RLIT0000457
RLIT0000457
815
1QB.
[court oF APPEAL]
REGINA v. PANEL ON TAKE-OVERS AND MERGERS, Ex parte
DATAFIN PLC. anp ANOTHER
1986 Nov. 25, 26, 27; Sir John Donaldson M.R.,
Dec. 1; 5 Lloyd and Nicholls L.JJ.
Judicial Review—Panel on Take-overs and Mergers—Complaint—
Panel dismissing complaint of alleged breach of panel's code on
take-overs and mergers--Whether decision subject to judicial
review
Company—Take-overs and mergers—Reference to City Panel on
Take-overs and Mergers—Take-over bid—Alleged breach of
panel’s code on take-overs and mergers~Panel dismissing
complaint—Whether decision of panel erroneous—Whether panel's
decision subject to judicial review
The applicants, who were bidding in competition with N.
Plc. to take over another company, complained to the Panel of
Take-overs and Mergers that N. Plc. had acted in concert with
other parties in breach of the City Code on Take-overs and
Mergers. The panel dismissed the complaint and the applicants
applied to the High Court for leave to apply for judicial review
by way, inter alia, of certiorari to quash the panel’s decision
and of mandamus to compel the panel to reconsider the
complaint. The judge refused leave on the ground that the
panel’s decision was not susceptible to judicial review.
On the renewed application before the Court of Appeal,
the court granting leave in order itself to consider both the
substantive application and the question of jurisdiction:—
Held, that the supervisory jurisdiction of the High Court was
adaptable and could be extended to any body which performed
or operated as an integral part of a system which performed
public law duties, which was supported by public law sanctions
and which was under an obligation to act judicially, but whose
source of power was not simply the consent of those over whom
it exercised that power; that although the panel purported to be
part of a system of self-regulation and to derive its power solely
from the consent of those whom its decisions affected, it was in
fact operating as an integral part of a governmental framework
for the regulation of financial activity in the City of London,
was supported by a periphery of statutory powers and penalties,
and was under a duty in exercising what amounted to public
powers to act judicially; that, therefore, the court had jurisdiction
to review the panetl’s decision to dismiss the applicants’
complaint; but that since, on the facts, there were no grounds
for interfering with the panel’s decision, the court would decline
to intervene (post, pp. 835E—836a, 838e—839a, 844E-H, 846c-
D, 848H—-849p, H, 852a-p).
Reg. v. Criminal Injuries Compensation Board, Ex parte
Lain {1967} 2 Q.B. 864, D.C., applied.
Per Sir John Donaldson M.R. In the light of the special
nature of the panel, its functions, the market in which it is
operating, the time scales which are inherent in that market and
the need to safeguard the position of third parties, who may be
numbered in thousands, all of whom are entitled to continue to
816
Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) (1987)
trade upon an assumption of the validity of the panel's rules
and decisions, unless and until they are quashed by the court,
the relationship between the panel and the court should be
historic rather than contemporaneous. The court should allow
contemporary decisions to take their course, considering the
complaint and intervening, if at all, later and in retrospect by
declaratory orders (post, p. 8428-£).
The following cases are referred to in the judgments:
Council of Civil Service Unions v. Minister for the Civil Service [1985] A.C.
374; [1984] 3 W.L.R. 1174; [1985] LC.R. 14; [1984] 3 All E.R. 935,
H.LAE.)
Czarnikow v. Roth, Schmidt & Co. [1922] 2 K.B. 478, C.A.
Gillick v. West Norfolk and Wisbech Area Health Authority (1986] A.C.
112; [1985] 2 W.L.R. 413; [1985] 1 All E.R. 533, C.A.; [1986] A.C.
112; [1985] 3 W.L.R. 830; [1985] 3 All E.R. 402, H.L.(E.)
O'Reilly v. Mackman [1983] 2 A.C. 237; [1982] 3 W.L.R. 604; [1982] 3 All
E.R. 680, C.A.; [1983] 2 A.C. 237; [1982] 3 W.L.R. 1696; [1982] 3 All
E.R. 1124, H.L.(E.)
Reg. v. British Broadcasting Corporation, Ex parte Lavelle {1983] 1 W.L.R.
23; [1983] I.C.R. 99; [1983] 1 AI E.R. 241
Reg. v. Criminal Injuries Compensation Board, Ex parte Lain (1967] 2 Q.B.
864; [1967] 3 W.L.R. 348; [1967] 2 All E.R. 770, D.C.
Reg. v. Industrial Court, Ex parte A.S.S.E.T. [1965] 1 Q.B. 377; [1964] 3
W.L.R. 680; [1964] 3 All E.R. 130, D.C.
Reg. v. Inland Revenue Commissioners, Ex parte National Federation of
Self-Employed and Small Businesses Ltd. [1982] A.C. 617; [1981] 2
W.L.R. 722; [1981] 2 All E.R. 93, H.L.(E.)
Reg. v. Monopolies and Mergers Commission, Ex parte Argyll Group Plc.
[1986] 1 W.L.R. 763; [1986] 2 All E.R. 257, C.A.
Reg. v. National Joint Council for the Craft of Dental Technicians (Disputes
Commitee), Ex parte Neate (1953] 1 Q.B. 704; [1953] 2 W.L.R. 342;
[1953] 1 All E.R. 327, D.C.
The following additional cases were cited in argument:
Clifford and O'Sullivan, In re [1921] 2 A.C. 570, H.L.(I.)
Eastham v. Newcastle United Football Club Ltd. [1964] Ch. 413; [1963] 3
W.L.R. 574; [1963] 3 AH E.R. 139
Law v. National Greyhound Racing Club Ltd. [1983] 1 W.L.R. 1302; [1983]
3 AIL E.R. 300, C.A.
Nagle v. Feilden [1966] 2 Q.B. 633; [1966] 2 W.L.R. 1027; [1966] 1 All
E.R. 689, C.A.
Reg. v. Aston University Senate, Ex parte Roffey [1969] 2 Q.B. 538; [1969] 2
W.L.R. 1418; [1969] 2 All E.R. 964, D.C.
Reg. v. Barnsley Metropolitan Borough Council, Ex parte Hook (1976] 1
W.L.R. 1052; [1976] 3 All E.R. 452, C.A.
Reg. v. East Berkshire Health Authority, Ex parte Walsh [1985} Q.B. 152;
[1984] 3 W.L.R. 818; (1984] L.C.R. 743; [1984] 3 All E.R. 425, C.A.
Reg. v. Post Office, Ex parte Byrne [1975] I.C.R. 221, D.C. ;
Rex v. Boycott, Ex parte Keasiey (1939) 2 K.B. 651; [1939] 2 All E.R. 626,
D.C.
Rex v. Electricity Commissioners, Ex parte London Electricity Joint
Committee Co. (1920) Ltd. [1924] 1 K.B. 171, C.A.
Rex v. Roupell (1776) 2 Cowp. 458
RLIT0000457
RLIT0000457
817
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Ple. (C.A.)
Ridge v. Baldwin [1964] A.C. 40; [1963] 2 W.L.R. 935; [1963] 2 All E.R.
66, H.L.(E.}
Sirros v. Moore (1975} Q.B. 118; [1974] 3 W.L.R. 459; [1974] 3 All E.R.
716, C.A.
APPLICATION for judicial review.
The applicants, Datafin Plc. and Prudential Bache Securities Inc.,
applied for leave to apply for judicial review of a decision of the Panel
on Take-overs and Mergers on 24 November 1986, under the City Code
on Take-overs and Mergers, with the effect that an offer by the first
interveners, Norton Opax Plc., for the issued ordinary share capital of
McCorquodale Pic. became unconditional. The second interveners were
Samuel Montagu & Co. Ltd., merchant bankers and financial advisers to
Norton Opax. The relief sought included (1) an order of certiorari to
quash the panel’s decision and/or a declaration that that decision was
wrong in jaw, (2) an order of mandamus requiring the panel to
reconsider and take a proper decision in accordance with the City code;
(3) an injunction to restrain Norton Opax, whether by itself, its
officers, employees, agents or otherwise from (a) acquiring shares in
McCorquodale pursuant to Norton Opax’s offer dated 7 November
1986, or (b) registering any further shares in McCorquodale in the name
of Norton Opax or any nominee of Norton Opax, pending the final
determination of these proceedings; (4) costs and further or other relief.
The grounds on which relief was sought were, inter alia, that rule 6.2 of
the City Code on Take-overs and Mergers had been infringed in the
course of Norton Opax’s take-over bid and the panel’s decision to the
contrary was erroneous; that decisions of the panel were susceptible to
judicial review; and that the applicants, as competing bidders for
McCorquodale, had a sufficient interest to make the application.
On 25 November 1986, Hodgson J. refused the applicants leave to
make that application and on the same day the applicants renewed the
application before the Court of Appeal. The court granted leave in
order to hear the substantive application itself and to consider more
fully the question of jurisdiction. At the conclusion of the hearing, the
court dismissed the substantive application but reserved both its reasons
and its decision on the question of jurisdiction.
The facts are stated in the judgment of Sir John Donaldson M.R.
Jeremy Lever Q.C. and Derrick Turriff for the applicants. Introduction:
there are three possible situations in which a person affected by a
decision may wish to challenge it: (a) a public duty is owed by the
decision-maker, which the person affected may invoke and obtain
judicial review under R.S.C., Ord. 53; (b) a private duty is owed by the
decision-maker, which the person affected can invoke to obtain the
“normal remedies of private law, including a declaratory judgment; (c) no
duty is owed by the decision-maker which the person affected can
invoke. A paradigm, but not the only case of public duty, is where the
power to take the decision was derived from public law, e.g. a statute,
statutory instrument, prerogative or some other aspect of the common
law. A paradigm case of private duty is where the decision-maker and
RLIT0000457
RLIT0000457
818
Reg. v. Take-over Panel, Ex p. Datafin Pie. (C.A.) (1987)
the person affected are in contractual relations with each other and the
decision arose exclusively out of, or related exclusively to, the contractual
relationship. Similarly, perhaps, if the decision affects the person’s
[private] right to earn a living, then the decision-maker’s duty might be
a private one. An example of no duty would be a decision by the
committee of the Garrick Club act to admit a person seeking election.
