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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Secretary Of State For Environment, Food & Rural Affairs v Crop Protection Association UK Ltd & Anor [2001] EWCA Civ 1656 (9 November 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1656.html Cite as: [2002] 1 CMLR 8, [2002] Eu LR 24, [2001] EWCA Civ 1656

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(CROWN OFFICE)
(Mr Justice Richards)

		Royal Courts of Justice Strand, London, WC2A 2LL Friday 9 November 2001

LORD JUSTICE SIMON BROWN:

1. This is an unusual appeal. It is brought by the Department for the Environment, Food and Rural Affairs (DEFRA, formally MAFF), acting by its executive agency the Pesticides Safety Directorate (PSD), against the order of Richards J made on 4 November 1999 declaring unlawful part of the control arrangements operated by the PSD with regard to the parallel import of plant protection products (pesticides). A parallel import is one which is permitted by reference to its essential identicality to a product already authorised for use on the U.K. market (a master approved product). The appeal concerns parallel imports coming from another Member State where their use is already authorised. The parallel import regime is, I may note, different from the concept of mutual recognition where reliance is placed on the other Member State's own authorisation. Richards J's judgment is now reported: R v MAFF, ex p. British Agrochemicals Association [2000] EuLR 149. Not all of it is under appeal. The one critical issue remaining alive is whether the formulation of the parallel import has to be literally the same as that of the master approved product.
2. The challenge to PSD's arrangements was made as long ago as May 1994. It was brought by the respondents, a company representing 37 members of the agrochemical manufacturing industry, then known as the British Agrochemicals Association Limited. It has already been the subject of a reference to the ECJ, the court's judgment being given on 11 March 1999 – R v MAFF ex p. British Agrochemicals Association [1999] ECR I-1499 (hereafter BAA). The essential issue before Richards J was as to the proper interpretation of that judgment. Following Richards J's order, however, the ECJ on 16 December 1999 gave judgment in R v Medicines Control Agency, ex p.Rhone-Poulenc [1999] I-8789 (hereafter Zimovane), a case concerning the closely related question of arrangements by the MCA for the parallel import of pharmaceutical products.
3. Mr Parker QC for the appellants (supported by Mr Brealey for the National Farmers Union which, with leave, has appeared as Intervener in the appeal) submits that Richards J's interpretation of BAA was incorrect and that, even if originally that was unclear, any doubts have been laid to rest by the subsequent judgment in Zimovane. Mr Pannick QC for the respondents asserts to the contrary that BAA was clearly in his favour and that Richards J correctly interpreted it. That notwithstanding, however, he accepts that the ECJ's judgment in Zimovane appears to have been inconsistent with its earlier ruling and that he cannot, therefore, ask us simply to dismiss this appeal. Rather he seeks a further reference to the ECJ to resolve the issue once and for all, acknowledging that in the meantime the effect of the disputed part of Richards J's judgment should properly be stayed. It is accordingly this court's essential task to decide what the ECJ meant in each of its two judgments – BAA and Zimovane – and in particular whether there remains any real doubt as to the proper resolution of the issue still outstanding in these proceedings. That is why at the outset I ventured to describe the appeal as unusual.
4. With that brief introduction let me turn next to explain just what it was that Richards J decided and why it is that the respondents are not pursuing their cross appeal against part of it. This requires some account of the background to the challenge but this I shall give in the most abbreviated form; the interested reader will find it in greater detail in paragraphs 1-11 of the judgment below.
5. Under Council Directive 91/414 uniform rules are laid down on the conditions and procedures for the grant of marketing authorisations for pesticides. Such products are defined by Article 1(1) as "active substances and preparations containing one or more active substances, put up in the form in which they are supplied to the user, intended to … " (and there is then set out the various uses for which these products are intended). Such products are not to be placed on the market unless duly authorised. Importation of such products into a Member State is deemed to constitute placing them on the market.
6. The control arrangements under challenge were made in 1994 and provide for the approval of imported pesticide products "identical to products having extant provisional or full approval" under the Regulations governing authorisation by which the Directive was implemented. The challenge was made both to the test of "identicality" to be applied by PSD and to the procedure they would use for verifying the identicality of the parallel import. Identicality was defined in paragraph 3(a) of the arrangements as follows:

"For the purpose of these arrangements an imported product is deemed to be identical to a master product if –

(i) the active ingredient in the imported product is manufactured by the same company (or by an associated undertaking or under licence …) as the active ingredient of the UK master product and is the same within variations accepted by the registration authority;

and

(ii) the formulation of the imported product is produced by the same company (or by an associated undertaking under licence) as that of the UK master product and any differences in the nature, quality and quantity of the components are deemed by the registration authority to have no material effect on the safety of humans, domestic animals, livestock, wildlife or the environment generally or on efficacy."

