of the Changes; and maintain reasonable access to pharmacies in rural areas. In the absence of evidence to the contrary, it could be assumed that the SoS had considered these documents. This was sufficient to discharge his duty. 

Comment

This case illustrates the difficulties involved in challenging a public body's decision regarding the allocation of resources. Public bodies have a wide discretion when making such decisions and the courts will be reluctant to interfere. Those considering challenging a public body's decision should be aware that the courts will not involve themselves in the decision's merits, and that there is a high hurdle to meet in order to successfully challenge the decision-making process. Claimants should gather as much information as they can to present to the decision maker on an issue rather than seeking to challenge a decision for insufficient enquiry once it is made.