(If the decision affected an existing member, he would have contractual
rights under (b) above.)
The circumstances in which a public duty exists are not confined to
situations where the source of the power lies in public law (the situation
considered by Lord Diplock in Council of Civil Service Unions vy.
Minister for the Civil Service [1985] A.C. 374, 409B). There are three
ways of testing the existence of a public law duty: (i) the aforementioned
“source” test; (ii) the “consequences” test: where the decision is made
under a system which has a public law character by reason of the fact
that it has consequences in the field of public law including, for example,
the fact that measures to secure compliance with the rules of the system
include measures taken in the exercise of public law powers; (iii) the
“function” test: where the system under which the decision is made
performs the functions of a public Jaw system.
In refusing leave to apply for judicial review in the present case,
Hodgson J. had in mind both Reg. v. East Berkshire Health Authority,
Ex parte Walsh [1985] Q.B. 152 and Law v. National Greyhound Racing
Club Ltd. (1983) 1 W.L.R. 1302; yet the circumstances of both cases are
different from those of the present case because of the contractual
relationships involved, making them essentially private duty cases.
The factual and legal background to the Code on Takeovers and
Mergers: the Bank of England was an important progenitor if not the
onlie begetter. The Bank of England is a statutory body with wide
powers: see Bank of England Act 1946, section 4. The Bank clearly
performs its relevant functions in part in collaboration with the
Department of Trade and Industry. Between them they gave birth to
the Joint Review Body, which is engaged in general supervision of the
securities market. For the origins of the Code on Take-overs and
Mergers, see Halsbury’s Laws of England, 4th ed. (1974), vol. 7, para.
791. The code is a code of ethics, not a code of law. Until recently, the
Council of the Securities Industry had been involved in its enforcement,
but in 1985 the Pane on Take-overs and Mergers assumed sole
responsibility. (The Securities and Investments Board is not yet in full
operation.) The code is statutorily recognised: see, for example,
paragraph 10 of the Schedule to the Restrictive Trade Practices (Services)
Order 1976 (S.I. 1976 No. 98) (made under the Fair Trading Act 1973
but now operating under the Restrictive Trade Practices Act 1976).
Sanctions for breach of the code are set out in the introduction to the
code and include expulsion from the securities markets and reference to
the Department of Trade and Industry, the Stock Exchange or other
appropriate body, which would use statutory or contractual powers to
penalise any transgressor. A breach of the code is ipso facto an act of
misconduct by a member of the Stock Exchange, for which he may be
expelled. Furthermore, the admission of shares to the Official List may
RLIT0000457
RLIT0000457
819
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Ple. (C.A.)
be withheld in the event of such a breach. The listing of securities is a
Statutory function performed by the Stock Exchange under the Stock
Exchange (Listing) Regulations 1984 (S.I. 1984 No. 716), made, pursuant
to section 2(2) of, and paragraph 2(2) of the Schedule to, the European
Communities Act 1972, in implementation of E.E.C. directives. Thus a
sanction for breach of the code—delisting—involves the exercise of a
statutory power. Therefore the code has many of the characteristics of
law, but lacks the redeeming features of a legal system.
The historical development of the courts’ supervisory jurisdiction by
way of judicial review may be outlined as follows. (1) Rex v. Electricity
Commissioners, Ex parte London Electricity Joint Committee Co. (1920)
Ltd. [1924] 1 K.B. 171, 205, per Lord Atkins. (2) Reg. v. Criminal
Injuries Compensation Board, Ex parte Lain [1967] 2 Q.B. 864, 882,
884a-885p, per Lord Parker C.J. and Diplock L.J. (3) O’Reilly v.
Mackman [1983] 2 A.C. 237, 2798-c, per Lord Diplock. (4) Council of
Civil Service Unions v. Minister for the Civil Service [1985] A.C. 374,
407u, where Lord Diplock castigates the treatment of previous judicial
dicta, which were never intended to be exhaustive, as if they were
statutes. See also per Lord Roskill at p. 414e-r, emphasising the
evolutionary nature of the law on judicial review.
Does the Panel on Take-overs and Mergers owe a public duty? One
answers this by reference to the three tests of the existence of a public
law duty outlined above. (1) Applying the source test: there was an
implied devolution by the government to the panel of a power to
regutate transactions covered by the code. That power came through the
Bank of England and, in the Joint Review Body, through the Department
of Trade and Industry. The Bank of England appoints the chairman and
deputy chairman of the panel. All this has been done for the better
governance of the realm; and in all the circumstances it is impossible to
say that the system established by the code operated by the panel has
nothing to do with the government. The role of the government in this
area is emphasised by a recommendation of the E.E.C. Commission in
1977 to the effect that governments should set up regulatory systems
such as that provided by the Code. (2) Applying the consequences test:
where a decision taken under the system which has a public law
character because it has consequences in a public law field, measures
taken include public law measures. Note references to consequences in
Reg. v. Criminal Injuries Compensation Board, Ex parte Lain [1967] 2
Q.B. 864, 884, and in O'Reilly v. Mackman [1983] 2 A.C. 237. See also
Rex v. Boycott, ex parte Keasley [1939] 2 K.B. 171 and Nagle v. Feilden
{1966] 2 O.B. 633, 651, per Salmon L.J. (3) Applying the function test:
despite the fact that the code claims not to contain legal rules, it does
have legal consequences and the power to make decisions comes from
‘the code and the rules. The function performed by the panel is a public
law function; it is regulatory in a public rather than a private sense, as
can be seen from the way it operates and the consequences of breach.
Furthermore, any attempt to oust the jurisdiction of the courts by
proclaiming the non-legal nature of the code must be against public
policy.
RLIT0000457
RLIT0000457
820
Reg. v. Take-over Panel, Ex p. Datafin Pte. (C.A.) {1987}
Robert Alexander Q.C., Timothy Lloyd Q.C. and Keith Rowley for
the panel. The question of the courts’ jurisdiction over the panel is
important for all self-regulating bodies. The City is traditionally seif-
regulating and remains substantially so, subject to the Financial Services
Act 1986. That Act does not expressly deal with the Panel on Take-
overs and Mergers. In many cases of self-regulation, there may be a
tight to a remedy in private law, usually arising out of a contractual
relationship. The absence of a public law jurisdiction does not necessarily
deprive persons affected of a remedy. For example, where someone
alleges that the rules of a body as to its membership are in restraint of
trade, it is open to him to bring an action notwithstanding that he is not
a member of that body: Eastham v. Newcastle United Football Club Lid.
[1964] Ch. 413. But in such a case there would be no jurisdiction in
public law over that body.
Self-regulation stems from a realization by a group that the regulation
of their activities is desirable in the common interest. That group accepts
that rules for the performance of functions and duties should be
established and enforced. The success of self-regulation depends on (i)
rules being drawn up by responsible and acceptable responsible bodies;
(ii) the observance of those rules; (iii) respect for the decisions of those
bodies by those affected; (iv) those who operate in the market accepting
that the rules and their obedience to them are essential as an aspect of
entering the market at all. In assessing whether the rules provide
sufficient protection, it is right to remember that no one can survive in
the market without the confidence of others, and that such rules
ultimately serve the public interest.
The Panel on Take-overs and Mergers, in denying the jurisdiction of
the court, is not claiming a licence to take wrong decisions. The panel
may be required to take decisions swiftly and finally. When a ruling is
asked for in the course of a bid, it may affect the outcome of the bid
before or after it has succeeded. If the latter, then the shares will
already be traded under the new name. In the former case, if a
dissatisfied party rushes to court, it will have the effect of dislocating the
market during a takeover situation, however fast the court is able to act.
If the panel: is called to resolve a conflict between parties and their
financial advisers, there is an overwhelming need for speedy finality. An
application to the court may be made as a defensive measure during a
bid, to create uncertainty even after the outcome of the bid is known. It
could be used as a ploy. The importance of finality was stressed by Sir
John Donaldson M.R. in Reg. v. Monopolies and Mergers Commission,
Ex parte Argyll Group Plc [1986] 1 W.L.R. 763, 7748. This is a valid
policy consideration when considering whether to extend jurisdiction.
The Code on Take-overs and Mergers already contains certain
safeguards for those affected by its decisions, including a right of appeal.
Where a party is affected by virtue of their membership of the Stock
Exchange, they can rely on the contractual relationship already existing
to provide a private law remedy.
The panel is only susceptible to judicial review if it satisfies the
traditional criteria for determining whether it is fulfilling a public duty.
This depends on power; more particularly, the source of that power. To
RLIT0000457
RLIT0000457
821
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Ple. (C.A.)
suggest, as do the applicants, that a body whose power does not derive
from a public source can still be subject to public law if it performs a
public law function with public law consequences, is to deny a
fundamental aspect of public law. Moreover, the fact that either the
Restrictive Trade Practices Act 1976 or the Restrictive Trade Practice
(Services) Order 1976 refer to an agreement or recommendation or
activity of another body does not render the functions of that body
public law functions. The exempted agreements listed in Schedule 3 to
the Act are clearly not within the ambit of public law. So far as the
Stock Exchange (Listing) Regulations 1984 are concerned, the fact that
a party (the Stock Exchange) governed by public law implements
(directly or indirectly) a decision by a third party (the panel) not within
the public law domain does not bring that third party into the public law
forum. In any case the Stock Exchange is only subject to public law by
virtue of those regulations.