7. The arrangements dealing with verification need no longer be quoted. This part of the challenge was rejected and, although the subject of a cross-appeal for which permission was granted, the respondents no longer pursue it. Their explanation for this, however, ought to be recorded. The fact is that since judgment was given below the PSD have tightened up their verification procedures. Mr Pannick makes it plain that if the PSD were ever to revert to their previous practice or any other practice significantly less rigorous than that now adopted, CPA might well wish to pursue the issue afresh.
8. Let me, therefore, return to the issue of identicality and indicate next the basis on which paragraph 3(a) of the arrangements was challenged. The respondents were advancing essentially two arguments. Their first and wider argument was that the Directive did not allow for a fast-track procedure at all: full testing of the imported product was required just as if there were no comparable product already authorised for the UK market. The respondents' narrow submission, however, was that, at the very least, paragraph 3(a) of the arrangements affords the PSD altogether too wide a discretion to allow imported products onto the market on the basis of identicality to a master approved product. Paragraph 3(a)(i) allows the PSD to admit the imported product even though its active ingredient is not the same but merely similar to that of the master product. An ingredient is not "the same" if it is "the same within variations accepted by the registration authority". Paragraph 3(a)(ii) likewise allows for parallel imports where the product's formulation is similar to but not the same as the master approved product, the registration authority having the discretion to deem any differences to be immaterial.
9. Following the ECJ's ruling in the case, to which I will shortly return, Richards J concluded that both limbs of paragraph 3(a) of the arrangements were unlawful, his judgment being crystallised in the following declaration (part (a) of which I set out in an amended form agreed by counsel to replace what is erroneously contained in the court order):

"Paragraph 3(a) of the 1994 Control Arrangements is unlawful as being in breach of Directive 91/414 because it purports to allow for parallel importing even though (a) the active ingredient of the imported product is not the same (both as to nature and percentage) as that of the master approved product (within the tolerances permitted for the master approved product) and (b) the formulation of the imported product is not the same in every respect as that of the master approved product."

10. The PSD now accept part (a) of that declaration, i.e. that parallel importing is permissible only if the active ingredient is the same as that in the master approved product, and accordingly that part is not appealed. They continue to dispute, however, the judge's ruling that the formulation of the imported product must be the same in every respect as that of the master approved product; and this, therefore, remains, as earlier stated, the single issue arising on the appeal. I turn, therefore, to examine the ECJ jurisprudence on this specific issue.
11. Before coming to the judgments in BAA and Zimovane, it is necessary first to consider two earlier decisions of the court which form the essential background to their understanding. Both, like Zimovane, concerned pharmaceuticals rather than pesticides, but, as will appear, the products have been treated as interchangeable with regard to the requirements for the parallel importation of each.

(i) De Peijper [1976] ECR 613

12. The critical paragraphs in the court's judgment (with the most directly relevant words underlined for emphasis) are for present purposes these:

"21. … it is clearly unnecessary, in order to protect the health and life of humans, for the … authorities to require a second trader who has imported a medicinal preparation which is in every respect the same, to produce the … particulars [the pharmaceutical particulars necessary to check that the medicinal preparation is effective and not harmful] to them again.

26. National authorities possess legislative and administrative methods capable of compelling the manufacturer or his duly appointed representative to supply particulars making it possible to ascertain that the medicinal preparation which is in fact the subject of parallel importation is identical with the medicinal preparation in respect of which they are already informed.