The source of its power remains of critical importance to any
determination as to whether a body is subject to judicial review. That
source might lie in primary or secondary legislation. Moreover, it is
clear from Council of Civil Service Unions v. Minister for the Civil
Service [1985] A.C. 374 that if the Crown exercises its prerogative
through a statutory instrument, then the source is such as to render it
liable to judicial review. Review might also lie if the Crown exercised its
Prerogative without a Statutory Instrument. The applicants’ second
(consequences) and third (function) tests represent an extension of the
law because they enable review to take place without looking at the
critical element, namely the source of the power to take the decision
under review. The seriousness of the consequences, or of the public
interest involved, is not the correct test. Public law operates against
those bodies which could be the subject of prerogative writs. The Order
53 procedure has not expanded the scope of operation of public Jaw in
the sense of having extended the category of bodies which could be
subject to prerogative orders. In O'Reilly v. Mackman [1983] 2 A.C.
237, Lord Diplock observed that Order 53 did not create new remedies
but was essentially procedural. In Council of Civil Service Unions v.
Minister for the Civil Service [1985] A.C. 374, 408-409, Lord Diplock,
setting out the types of action which were reviewable, emphasised
throughout the importance of the source of public law powers. See also
Reg. v. Criminal Injuries Compensation Board, Ex parte Lain [1967] 2
Q.B. 864 and Reg. v. Post Office, Ex parte Byrne [1975] 1.C.R. 743. All
these cases show that it is the source of power that determines whether
judicial review should lie.
The panel is performing a duty which it is in the public interest
should be performed, but it is not a public duty. It is a private duty,
because Parliament in its wisdom has decided to leave this area subject
‘to self-regulation. [Reference was made to Law v. National Greyhound
Racing Club Ltd. (1983] 1 W.L.R. 1302; Reg. v. East Berkshire Health
Authority, Ex parte Walsh [1985] Q.B. 152; O’Reilly v. Mackman [1983}
2 A.C. 237 and Nagle v. Feilden [1966] 2 Q.B. 633.] A body is only
subject to judicial review where its decisions affect persons qua subjects
of the realm. Such a body must be established by a governmental
RLIT0000457
RLIT0000457
822
Reg. v. Take-over Panel, Ex p. Datafin Pte. (C.A.) [1987]
power: see, generally, Reg. v. Criminal Injuries Compensation Board,
Ex parte Lain [1967] 2 Q.B. 864; Rex v. Electricity Commissioners, Ex
parte London Electricity Joint Committee Co. (1920) Ltd. [1924] 1 K.B.
171; In re Clifford and O’Sullivan [1921] 2 A.C. 570; O'Reilly v.
Mackman [1983] 2 A.C. 237; Reg. v. Barnsley Metropolitan Borough
Council, Ex parte Hook [1976] 1 W.L.R. 1052; Reg. v. Aston University
Senate, Ex parte Roffey [1969] 2 Q.B. 538; Sirros v. Moore [1975] Q.B.
118 and Reg. v. Post Office, Ex parte Byrne [1975] 1.C.R. 221.
On the facts of this case, the panel does not derive its power from a
public source. The applicants rely on a devolution of power through the
Bank of England and the Department of Trade and Industry but the
only statutory powers the Bank of England has are the power to give
directions to other banks (under the Bank of England Act 1946) and the
power to grant banking licences. Otherwise, it has no power over other
institutions. The Joint Review Body is a wholly informal body which
does not exercise powers. It is and has been the policy of governments
to leave such institutions to self-regulation. The applicants cannot rely
on the fact that other bodies, such as the Stock Exchange, have powers,
such as the power to list or de-list stocks, which apply the standards of
the panel as making the panel subject to judicial review. Finally, the
applicants’ reliance on the function test runs counter to the decision of
the House of Lords in In re Clifford and O'Sullivan [1921] 2 A.C. 570.
{Counse] also referred to a skeleton argument which is substantially
quoted in the judgment of Sir John Donaldson M.R., post, p. 839D-H.]
Jonathan Sumption Q.C. and Stephen Richards for the interveners. It
is against the public interest for decisions of the Panel on Take-overs
and Mergers to be subject to judicial review. As an essential component
in a system of self-regulation, it is imperative that the panel should be
able to make decisions with absolute finality, in view of the damage
otherwise done to the smooth operation of the market. If a party which
is unsuccessful before the panel is able to apply for judicial review, it
will soon become a device to which anyone wanting to frustrate a bid
will be able to resort.
Even if the panel is subject to judicial review, the chances of the
court’s discretion being exercised in favour of an applicant are slim
indeed. An application for judicial review is not an appeal. It is for the
panel to hear and evaluate the evidence and to find the relevant facts.
The court can only interfere if there has been illegality (the panel has
misdirected itself in law), irrationality (no reasonable panel could have
reached such a decision) or procedural impropriety (failure by the panel
to conform to the rules governing its own conduct or to basic rules of
natural justice).
On the chronology to the take-over bid, once a bid goes unconditional
as to acceptances (i.e. acceptances exceed 50 per cent) it is undesirable
that there be any substantial lapse of time before the bid goes
unconditional in all respects. Otherwise those who have already accepted
the bid cannot trade their stock. A contract is -formed between the
offeror and each accepting shareholder from which neither can resile. It
is common ground that in this case, the Norton Opax bid had gone
RLIT0000457
RLIT0000457
823
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.)
unconditional as to acceptances. Once that happens, none of these
contracts is conditional on the approval of the panel.
The applicants make three basic complaints. First, they allege that in
breach of the Code on Take-overs and Mergers, Norton Opax failed
to increase its offer to McCorquodale shareholders, other than core
sub-underwriters, to reflect the increased consideration paid to core sub-
underwriters and the parent company of the principal core sub-
underwriter for the McCorquodale shares acquired by it from them. But
Norton Opax did not pay any increased consideration for McCorquodale
shares either to the core sub-underwriters or indeed to anyone else.
Under the terms of the underwriting agreements, the success of the bid
gave the core sub-underwriters the entitlement to an increased
underwriting fee, but that was no part of the consideration for the
McCorquodale shares. The sub-underwriters would have received it
even if the same shares had been assented to Norton Opax by someone
other than a core sub-underwriter. But in any case, since this point was
not put to the panel, it cannot be argued here.
Secondly, the applicants allege that in breach of the code, the
Kuwait Investment Office (“K.I.0.”) acted in concert with Norton Opax
in that, for whatever reasons, they had an agreement with Samuet
Montagu & Co. Ltd., Norton Opax’s merchant banker, which gave them
an incentive to see that Norton Opax’s offer became unconditional and
they did so by purchasing shares at a price 12-2p in excess of the cash
price offered by Norton Opax and by assenting those shares to Norton
Opax. Essentially, this amounts to an allegation that an agreement
which gives underwriters an interest in the success of the bid makes the
underwriter a concert party if he purchases shares in the target company.
But that does not come within the definition of “concert party” in the
code, and it is not for the court to make it do so now.
Thirdly, the applicants allege that in view of the timing of and the
price paid by K.J.O. in their purchase of McCorquodale shares, the fact
that they were purchased through one of the brokers to Norton Opax
and the assenting of those shares to that offer, the panel could not
properly fail to conclude that K.1.0. and Norton Opax were acting in
concert, unless it misdirected itself in law by erroneously assuming that
in order to support such a finding it would have to have found that there
had been communication between Norton Opax and K.1.O. in connection
with those share purchases. This complaint is no doubt partly based on a
sentence in the report to the panel’s executive: “Certain of [the core
underwriters] met the management for the standard presentation during
the offer in the normal way but in fact K.I.O. never met the management
at all.” The applicants assume from this first that the executive regarded
that as conclusive of the absence of a concert party situation and
secondly that the panel did likewise. But it is clear from the affidavit
evidence of Sir Jasper Hollom, chairman of the panel, that the panel
made no such error. The panel approached the matter on the assumption
that for a “concert party” to exist there had to be an agreement or
understanding between the parties, and in the absence of contact at the
presentation meeting, evidence had to be found elsewhere to support
such a finding. Such evidence, sufficient to satisfy the panel, was not
RLIT0000457
RLIT0000457
824
Reg. v. Take-over Panel, Ex p. Datafin Pte. (C.A.) (1987]
adduced, who therefore concluded that K.1.0.’s decision to purchase the
shares was made for genuine investment reasons, all of which explained
both the purchase and its timing.
In any event, these were all matters of fact for the panel to consider
so that even if the court had jurisdiction to intervene, it should not
exercise its discretion in favour of doing so. But for the reasons given
both on behalf of the interveners and previously on behalf of the panel
itself, the court has no jurisdiction to intervene and the application
should be refused.
Lever in reply, referred to Reg. v. Inland Revenue Commissioners,
Ex parte National Federation of Self-Employed and Small Businesses
Lid. [1982] A.C. 617, 642-643, per Lord Diplock; O'Reilly v. Mackman
+ {1983} 2 A.C. 237, 257-258, per Lord Denning M.R.; In re Clifford and
O'Sullivan [1921] 2 A.C. 570; Reg. v. Criminal Injuries Compensation
Board, Ex parte Lain [1967] 2 Q.B. 864; Ridge v. Baldwin {1964] A.C.
40; Rex v. Rorpell (1776) 2 Cowp. 458; Reg. v. Barnsley Metropolitan
Borough Council, Ex parte Hook [1976] 1 W.L.R. 1052 and Reg. v. Post
Office, Ex parte Byrne [1975] I.C.R. 221.
The reality of the situation is that the self-regulation urged by the
respondents does not exist. The right of a man to offer to buy another’s
property is restricted by statutes such as the Fraud (Investment) Act
1958. He has to go through an authorised person or obtain the
permission of the Department of Trade and Industry. Datafin cannot
make an offer except subject to the restrictions imposed. This strongly
supports the concept of implied devolution and the role of the function
test which the applicants urge upon the court. It is hollow to speak of
self-regulation here: what we are discussing is clearly a public law
system. The function being performed is one of public law. It must be a
matter of deep concern to the courts if such a system can operate out-
with the law.
Even if a private remedy is available, that is not fatal to a claim for
judicial review. Only if the decision concerned is taken specifically by
reference to a private law situation will it be excluded from the public
law jurisdiction. Even if there is a private law relationship in the present
case, this decision was not taken in that context, so it is no bar to the
availability of the Order 53 jurisdiction.
Cur. adv. vult,
5 December. The following judgments were handed down.
Str Joun DonaLpson M.R. The Panel on Take-overs and Mergers
is a truly remarkable body. Perched on the 20th floor of the Stock
Exchange building in the City of London, both literally and metaphorically
it oversees and regulates a very important part of the United Kingdom~
financial market. Yet it performs this function without visible means of
legal support.
The panel is an unincorporated association without legal personality
and, so far as can be seen, has only about twelve members. But those
members are appointed by and represent the Accepting Houses
RLIT0000457
RLIT0000457
: 825
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.} pecaiacst Set
Committee, the Association of Investment Trust Companies, the
Association of British Insurers, the Committee of London and Scottish
Bankers, the Confederation of British Industry, the Council of the Stock
Exchange, the Institute of Chartered Accountants in England and Wales,
the Issuing Houses Association, the National Association of Pension
Funds, the Financial Intermediaries Managers and Brokers Regulatory
Association, and the Unit Trust Association; the chairman and deputy
chairman being appointed by the Bank of England. Furthermore, the
panel is supported by the Foreign Bankers in London, the Foreign
Brokers in London and the Consultative Committee of Accountancy
Bodies.
It has no statutory, prerogative or common law powers and it is not
in contractual relationship with the financial market or with those who
deal in that market. According to the introduction to the City Code on
Take-overs and Mergers, which it promulgates:
“The code has not, and does not seek to have, the force of law, but
those who wish to take advantage of the facilities of the securities
markets in the United Kingdom should conduct themselves in
matters relating to take-overs according to the code. Those who do
not so conduct themselves cannot expect to enjoy those facilities ©
and may find that they are withheld. The responsibilities described
herein apply most directly to those who are actively engaged in all
aspects of the securities markets, but they are also regarded by the
panel as applying to directors of companies subject to the code, to
persons or groups of persons who seek to gain control (as defined}
of such companies, and to all professional advisers (insofar as they
advise on the transactions in question), even where they are not
directly affiliated to the bodies named in section (1)(a}. Equally,
where persons other than those referred to above issue circulars to
shareholders in connection with take-overs the panel expects the
highest standards of care to be observed. The provisions of the code
fall into two categories. On the one hand, the code enunciates
general principles of conduct to be observed in take-over transactions:
these general principles are a codification of good standards of
commercial behaviour and should have an obvious and universal!
application. On the other hand, the code lays down a series of
rules, some of which are no more than examples of the application
of the general principles whilst others are rules of procedure
designed to govern specific forms of take-over. Some of the general
principles, based as they are upon a concept of equity between one
shareholder and another, while readily understandable in the City
and by those concerned with the securities markets generally, would
not easily lend themselves to legislation. The code is therefore
framed in non-technical language and is, primarily as a measure of
self-discipline, administered and enforced by the panel, a body
representative of those using the securities markets and concerned
with the observance of good business standards, rather than the
enforcement of the law. As indicated above, the panel executive is
always available to be consulted and where there is doubt this
should be done in advance of any action. Taking legal or other
Q.B. 1987~33
RLIT0000457
RLIT0000457
826
Su Jone MR Reg. v. Take-over Panel, Ex p. Datafin Plc. (C.A.) (1987)
professional advice on matters of interpretation under the code is
not an appropriate alternative to obtaining a view or a ruling from
the executive.”
“Self-regulation” is an emotive term. It is also ambiguous. An
individual who voluntarily regulates his life in accordance with stated
principles, because he believes that this is morally right and also,
perhaps, in his own long term interests, or a group of individuals who
do so, are practising self-regulation. But it can mean something quite
different. It can connote a system whereby a group of people, acting in
concert, use their collective power to force themselves and others to
comply with a code of conduct of their own devising. This is not
necessarily morally wrong or contrary to the public interest, unlawful or
even undesirable. But it is very different.
The panel is a self-regulating body in the latter sense. Lacking any
authority de jure, it exercises immense power de facto by devising,
promulgating, amending and interpreting the City Code on Take-overs
and Mergers, by waiving or modifying the application of the code in
particular circumstances, by investigating and reporting upon alleged
breaches of the code and by the application or threat of sanctions. These
sanctions are no less effective because they are applied indirectly and
lack a legaliy enforceable base. Thus, to quote again from the
introduction to the code:
“If there appears to have been a material breach of the code, the
executive invites the person concerned to appear before the panel
for a hearing. He is informed by letter of the nature of the alleged
breach and of the matters which the director general will present. If
any other matters are raised he is allowed to ask for an adjournment.
If the panel finds that there has been a breach, it may have recourse
to private reprimand or public censure or, in a more flagrant case,
to further action designed to deprive the offender temporarily or
permanently of his ability to enjoy the facilities of the securities
markets. The panel may refer certain aspects of a case to the
Department of Trade and Industry, the Stock Exchange or other
appropriate body. No reprimand, censure or further action will take
place without the person concerned having the opportunity to
appeal to the appeal committee of the panel.”
The unspoken assumption, which I do not doubt is a reality, is that the
Department of Trade and Industry or, as the case may be, the Stock
Exchange or other appropriate body would in fact exercise statutory or
contractual powers to penalise the transgressors. Thus, for example,
rules 22 to 24 of the Rules of the Stock Exchange (1984) provide for the
severest penalties, up to and including expulsion, for acts of misconduct
and by rule 23.1:
“Acts of misconduct may consist of any of the following ...
(g) Any action which has been found by the Panel on Take-overs
and Mergers (including where reference has been made to it, the
appeal committee of the panel) to have been in breach of the City
Code on Take-overs and Mergers. The findings of the panel, subject
RLIT0000457
RLIT0000457
827
1Q.B. Reg. v, Take-over Panel, Ex p. Datafin Pic. (C.A.) D se jon
to any modification by the appeal committee of the panel, shall not
be re-opened in proceedings taken under rules 22 to 24.”
The principal issue in this appeal, and only issue which may matter
in the fonger term, is whether this remarkable body is above the law. Its
respectability is beyond question. So is its bona fides. I do not doubt for
one moment that it is intended to, and does, operate in the public
interest and that the enormously wide discretion which it arrogates to
itself is necessary if it is to function efficiently and effectively. Whilst not
wishing to become involved in the political controversy on the relative
merits of self-regulation and governmental or statutory regulation, I am
content to assume for the purposes of this appeal that self-regulation is
preferable in the public interest. But that said, what is to happen if the
panel goes off the rails? Suppose, perish the thought, that it were to use
its powers in a way which was manifestly unfair. What then? Mr.
Alexander submits that the panel would lose the support of public
opinion in the financial markets and would be unable to continue to
operate. Further or alternatively, Parliament could and would intervene.
Maybe, but how long would that take and who in the meantime could
or would come to the assistance of those who were being oppressed by
such conduct?
A somewhat similar problem confronted the courts in 1922 when the
Council of the Refined Sugar Association, a self-regulatory body for the
sugar trade and no less respectable than the panel, made a rule which
purported to preclude any trader from asking a trade arbitrator to state
a case for the opinion of the court or from applying to the court for an
order that such a case be stated. The matter came before a Court of
Appeal consisting of Bankes, Atkin and Scrutton L.JJ.: see Czarnikow
v. Roth, Schmidt & Co. (1922] 2 K.B. 478. The decision has no direct
application to the present situation, because the court was concerned
with the law of contract, but its approach was traditional, significant
and, in the case of Scrutton L.J., colourful. This approach can be
illustrated by brief quotations from the judgments. Bankes L.J. said, at
p. 484:
“To release real and effective control over commercial arbitration is
to allow the arbitrator, or the arbitration tribunal, to be a law unto
himself, or themselves, to give him or them a free hand to decide
according to law or not according to law as he or they think fit, in
other words to be outside the law. At present no individual or
association is, so far as I am aware, outside the law except a trade
union. To put such associations as the Refined Sugar Association in
a similar position would in my opinion be against public policy.
Unlimited power does not conduce to reasonableness of view or
conduct.”
Scrutton L.J. said, at p. 488:
“In my view toxallow English citizens to agree to exclude this
safeguard for the administration of the law is contrary to public
RLIT0000457
RLIT0000457
828
Sir John ie. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) (1987]
policy. There must be no Alsatia in England where the King’s writ
does not run.'”
Atkin L.J. said, at p. 491:
“{ think that it is still a principle of English law that an agreement
to oust the jurisdiction of the courts is invalid ... In the case of
powerful associations such as the present, able to impose their own
arbitration clauses upon their members, and, by their uniform
contract, conditions upon all non-members contracting with members,
the result might be that in time codes of law would come to be
administered in various trades differing substantially from the
English mercantile law. The policy of the law has given to the High
Court large powers over inferior courts for the very purpose of
maintaining a uniform standard of justice and one uniform system
of law... If an agreement to oust the common law jurisdiction of
the court is invalid every reason appears to me to exist for holding
that an agreement to oust the court of this statutory jurisdiction is
invalid.”