33. By the second question the Court is asked to say whether in principle the answer which must be given to the first question also applies to the case where (a) the process of manufacture and the qualitative and quantitative composition of the medicinal preparation imported by the parallel importer coming from another Member State are different from those of the medicinal preparation bearing the same name and in respect of which the authorities of the Member State into which it has been imported already have these data but (b) 'the differences between the one and the other product are of such minor importance that it is likely that the manufacturer is applying or introducing … these differences with the conscious and exclusive intention of using these differences … in order to prevent or impede the possibility of the parallel importation of the proprietary medicinal product.'

36. It is only if the documents produced in this way show that there are differences which have a therapeutic effect that there would be any justification for treating the variants as different medicinal preparations, for the purposes of authorising them to be placed on the market and as regards producing the relevant documents, it being understood that the answer to the first question remains valid as regards each of the authorisation procedures which have become necessary."

(ii) R v Medicines Control Agency ex parte Smith & Nephew [1996] ECR 1-5819

13. Again I confine myself to only the most material paragraphs of the judgment:

"22. … the effect of the court's judgment in De Peijper [1976] ECR 613, paragraphs 21 and 36, … stated that, if the public health authorities of the Member State of importation already have in their possession, as a result of importation on a previous occasion, all the pharmaceutical particulars relating to the medicinal product in question and considered to be absolutely necessary for the purpose of checking that the product is effective and not harmful, it is clearly unnecessary, in order to protect the health and life of humans, for those authorities to require a second trader who has imported a medicinal product which is in every respect the same or whose differences have no therapeutic effect, to produce these particulars again.

26. The competent authority in the Member State of importation must also verify that the two proprietary medicinal products, if not identical in all respects, have at least been manufactured according to the same formulation, using the same active ingredient, and that they also have the same therapeutic effects.

32. Consequently, when the competent authority of a Member State concludes that a proprietary medicinal product covered by a marketing authorisation in another Member State and a proprietary medicinal product for which it has already issued a marketing authorisation are manufactured by independent companies pursuant to agreements concluded with the same licensor and that those two products, although not identical in all respects, have at least been manufactured according to the same formulation, using the same active ingredient, and that they also have the same therapeutic effects, it must treat the imported product as being covered by the latter marketing authorisation unless there are countervailing considerations relating to the effective protection to the life and health of humans. … "

14. I may note at this stage that, following the ECJ's judgment in Smith & Nephew, the substantive judicial review came before Carnwath J (R v MCA ex. Smith & Nephew Pharmaceuticals Limited, unreported, 21 May 1997) who noted the expert's conclusion "that any apparent differences in the wording of the formulations is either non-existent or, at any event, not material" and himself concluded:

"I am far from satisfied that, even if I was the judge of fact, there would be any material difference between them, and I am far from satisfied that it has any therapeutic relevance."

The parallel import should therefore have been permitted.

15. Carnwath J was accordingly there adopting the approach for which the appellants contend, namely that the formulation is to be regarded as the same providing that any differences have no therapeutic relevance. Mr Pannick may well be right in suggesting, however, that the applicant's counsel in that case had neglected to put to the judge the argument advanced here by CPA, that paragraph 32 of the ECJ's judgment in Smith & Nephew appears explicitly to require the parallel import to be of "the same formulation" as the master product, as well as "also having the same therapeutic effects". Be that as it may, Carnwath J's judgment was overlooked and not, therefore, cited to Richards J below.
16. I come next to BAA, the ECJ's judgment in the present case, which Richards J interpreted as requiring parallel imports to have literally the same formulation as that of the master product. He concluded that "where differences exist in formulation, their implication should not be left to the broad discretion of the competent authority but should be determined in accordance with the rigorous procedures laid down by the Directive." (paragraph 35 of his judgment)

(iii) BAA

17. The specific questions referred to the ECJ for their preliminary ruling are set out in paragraph 13 of the judgment below; and I shall not repeat them. Those presently relevant were taken together as questions by which "the national court seeks essentially to ascertain the conditions in which the competent authority of a Member State may authorise the placing on the market of a plant protection product which has been imported from …an EEA State …".
18. I again quote only the most important paragraphs in the judgment, underlined for emphasis:

"25. … The government takes the view that the Member States must adopt the definition of identicality laid down by the court in De Peijper [1976] ECR 613.