Thus far I have made no mention of the facts underlying this
application or of the parties, other than the panel. This is not accidental,
but reflects the fact that the major issue of whether the courts of this
country have any jurisdiction to control the activities of a body which de
facto exercises what can only be characterised as powers in the nature of
public law powers does not depend upon those particular facts. Nor has
the issue of jurisdiction vel non any connection with the quite distinct
issue of how, in principle, the court should exercise any jurisdiction
which it may have. The facts are only relevant to whether this is an
appropriate case in which, in accordance with such general principles, to
exercise any such jurisdiction. However, I should now remedy the
deficiency.
The applicants for relief by way of judicial review are Datafin Pic.,
an English company, and Prudential-Bache Securities Inc. of New York.
In addition there appear, as interveners, Norton Opax Plc. and Samuel
Montagu & Co. Ltd., their merchant bankers and financial advisers,
both being English companies. Other members of the cast, albeit not
parties to the proceedings, are Greenwell Montagu & Co. Ltd., the
stockbroking arm of Samuel Montagu; Laurence Prust, another
stockbroker; the Kuwait Investment Office (“K.I.0.”) a major investor
in the United Kingdom financial market; and McCorquodale Plc., an
English printing company, which was the target for the take-over bids
which precipitated the present proceedings. I can take the background
facts from the paper prepared by the executive of the panel:
“2.1 In March 1986 Norton Opax made its original offer for
McCorquodale, but the offer lapsed in April on reference to the
' “Alsatias. The colloquial name (which first appears in Shadwell’s plays in the time of
Charles UI) for recognised areas of sanctuary for criminals, survivals of the mediaeval
sanctuaries, which lasted till the end of the 17th century in London. The one which gave
its name to the others was Alsatia or Whitefriars, between Fleet Street and the Thames,
but the Southwark Mint, the Minories and other places were other convenient refuges for
thieves”: see The Oxford Companion to Law (1980), p. 50.
RLIT0000457
RLIT0000457
RLIT0000457
RLIT0000457
829
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) teas aor ha
Monopolies and Mergers Commission. On 24 September it was
announced that the M.M.C. had concluded that the acquisition
would not operate against the public interest. Norton Opax was
then free to proceed with its offer. 2.2 On 25 September 1986
Norton Opax announced its final offer for McCorquodale. The offer
was two new Norton Opax ordinary shares for each McCorquodale
ordinary share and, at that time, valued each McCorquodale
ordinary share at 290p. In addition there was an underwritten cash
alternative of 260p per McCorquodale share provided by Samuel
Montagu. The board of McCorquodale, advised by Kleinwort
Benson, recommended shareholders to reject the offer. 2.3 On 1
November 1986 a competing offer was announced. The offeror was
Datafin, a new company formed by certain executive directors and
members of the management of McCorquodale and backed by a
number of financial institutions, led by Prudential-Bache. ‘The offer
was 300p cash per McCorquodale share. Subsequently on 6
November 1986, Norton Opax announced an increased final offer of
seven new Norton Opax ordinary shares for every three McCorquo-
dale shares, valuing each McCorquodale share (on the basis of
Norton Opax’s share price at the time) at 340.7p, with an
underwritten cash alternative of 303.3p per share. Datafin then
increased its offer first to 310p and subsequently to 315p cash per
share. 2.4 During the course of the offers Mr. Robert Maxwell
acquired a substantial shareholding in McCorquodale and by the
time of the announcement of Datafin’s final offer held some 22 per
cent. At that stage he undertook to commit his entire shareholding
to Norton Opax’s offer on the basis that if it failed both his
shareholding and Norton Opax’s would be assented to Datafin’s
offer, 2.5 On 20 November 1986, Norton Opax declared its offer
unconditional as to acceptances, having received acceptances
representing 50.2 per cent. of the share capital of McCorquodale.
At the request of the executive, Norton Opax has agreed not to
declare its offer fully unconditional pending the result of this
hearing.”
Both the alternative cash offers by Norton Opax were underwritten
in a novel, but not unprecedented, form, involving core underwriters
and core sub-underwriters as contrasted with traditional market
underwriters. The executive reported:
“Under these arrangements in outline, a number of potential sub-
underwriters are identified who are prepared to accept a lower
commission if the offer fails, on the basis of a higher one if it is
successful. This practice has recently developed and its rationale is
apparent in the case of companies bidding for others larger than
themselves where there is a particular need to save costs if the bid
is unsuccessful. It was first used in the Argyli/Distillers offer and
was also seen as relevant for Norton Opax’s bid for McCorquodale.
Both core underwriters and market underwriters receive a greater
commission if the bid is successful, but the difference is more
marked in the case -of the core underwriters. Full details of the
830
Sir John MR. Reg. v. Take-over Panel, Ex p. Datafin Pie. (C.A.) (1987)
commission arrangements are set out in Samuel Montagu’s
submission, but they can be summarised as follows. (1) Market
underwriters receive a commitment commission of 4 per cent.
together with a further $ per cent. for each period of 7 days (or
part) in excess of 30 days. (2) Core underwriters receive a
commitment commission of + per cent. increased to 14 per cent. if
the bid is successful. (3) Both market and core underwriters receive
a further } per cent. based upon the value of Norton Opax shares
allotted pursuant to the offer in respect of acceptances received up
to the time the cash alternative closes.
“Approximately 100 million Norton Opax shares were involved
in the initial underwriting on 25 September; of these K.1.0. sub-
underwrote some 11 million as core underwriter and 8 million as
market underwriter. For the increased final offer announced on 6
November some 89 million Norton Opax shares were underwritten,
K.I.O. taking approximately 11 million as core underwriter. In each
case the proportion of shares underwritten by K.I.O. was greater
than that of other sub-underwriters although it is noteworthy that
one other core sub-underwriter took 10 million shares in the second
underwriting. Moreover Greenwell Montagu have said that K.I.0.’s
share was not disproportionately large, given that K.I.O. are
generally the greater participant in their underwriting list, owing to
their substantial size.”
Consistently with the panel’s declared intention of doing equity
between one shareholder and another, the code contains rules which
prevent an offeror from buying shares at prices higher than that
contained in his offer without revising that offer upwards to match those
prices and which also prevent him increasing any offer which has been
made on the expressed basis that it would not thereafter be increased.
These rules would be ineffective if, while the offeror was subject to
restrictions upon his conduct, his servants, agents or those acting in
collaboration with him remained wholly free to take whatever action
they thought fit. Accordingly the rules contain restrictions upon the
freedom of action of persons acting in concert with the offeror, quaintly
teferred to as “concert parties.” They are “defined” in the rules as
follows, although it should be noted that whilst part of the definition
could be properly so described, the remainder involves a rebuttable
presumption that certain parties fall within the definition:
“Acting in concert
“This definition has particular relevance to mandatory offers and
further guidance with regard to behaviour which constitutes acting in
concert is given in the notes on rule 9.1.
“Persons acting in concert comprise persons who, pursuant to an
agreement or understanding (whether formal or informal), actively
co-operate, through the acquisition by any of them of shares in a
company, to obtain or consolidate control (as defined below) of that
company. Without prejudice to the general application of this
definition the following persons will be presumed to be persons
acting in concert with other persons in the same category unless the
RLIT0000457
RLIT0000457
831
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) De Sir =
contrary is established:—(1) a company, its parent, subsidiaries and
fellow subsidiaries, and their associated companies, and companies
of which such companies are associated companies, all with each
other (for this purpose ownership or control of 20 per cent. or more
of the equity share capital of a company is regarded as the test of
associated company status); (2) a company with any of its directors
{together with their close relatives and related trusts); (3) a company
with any of its pension funds; (4) a person with. any investment
company, unit trust or other person whose investments such person
manages on a discretionary basis; (5) a financial, adviser with its
client in respect of the shareholdings of: (a) the financial adviser;
and (b) all the investment accounts which the financial adviser
manages on a discretionary basis, where the percentage of the
client’s equity share capital held by the financial adviser and those
investment accounts totals 10 per cent. or more; and (6) directors of
a company which is subject to an offer or where the directors have
teason to believe a bona fide offer for their company may be
imminent.
“Note: where the panel has ruled that a group of persons is acting in
concert, it will be necessary for clear evidence to be presented to the
panel before it can be accepted that the position no longer obtains.”
It is common ground that Datafin and Prudential-Bache, as the
leading financial backer of Datafin’s bid, are concert parties. Accordingly
neither could seek to obtain further shares in McCorquodale at a price
in excess of 315p cash per share, the figure put forward in Datafin’s final
offer. It is also common ground that Norton Opax and Laurence
Prust/Greenwell Montagu, the two brokers to the offer whilst acting as
such were concert parties, as were Norton Opax and Samuel Montagu,
their merchant bankers. So too were K.I.O. and Greenwell Montagu,
when acting on their behalf, but K.I.O. was subject to no relevant
restrictions under the rules, provided that it was not acting in concert
with one or other of the rival bidders.
However, Datafin and Prudential-Bache maintained that K.I.O. and
Norton Opax were concert parties and that K.1.0. had acted in breach
of the code in authorising Greenwell Montagu to buy some 2.4 million
McCorquodale shares on its behalf from Sun Life Assurance Society Plc.
(“Sun Life”) at a price of 315.5p on 17 November 1986 immediately
after Datafin had made a final offer of 315p and in assenting those
shares to Norton Opax’s offer.
The basic facts upon which this charge was founded were as follows.
(a) K.1.0. had a significant interest in the Norton Opax bid being
successful, since, in that event under the core underwriting arrangement,
it would be paid about £350,000 in underwriting fees, whereas it would
only receive £35,000 if the bid failed. (b) The £350,000 would be paid by
Norton. Opax through the principal underwriter, K.I.O. being sub-
underwriters. (c) The purchase of the Sun Life shares was suggested to
K.1.0. by Greenwell Montagu, one of the joint brokers to the Norton
Opax bid. (d) K.I.0. assented the shares to the Norton Opax bid. (e)
K.1.O. could have bought McCorquodale shares on the market at a
RLIT0000457
RLIT0000457
832
Sr John MR Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) [1987]
price below 315-5p per share before the final Datafin offer was made at
315p per share and at a time when Datafin might thereby have been
induced to raise its earlier bid, but failed to do so.
On these facts Datafin and Prudential-Bache concluded that there
must have been some agreement or understanding (formal or informal)
between Norton Opax and K.I.O. actively to co-operate through the
acquisition of shares in McCorquodale in order to obtain control of that
company. They further contended that K.I.O. as a concert party with
Norton Opax, had offered Sun Life more than 303-3p per share, the
Norton Opax cash alternative and that, reading the underwriting
agreement and the offer together, Norton Opax had agreed to acquire
the ex-Sun Life McCorquodale shares from K.I.O. at a price in excess
of that on offer to other shareholders in McCorquodale, since the assent
of these shares tipped the balance in favour of the success of the bid and
entitled K.I.0. to a bonus of the additional underwriting fee.
This complaint against Norton Opax and K.I.O. was put to the panel
and considered by the executive, which heard evidence and. concluded: .
“6 The views of the executive 6.1 In order that Norton Opax and
K.1.0. can be regarded as acting in concert, it must be established
that there is an agreement or understanding, which provides for
active co-operation between them; that such co-operation includes
the purchasing of McCorquodale shares by one of them; and that
any such purchasing is for the purpose of obtaining and consolidating
code control of McCorquodale. 6.2 To reach a conclusion of acting
in concert, the executive considers there should be evidence that
leads to that conclusion or circumstances must be such that it should
on balance be inferred that the relevant parties were acting in
concert. In this case, the executive has no reason to doubt the facts,
and statements of intentions, as recounted by representatives of
Norton Opax, Greenwell Montagu, Laurence Prust and K.I.O. The
fact that people may act with similar intentions or that someone
may purchase further shares with a view to becoming a substantial
shareholder in the offeror will not of themselves amount to evidence
of a concert party. 6.3 K.1.O. is one of the most substantial
investment institutions, in this country. For this reason it is generally
offered a large share in underwritings by brokers, and deals with
Greenwell Montagu on this basis. The particular type of underwriting
arrangement entered into in connection with the Norton Opax
offer, involving K.1.0.’s role as a ‘core’ underwriter, although not
the norm, is by no means extraordinary. The core underwriters
were not approached before the day the offers were announced, did
not know each othet’s identity and received no special presentations.
Certain of them met the management for the standard presentation
during the offer in the normal way but in fact K.I.O. never met the
management at all. The executive is therefore of the view that the
underwriting arrangements do not provide evidence of any agreement
or understanding providing for active co-operation between K.I.O.
and Norton Opax for the purpose of obtaining control of
McCorquodale. The executive has discussed the subsequent purchases
of McCorquodale shares with K.I.O. As stated above, K.1.0. have
RLIT0000457
RLIT0000457
RLIT0000457
RLIT0000457
833
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) De Paint Fy
said that the purchase of McCorquodale shares was seen simply as
an opportunity for acquiring a significant interest in the combined
Norton Opax/McCorquodale group and was motivated solely by
investment criteria. The executive see no reason to doubt K.1.0.’s
motives in this respect. The fact that K.1.0. sought to become a
substantial shareholder in the combined group cannot of itself give
rise to a presumption of concertedness. The purchase price of the
McCorquodale shares is also worthy of note. At 3154p it was only
4p in excess of Datafin’s offer. The exposure to K.I.O. in the event
that the Norton Opax offer lapsed was therefore minimal, since it
would be able to realise 315p in accepting the Datafin offer. The
executive has also discussed the purchases with the other investment
institutions involved; again in each case the executive has been
assured that the purchases were made solely with a view to investing
in the combined group. 6.4 In conclusion, the executive is of the
view that at no stage during the course of the offer has there been
any agreement or understanding between K.I.0. and Norton Opax
which leads to their being held to be acting in concert.
“7 Consequences of the panel's ruling 7.1 If the panel agrees with
the executive’s ruling the executive recommends that Norton Opax
should be released from its undertaking not to declare the offer
wholly unconditional. 7.2 If the panel were to take the contrary
view to the executive it would be necessary to address the question
of how to deal with the consequences in the context of a final offer.
On the one hand, to order an increased offer under either rule 6 or
tule 11 would be problematic; as has been stated above, since the
offer was expressed to be final, it could be argued that a concert
party should not enable the offeror to increase his offer when he
would otherwise be precluded from doing so. On the other hand, to
require the bid to lapse might be equally inappropriate.”
The complaint was futher considered by the panel itself, which also
heard evidence. It dismissed the complaint, the chairman saying:
“The panel have carefully considered the evidence laid before them
in this case and I have to tell you that they are not convinced that a
concert party did exist in code terms in this instance; and they,
therefore, uphold the ruling of the executive on that point. The
panel did go on to consider more generally the position of—the
relationship of—core underwriting arrangements in circumstances
such as these and they would wish to add a rider to the effect that
the gearing effects core underwriting arrangements have could in
their view, in particular circumstances, in particular cases, be such
as to contribute appreciably towards the creation of a presumption
of concerted action; and that, therefore, in cases where core
‘underwriting arrangements are involved those concerned should
have particular regard to the possibility of their being held, in the
light of all the circumstances in a particular case, to be in concert.
And they would further add that in such circumstances where there
is core underwriting involved, one of the circumstances which would
further intensify the degree of investigation which would be implied,
834
Se Lal MR. Reg. v, Take-over Panel, Ex p. Datafin Pic. (C.A,) [1987]
would be the fact of purchases above the bid price. It is not of
course to be seen as exclusively a feature that would necessarily be
brought into examination; but the existence of purchases above the
bid price is naturally one which would intensify the degree of
examination which would be appropriate in such cases. It will
clearly, I think, be apt for the panel to issue a statement as soon as
we can do so giving the announcement that a hearing on this
subject has been held, that a concert party has not been found to
exist and carrying also the rider points that 1 have mentioned.”
On the morning of 25 November 1986 Datafin and Prudential-Bache
sought leave from Hodgson J. to apply for judicial review of the panel’s
decision and for consequential relief. The judge refused the application
without giving reasons, whilst indicating that in his view the court had
no jurisdiction. The application was renewed to this court that afternoon
and we began the hearing at once. In the course of the argument we
decided to give leave and further determined to hear the substantive
application ourselves. We gave leave because the issue as to jurisdiction
seemed to us to be arguable and of some public importance and we
retained seisin of the matter with a view to saving time in a situation of
considerable urgency.
It will be seen that there are three principal issues, viz.: (a) Are the
decisions of the panel susceptible to judicial review? This is the
“jurisdictional” issue. (b) If so, how in principle is that jurisdiction to be
exercised given the nature of the panel's activities and the fact that it is
an essential part of the machinery of a market in which time is money in
a very real sense? This might be described as the “practical” issue. (c) If
the jurisdictional issue is answered favourably to the applicants, is this a
case in which relief should be granted and, if so, in what form?
As the new Norton Opax ordinary shares have been admitted to the
Official Stock Exchange List and so can be traded, subject to allotment,
any doubt as to the outcome of the present proceedings could affect the
price at which these shares are or could be traded and thus the rights of
those entitled to trade in them. Accordingly we thought it right to
announce at the end of the argument that the application for judicial
review would be refused, However, I propose to explain my reasons for
reaching this conclusion by considering the three issues in the order in
which I have set them out.
The jurisdictional issue
As I have said, the panel is a truly remarkable body, performing its
function without visible means of legal support. But the operative word
is “visible,” although perhaps I should have used the word “direct.”
Invisible or indirect support there is in abundance. Not only is a breach
of the code, so found by the panel, ipso facto an act of misconduct by a
member of the Stock Exchange, and the same may be true of ‘other
bodies represented on the panel, but the admission of shares to the
Official List may be withheld in the event of such a breach. This is
interesting and significant for listing of securities is a statutory function
performed by the Stock Exchange in pursuance of the Stock Exchange
(Listing) Regulations 1984 (S.I. 1984 No. 716), enacted in implementation
RLIT0000457
RLIT0000457
835
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) Sie Fry
of E.E.C. directives. And the matter does not stop there, because in
December 1983 the Department of Trade and Industry made a statement
explaining why the Licensed Dealers (Conduct of Business) Rules 1983
(S.I. 1983 No. 585) contained no detailed provisions about take-overs. It
said:
“There are now no detailed provisions in these statutory rules about
take-overs and the following paragraphs set out the provisions as
regards public companies and private companies respectively. 2. As
regards public companies (as well as private companies which have
had some kind of public involvement in the ten years before the
bid) the department considers it better to rely on the effectiveness
and flexibility of the City Code on Take-overs and Mergers, which
covers bids made for public companies and certain private companies
which have had some past public involvement. The City code has
the support of, and can be enforced against, professional security
dealers and accordingly the department expects, as a matter of
course, that those making bids for public companies (and private
companies covered by the code) to use the services of a dealer in
securities authorised under the Prevention of Fraud (Investments)
Act 1958 (such as a stockbroker, exempt dealer, licensed dealer, or
a member of a recognised association), in which case the Secretary
of State’s permission for the distribution of take-over documents is
not required. This is seen as an important safeguard for the
shareholders of the public company (of which there may be several
hundreds or thousands) and as a means of ensuring that such take-
overs are conducted properly and fully in accordance with the
provisions of the City code. It would only be in exceptional cases
that the Secretary of State would consider removing this safeguard
by granting permission under section 14(2) of the Act for the
distribution of take-over documents in these circumstances.”