26. In that connection it should be borne in mind that in De Peijper the court held, at paragraphs 21 and 36, in the context of articles 30 and 36 of the EEC Treaty, that … it is clearly unnecessary, in order to protect the health and life of humans, … to require a second trader who has imported a medicinal preparation which is in every respect the same or displays differences which have no therapeutic effect, to produce … particulars … again.

27. Furthermore, in Smith & Nephew … the court considered that [the relevant Directive] could not apply to a proprietary medicinal product covered by marketing authorisation in one Member State and imported into another Member State as a parallel import of a proprietary medicinal product already covered by marketing authorisation in the latter Member State, since that imported product cannot, in such a case, be regarded as being placed on the market for the first time in the Member State of importation.

28. It went on to explain, in paragraph 25 and 26 of that judgment, that the competent authority and the Member State of importation must verify that the two proprietary medicinal products, which have a common origin by virtue of the fact that they are manufactured pursuant to agreements concluded with the same licensor, if not identical in all respects, have at least been manufactured according to the same formulation, using the same active ingredient, and have the same therapeutic effects.

29. That reasoning may be applied mutatis mutandis to the placing of plant protection products on the market.

33. It is important … that the competent authority should verify, apart from the existence of a common origin, that the two plant protection products, if not identical in all respects, have at least been manufactured according to the same formulation, using the same active ingredient, and also have the same effect with due regard, in particular, to differences which may exist in conditions relating to agriculture, plant health and the environment, in particular climatic conditions, relevant to the use of the product.

40. Accordingly, it must be held, on the same grounds as those mentioned at paragraph 33 above, that, where the competent authority of a Member State finds that a plant protection product imported from an EEA State in which it is already covered by marketing authorisation granted in accordance with the Directive, if not identical in all respects to a product already authorised within the Member State of importation, at least

(a) shares a common origin with that product in that it has been manufactured by the same company or by an associated undertaking or licence according to the same formulation,

(b) was manufactured using the same active ingredient, and

(c) also has the same effect with due regard to differences which may exist in conditions relating to agriculture, plant health and the environment, in particular climatic conditions, relevant to the use of the products,

that product must be able to benefit from the marketing authorisation already granted in the Member State of importation, unless that is precluded by consideration concerning the protection of human and animal health and of the environment." (The lettering (a), (b) and (c) in paragraph 40 is mine, included for convenience)

19. The court's ruling was in precisely the same terms as paragraph 40 of its judgment. Before turning to see how Richards J applied it, it is convenient to complete the sequence of ECJ cases.

(iv) Zimovane

20. Paragraphs 26, 27 and 28 of the court's judgment repeat, largely verbatim, the same numbered paragraphs in the judgment in BAA (quoted above). I shall, therefore, set out just three additional paragraphs, pausing only to note that what are called co-formulants in pesticides are known as excipients in pharmaceuticals; in each case they combine with the active ingredient(s) to make up the finished product:

"43. Although, as the United Kingdom government has submitted, differences in the excipients used in medicinal products do not normally have any effect on safety, it is not disputed that such effects can exist. It is possible for a medicinal product imported as a parallel import, which contains the same active ingredients and has the same therapeutic effect but does not use the same excipients as the medicinal product which is the subject of the marketing authorisation in the Member State of importation, to show significant differences from the authorised product in terms of safety, given that modifications to the formulation of a medicinal product in respect of the excipients may have an effect on the shelf-life and the bioavailability of the product, for example in relation to the rates at which the medicinal product dissolves or is absorbed that does not use the same excipients …

44. However, the possibility of such effects on safety does not mean that as a consequence of differences relating to the excipients used the national authorities may never resort to simplified procedures for the licences granted to parallel importers.

45. The national authorities are required to authorise, in accordance with the rules relating to parallel imports, a medicinal product imported as a parallel product where they are convinced that that product, in spite of differences relating to the excipients, does not pose a problem for public health. Accordingly, the competent authorities of the Member State of importation must ensure, at the time of import and on the basis of information in their possession, that the medicinal product is imported as a parallel product, even if not identical in all respects to that already authorised by them, has the same active ingredient and the same therapeutic effect and does not pose a problem of quality, efficacy or safety (see, to that effect, British Agrochemicals Association [1999] ECR I-1499, paragraph 40)."