The picture which emerges is clear. As an act of government it was
decided that, in relation to take-overs, there should be a central self-
regulatory body which would be supported and sustained by a periphery
of statutory powers and penalties wherever non-statutory powers and
penalties were insufficient or non-existent or where E.E.C. requirements
called for statutory provisions.
No one could have been in the least surprised if the panel had been
instituted and operated under the direct authority of statute law, since it
operates wholly in the public domain. Its jurisdiction extends throughout
the United Kingdom. Its code and rulings apply equally to all who wish
to make take-over bids or promote mergers, whether or not they are
members of bodies represented on the panel. Its lack of a direct
statutory base is a complete anomaly, judged by the experience of other
comparable markets world wide. The explanation is that it is an historical
“happenstance,” to borrow a happy term from across the Atlantic. Prior
to the years leading up to the “Big Bang,” the City of London prided
itself upon being a village community, albeit of an unique kind, which
could regulate itself by pressure of professional opinion. As government
increasingly accepted the necessity for intervention to prevent fraud, it
RLIT0000457
RLIT0000457
836
Sir Joe LR. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.)} (1987]
built on City institutions and mores, supplementing and reinforcing them
as appeared necessary. It is a process which is likely to continue, but the
position has already been reached in which central government has
incorporated the panel into its own regulatory network built up under
the Prevention of Fraud (Investments) Act 1958 and allied statutes, such
as the Banking Act 1979.
The issue is thus whether the historic supervisory jurisdiction of the
Queen’s courts extends to such a body discharging such functions,
including some which are quasi-judicial in their nature, as part of such a
system. Mr. Alexander, for the panel, submits that it does not. He says
that this jurisdiction only extends to bodies whose power is derived from
legislation or the exercise of the prerogative. Mr. Lever for the
applicants, submits that this is too narrow a view and that regard has to
be had not only to the source of the body's power, but also to whether
it operates as an integral part of a system which has a public law
character, is supported by public law in that public law sanctions are
applied if its edicts are ignored and performs what might be described as
public law functions.
In Reg. v. Criminal Injuries Compensation Board, Ex parte Lain
[1967] 2 Q.B. 864, 882, Lord Parker C.J., who had unrivalled experience
of the prerogative remedies both on the Bench and at the Bar, said that
the exact limits of the ancient remedy of certiorari had never been and
ought not to be specifically defined. I respectfully agree and will not
attempt such an exercise. He continued, at p. 882:
“They have varied from time to time being extended to meet
changing conditions. At one time the writ only went to an inferior
court. Later its ambit was extended to statutory tribunals determining
a lis inter partes. Later again it extended to cases where there was
no lis in. the strict sense of the word but where immediate or
subsequent rights of a citizen were affected. The only constant
iimits throughout were that it was performing a public duty. Private
or domestic tribunals have always been outside the scope of
certiorari since their authority is derived solely from contract, that
is, from the agreement of the parties concerned. . . . We have as it
seems to me reached the position when the ambit of certiorari can
be said to cover every case in which a body of persons of a public
as opposed to a purely private or domestic character has to
determine matters affecting subjects provided always that it has a
duty to act judicially. Looked at in this way the board in my
judgment comes fairly and squarely within the jurisdiction of this
court. It is, as Mr. Bridge said, ‘a servant of the Crown charged by
the Crown, by executive instruction, with the duty of distributing
the bounty of the Crown.’ It is clearly, therefore, performing public
duties.”
Diplock L.J., who later was to make administrative law almost his own,
said, at pp. 884-885:
“The jurisdiction of the High Court as successor of the Court of
Queen’s Bench to supervise the exercise of their jurisdiction by
inferior tribunals has not in the past been dependent upon the
RLIT0000457
RLIT0000457
837
1Q.B. Reg. . Take-over Panel, Ex p- Datafin Ple. (C.A,) ee wat ie
A source of the tribunal’s authority to decide issues submitted to its
determination, except where such authority is derived solely from
agreement of parties to the determination. The latter case falls
within the field of private contract and thus within the ordinary civil
jurisdiction of the High Court supplemented where appropriate by
its statutory jurisdiction under the Arbitration Acts. The earlier
history of the writ of certiorari shows that it was issued to courts
B whose authority was derived from the prerogative, from Royal
Charter, from franchise or custom as well as from Act of Parliament.
Its recent history shows that as new kinds of tribunals have been
created, orders of certiorari have been extended to them too and to
all persons who under authority of the Government have exercised
quasi-judicial functions. True, since the victory of Parliament in the
Cc constitutional struggles of the 17th century, authority has been,
generally if not invariably, conferred upon new kinds of tribunals by
or under Act of Parliament and there has been no recent occasion
for the High Court to exercise supervisory jurisdiction over persons
whose ultimate authority to decide matters is derived from any
other source. But I see no reason for holding that the ancient
jurisdiction of the Court of Queen’s Bench has been narrowed
D merely because there has been no occasion to exercise it. If new
tribunals are established by acts of government, the supervisory
jurisdiction of the High Court extends to them if they possess the
essential characteristics upon which the subjection of inferior
tribunals to the supervisory control of the High Court is based.
What are these characteristics? It is plain on the authorities that the
E tribunal need not be one whose determinations give rise directly to
any legally enforceable right or liability. Its determination may be
subject to certiorari notwithstanding that it is merely one step in a
process which may have the result of altering the legal rights or
liabilities of a person to whom it relates. It is not even essential that
the determination must have that result, for there may be some
subsequent condition to be satisfied before the determination can
F have any effect upon such legal rights or liabilities. That subsequent
condition may be a later determination by another tribunal (see Rex
v. Postmaster-General, Ex parte Carmichael [1928] 1 K.B. 291; Rex
v. Boycott, Ex parte Keasley {1939] 2 K.B. 651). Is there any reason
in principle why certiorari should not lie in respect of a determination,
where the subsequent condition which must be satisfied before it
G can affect any legal rights or liabilities of a person to whom it
relates is the exercise in favour of that person of an executive
discretion, as distinct from a discretion which is required to be
exercised judicially?”
Ashworth J., who like Lord Parker C.J. had served as junior counsel to
the Treasury and as such had vast experience in this field, said, at
H_ pp. 891-892:
“It is a truism to say that the law has to adjust itself to meet
changing circumstances and although a tribunal, constituted as the
board, has not been the subject of consideration or decision by this
RLIT0000457
RLIT0000457
838
Sir Joh Mr. Reg. v. Take-over Panel, Ex p. Datafin Ple. (C.A.) {1987}
court in relation to an order of certiorari, I do not think that this
court should shrink from entertaining this application merely because
the board had no statutory origin. It cannot be suggested that the
board had unlawfully: usurped jurisdiction: it acts with lawful
authority, albeit such authority is derived from the executive and
not from an Act of Parliament. In the past this court has felt itself
able to consider the conduct of a minister when he is acting
judicially or quasi-judicially and while the present case may involve
an extension of relief by way of certiorari I should not feel
constrained to refuse such relief if the facts warranted it.”
The Criminal Injuries Compensation Board, in the form which it
then took, was an administrative novelty. Accordingly it would have
been impossible to find a precedent for the exercise of the supervisory
jurisdiction of the court which fitted the facts. Nevertheless the court not
only asserted its jurisdiction, but further asserted that it was a jurisdiction
which was adaptable thereafter. This process has since been taken
further in O’Reilly v. Mackman [1983] 2 A.C. 237, 279 (per Lord
Diplock) by deleting any requirement that the body should have a duty
to act judicially; in Council of Civil Service Unions v. Minister for the
Civil Service [1985] A.C. 374 by extending it to a person exercising
purely prerogative power; and in Gillick v. West Norfolk and Wisbech
Area Health Authority [1986] A.C. 112, where Lord Fraser of Tullybelton,
at p. 163F and Lord Scarman, at p. 178F-H expressed the view obiter
that judicial review would extend to guidance circulars issued by a
department of state without any specific authority. In all the reports it is
possible to find enumerations of factors giving rise to the jurisdiction,
but it is a fatal error to regard the presence of all those factors as
essential or as being exclusive of other factors. Possibly the only essential
elements are what can be described as a public element, which can take
many different forms, and the exclusion from the jurisdiction of bodies
whose sole source of power is a consensual submission to its jurisdiction.
In fact, given its novelty, the panel fits surprisingly well into the
format which this court had in mind in the Criminal Injuries Compensation
Board case. It is without doubt performing a public duty and an
important one. This is clear from the expressed willingness of the
Secretary of State for Trade and Industry to limit legislation in the field
of take-overs and mergers and to use the panel as the centrepiece of his
regulation of that market. The rights of citizens are indirectly affected
by its decisions, some, but by no means all of whom, may in a technical
sense be said to have assented to this situation, e.g. the members of the
Stock Exchange. At least in its determination of whether there has been
a breach of the code, it has a duty to act judicially and it asserts that its
raisin d'etre is to do equity between one shareholder and another. Its
source of power is only partly based upon moral persuasion and the
assent of institutions and their members, the bottom line being the
statutory powers exercised by the Department of Trade and Industry
and the Bank of England. In this context I should be very disappointed
if the courts could not recognise the realities of executive power and
RLIT0000457
RLIT0000457
839
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic, (C.A.) Sir Jona
allowed their vision to be clouded by the subtlety and sometimes
complexity of the way in which it can be exerted.