21. As Mr Pannick recognises, the test set out in paragraph 45 of Zimovane appears irreconcilable with that laid down in paragraph 40 of BAA. Zimovane, so far from requiring (as between the parallel import and the master approved product) "the same formulation", expressly postulates "differences relating to the excipients". And yet the parenthesis which concludes paragraph 45 suggests that paragraph 40 of BAA is to the same effect. Such are the problems of community law and the ECJ's well-known reluctance to recognise when it is differing from a previous decision. Indeed the self-same difficulty arises from the earlier decisions in this series of cases: De Peijper allows for differences providing that they do not have a therapeutic effect; Smith & Nephew, although on its face applying De Peijper (and being treated in the court's later judgments as being entirely consistent with it), appears to decide to the contrary that the products must not only be "manufactured according to the same formulation" but also "have the same therapeutic effects".
22. In short, the first and last of these four cases appear to support the appellants; the second and third, the respondents – unless, that is, there is yet further inconsistency to be found within the DePeijper judgment itself, between paragraphs 21 and 26 on the one hand, and paragraphs 33 and 36 on the other.
23. I come now to Richards J's judgment below. Having regard to the ECJ's jurisprudence at the time, and in particular the ruling in this very case, the judge's decision was perhaps unsurprising. His reasoning, expressed with characteristic clarity and elegance, appears (on the sole point now at issue) in paragraphs 29-35 of his judgment. Essentially it comes to this:

1. "The language of the [ECJ's] judgment is clear and is twice repeated [in paragraphs 33 and 40]. Further, in each passage the condition as to manufacture according to the same formulation is expressed separately from the condition as to effects ('and also have the same effect …') which, in itself, tells strongly against reading the former condition as being subject to an implied qualification concerning the effects of any differences." (paragraph 30)

2. "BAA had submitted to the ECJ that the precise formulation of an agrochemical product can make a very considerable difference to its safety and efficacy. In the light of those submissions one should be slow to conclude that the ECJ's choice of words is other than deliberate and careful; and one should be particularly slow to read in a significant qualification to the chosen words." (paragraph 31)

4. "The ECJ conspicuously failed to adopt the Advocate-General's proposed ruling that 'The products are also identical if the differences found … are negligible with regard to the therapeutic efficacy, the safety and quality of the imported product under consideration'". (paragraphs 32 and 33)

5. "It may be that the ECJ has erred on the side of caution in requiring that the imported product be manufactured to the same formulation as the master product. But in the context of the Directive one can readily understand why the view was taken that, where differences exist in formulation, their implications should not be left to the broad discretion of the competent authority but should be determined in accordance with the rigorous procedures laid down by the Directive." (paragraph 35)

24. The appellants criticise that reasoning on various grounds but perhaps most powerfully on the basis that it is irreconcilable with Zimovane. This, of course, is why now the summit of Mr Pannick's ambitions is a further reference to the ECJ to discover whether the principle stated in paragraph 45 of Zimovane is intended to apply in relation to pesticides and, in particular, to ask:

"Do the criteria for parallel importing of a plant protection product under Directive 91/414 include a requirement that the product must have the same formulation as the master approved product where the competent national authority is satisfied/convinced that any differences in formulation have no significant effect on the environment, health, safety or efficacy?"

25. Mr Parker submits that no such reference is necessary: both Community law and indeed the ECJ's view upon the proposed question are now clear and the answer must be a resounding no.
26. Having reached the clear conclusion that Mr Parker's argument is correct, I propose to state my reasons really quite shortly.

i) A central difficulty with what I may call the literalist approach adopted by Richards J is that it appears to render redundant other parts of the BAA ruling in paragraph 40. If the parallel import has to be manufactured not only "using the same active ingredient" (condition (b)) but also "according to the same [in the literal sense] formulation (condition (a)), what room is there both for the premise of the entire ruling, namely that the import be "not identical in all respects", but in addition for condition (c) (that it "also has the same effect")? I have difficulty with Mr Pannick's suggestion that these further provisions are explicable by reference to the products' packaging (not, I think, encompassed within the Article 1(i) definition of product), storage history or shelf-life. Nor do I accept Mr Pannick's riposte that on the appellants' approach condition (c) is no less (if not, indeed, more) plainly otiose. I prefer instead Mr Parker's submission that condition (a) requires the product merely to be the same in all material respects: condition (c), usefully identifies what those material respects are.

ii) The ECJ in Zimovane (a full court of nine comprising not merely the President and three Chambers' Presidents, but also three members of the Chamber of five which decided BAA) appears clearly to have understood the BAA ruling (or at least intended it to be understood) in the sense contended for by the appellants. Having stated in paragraph 45 of Zimovane that what is required of the parallel import is that it "has the same active ingredient and the same therapeutic effect and does not pose a problem of quality, efficacy or safety", the court expressly then referred to paragraph 40 of BAA as being "to that effect". It appears, indeed, that the argument advanced by Mr Pannick before us was put to the court in Zimovane and rejected.

iii) With those first two reasons in mind I have little difficulty in accepting the main thrust of Mr Parker's argument on construction which is to the effect that, wherever throughout the case law one finds reference to "the same formulation" (for example, in paragraph 26 of Smith & Nephew), this falls to be understood as a reference to a formulation which is either "in every respect the same or whose differences have no therapeutic effect" – see paragraph 22 of Smith & Nephew. Only thus is it possible to harmonise the passages quoted from each of the four authorities, either internally or between the various cases.

iv) There is no warrant for Mr Pannick's suggestion that the court's ruling in Zimovane is dependent upon the particular facts of that case, nor can I accept his submssion that there are significant differences between pesticides and pharmaceuticals which make it appropriate to have a stricter parallel import regime for the former than the latter. As already stated, the ECJ has throughout treated the two types of product in the same way (see, for example, paragraph 29 of BAA and, indeed, paragraph 31 of Richards J's judgment below); and indeed the respondents' own argument to the ECJ in BAA, in the addendum dealing with that court's recent judgment in Smith & Nephew, was put no higher than that the need for strictness "is at least as important for agrochemicals as pharmaceuticals." True, of course, there are differences between the two products; but I am persuaded by Mr Parker's submission that the PSD as the competent authority has the means to determine under the simplified procedures whether the parallel import of a pesticide is materially different from the master approved product so as adequately to protect the interests of health, safety and the environment – see, for example, paragraphs 15-17, 21(a), 26 and 27 of De Peijper, 22, 27 and 28 of Smith & Nephew, 34 of BAA, and 46 of Zimovane (not all of which I have thought it necessary to set out).

v) It necessarily follows from this that to require literally the same formulation for the parallel import would be wholly disproportionate to the needs of safety and thus an unjustified restraint on trade, contrary to articles 28 and 30 (originally 30 and 36) of the Treaty. This, I may note, is the view of the European Commission itself which, because of the restrictive arrangements put in place following Richards J's order, is now threatening the U.K. within infraction proceedings under Article 226 of the Treaty.

27. I add two footnotes before finally parting from this case. The first concerns the respondents' suggestion that the PSD's approach would involve allowing in parallel imports when a proposal to make the equivalent variations in the domestic product would require the master approval holder to obtain a separate or modified marketing approval. That, the PSD assures us, is not the case: their approach to variations is the same whether it concerns the parallel import or the master approved product. In any event, as Mr Pannick acknowledges, to impose more stringent requirements upon the master approved product would not raise any question of EU law.
28. Secondly, with regard to verification I should just mention Mr Pannick's submission that even if one accepts the approach to identicality enshrined in Zimovane paragraph 45, that still requires the PSD as the competent authority to be "convinced" (or, as the paragraph later says, to "ensure") that the parallel import does not pose a problem. This, however, merely serves to underline the importance which the respondents attach to the PSD's newly tightened up verification procedures.
29. It follows from all this that I would allow this appeal to the extent indicated and vary part (b) of the declaration made below to allow for parallel importing of pesticides without their formulation having to be in every respect the same as that of the master approved product.

LORD JUSTICE MANTELL:

30. I agree.

LORD JUSTICE LATHAM:

31. I also agree.
Order:
32. Appeal allowed
33. DEFRA to have costs of Appeal and of hearing today
34. CPA to have costs of the intervention (i.e. additional trip to Luxemburg to intervene to take Monsanto point). Those costs not to include costs reserved and the hearing before Newman J.
35. CPA to have one quarter of costs of hearing below instead of three quarters of those costs.
(Order does not form part of the approved judgment)