Given that it is really unthinkable that, in the absence of legislation
such as affects trade unions, the panel should go on its way cocooned
from the attention of the courts in defence of the citizenry, we sought to
investigate whether it could conveniently be controlled by established
forms of private law, e.g. torts such as actionable combinations in
restraint of trade, and, to this end, pressed Mr. Lever to draft a writ.
Suffice it to say that the result was wholly unconvincing and, not
surprisingly, Mr. Alexander did not admit that it would be in the least
effective.
In reaching my conclusion that the court has jurisdiction to entertain
applications for the judicial review of decisions of the panel, I have said
nothing about the substantial arguments of Mr. Alexander based upon
the practical problems which are involved. These, in my judgment, go
not to the existence of the jurisdiction, but to how it should be exercised
and to that I now turn.
The practical issue
Mr. Alexander waxed eloquent upon the disastrous consequences of
the court having and exercising jurisdiction to review the decisions of
the panel and his submissions deserved, and have received, very serious
consideration. In a skeleton argument, he put it this way:
“Even if, which is not accepted, there is an apparent anomaly for
an inability to challenge a patently wrong decision which may have
important consequences, countervailing disadvantages would arise if
the decisions were open to review. Applications would often be
made which were unmeritorious. The fact that the court could
dismiss such applications does not prevent their having a substantial
effect in dislocating the operation of the market during the pendency
of proceedings, in creating uncertainty in areas where it is vital that
there should be finality. That finality should more appropriately
exist at the threshold stage, by denying the possibility of action,
rather than at the subsequent stage when the court comes to
exercise its discretion since by that time there will already have
been a lack of finality for a period. The nature of the rulings of the
take-over panel are particularly required to have speed and certainty:
they may be given in the middle of a bid, and they clearly may
affect the operation of the market, and even short-term dislocation
could be very harmful. The present case illustrates the uncertainty
within the market which can be created by the mere bringing of an
application. The issue is important for self-regulation as a whole. It
would create uncertainty if it were to be said that each self-
fegulating body were to be considered in the context of the entire
factual background of its operation, and of the peculiar features of
the take-over panel which made it susceptible to judicial review. It
would obviously have wide ranging consequences if there were
general statements that self-regulating bodies carrying out important
functions were susceptible to judicial review.”
RLIT0000457
RLIT0000457
840
fe lan ak Reg. v. Take-over Panel, Ex p. Datafin Pte. (C.A.) (1987)
I think that it is important that all who are concerned with take-over
bids should have well in mind a very special feature of public law
decisions, such as those of the panel, namely that however wrong they
may be, however lacking in jurisdiction they may be, they subsist and
remain fully effective unless and until they are set aside by a court of
competent jurisdiction. Furthermore, the court has an ultimate discretion
whether to set them aside and may refuse to do so in the public interest,
notwithstanding that it holds and declares the decision to have been
made ultra vires: see, for example, Reg. v. Monopolies and Mergers
Commission, Ex parte Argyll Group Pic. [1986] 1 W.L.R. 763. That case
also illustrates the awareness of the court of the special needs of the
financial markets for speed on the part of decision-makers and for being
able to rely upon those decisions as a sure basis for dealing in the
market. It further illustrates an awareness that such decisions affect a
very wide public which will not be parties to the dispute and that their
interests have to be taken into account as much as those of the
immediate disputants.
In the context of judicial review, it must alsé be remembered that it
is not even possible to apply for relief until leave has been obtained.
The purpose of this provision was explained by Lord Diplock in Reg. v.
Inland Revenue Commissioners, Ex parte National Federation of Self-
Employed and Small Businesses Ltd. [1982] A.C. 617, 642-643:
“The need for leave to start proceedings for remedies in public law
is not new. It applied previously to applications for prerogative
orders, though not to civil actions for injunctions or declarations. Its
purpose is to prevent the time of the court being wasted by
busybodies with misguided or trivial complaints of administrative
error, and to remove the uncertainty in which public officers and
authorities might be left as to whether they could safely proceed
with administrative action while proceedings for judicial review of it
were actually pending even though misconceived.”
In many cases of judicial review where the time scale is far more
extended than in the financial markets, the decision-maker who learns
that someone is seeking leave to challenge his decision may well seek to
preserve the status quo meanwhile and, in particular, may not seek to
enforce his decision pending a consideration of the matter by the court.
If leave is granted, the court has the necessary authority to make orders
designed to achieve this result, but usually the decision-maker will give
undertakings in lieu. All this is but good administrative practice.
However, against the background of the time scales of the financial
market, the courts would not expect the panel or those who should
comply with its decisions to act similarly. In that context the panel and
those affected should treat its decisions as valid and binding, unless and
until they are set aside. Above all they should ignore any application for
leave to apply of which they become aware, since to do otherwise would
enable such applications to be used as a mere ploy in take-over battles
which would be a serious abuse of the process of the court and could
not be adequately penalised by awards of costs.
RLIT0000457
RLIT0000457
841
1Q.B. Reg. v, Take-over Panel, Ex p. Datafin Pic. (C.A.) Douala” pene
If this course is followed and the application for leave is refused, no
harm will have been done. If the application is granted, it will be for the
court to decide whether to make any and, if so, what orders to preserve
the status quo. In doing so it will have regard to the likely outcome of
the proceedings which will depend partly upon the facts as they appear
from the information at that time available to the court, but also in part
upon the public administrative purpose which the panel is designed to
serve. This is somewhat special.
Consistently with its character as the controlling body for the self-
regulation of take-overs and mergers, the panel combines the functions
of legislator, court interpreting the panel’s legislation, consultant, and
court investigating and imposing penalties in respect of alleged breaches
of the code. As a legislator it sets out to lay down general principles, on
the lines of E.E.C. legislation, rather than specific prohibitions which
those who are concerned in take-over bids and mergers can study with a
view to detecting and exploiting loopholes.
Against that background, there is little scope for complaint that the
panel has promulgated rules which are ultra vires, provided only that
they do not clearly violate the principle proclaimed by the panel of
being based upon the concept of doing equity between one shareholder
and another. This is a somewhat unlikely eventuality.
When it comes to interpreting its own rules, it must clearly be given
considerable latitude both because, as legislator, it could properly alter
them at any time and because of the form which the rules take, i.e.
laying down principles to be applied in spirit as much as in letter in
specific situations. Where there might be a legitimate cause for complaint
and for the intervention of the court would be if the interpretation were
so far removed from the natural and ordinary meaning of the words of
the rules that an ordinary user of the market could reasonably be
misled. Even then it by no means follows that the court would think it
appropriate to quash an interpretative decision of the panel. It might
well take the view that a more appropriate course would be to declare
the true meaning of the rule, leaving it to the panel to promulgate a new
rule accurately expressing its intentions.
Again the panel has powers to grant dispensation from the operation
of the rules: see, for example, rule 9.1. of the code. This is a
discretionary power only fettered by the overriding obligation to seek, if
not necessarily to achieve, equity between one shareholder and another.
Again I should be suprised if the exercise of this power could be
attacked, save in wholly exceptional circumstances and, even then, the
court might well take the view that the proper form of relief was
declaratory rather than substantive.
This leaves only the panel’s disciplinary function. If it finds a breach
of the rules proved, there is an internal right of appeal which, in
accordance with established principles, must be exercised before, in any
ordinary circumstances, the court would consider intervening. In a case,
such as the present, where the complaint is that the panel should have
found a breach of the rules, but did not do so, I would expect the court
to be even more reluctant to move in the absence of any credible
allegation of lack of bona fides. It is not for a court exercising a judicial
RLIT0000457
RLIT0000457
842
She ball mn. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) [1987]
review jurisdiction to substitute itself for the fact-finding tribunal and
error of Jaw in the form of finding of fact for which there was no
evidence or in the form of a mis-construction of the panei’s own rules
would normally be a matter to be dealt with by a declaratory judgment.
The only circumstances in which I would anticipate the use of the
remedies of certiorari and mandamus would be in the event, which I
hope is unthinkable, of the panel acting in breach of the rules of natural
justice—in other words, unfairly.
Nothing that I have said can fetter or is intended to or should be
construed as fettering the discretion of any court to which application is
made for leave to apply for judicial review of a decision of the panel or
which, leave having been granted, is charged with the duty of considering
such an application. Nevertheless, I wish to make it clear beyond a
peradventure that in the light of the special nature of the panel, its
functions, the market in which it is operating, the time scales which are
inherent in that market and the need to safeguard the position of third
parties, who may be numbered in thousands, all of whom are entitled to
continue to trade upon an assumption of the validity of the panel's rules
and decisions, unless and until they are quashed by the court, I should
expect the relationship between the panel and the court to be historic
rather than contemporaneous. I should expect the court to allow
contemporary decisions to take their course, considering the complaint
and intervening, if at all, later and in retrospect by declaratory orders
which would enable the panel not to repeat any error and would relieve
individuals of the disciplinary consequences of any erroneous finding of
breach of the rules. This would provide a workable and valuable
partnership between the courts and the panel in the public interest and
would avoid all of the perils to which Mr. Alexander alluded.
The reasons for rejecting this application
There was some failure on the part of the applicants to appreciate,
or at least to act in recognition of the fact, that an application for
judicial review is not an appeal. The panel and not the court is the body
charged with the duty of evaluating the evidence and finding the facts.
The role of the court is wholly different. It is, in an appropriate case, to
review the decision of the panel and to consider whether there has been
“illegality,” i.e., whether the panel has misdirected itself in law;
“irrationality,” i.e., whether the panel’s decision is so outrageous in its
defiance of logic or of accepted moral standards that no sensible person
who had applied his mind to the question to be decided could have
arrived at it; or “procedural impropriety,” i.e., a departure by the panel
from any procedural rules governing its conduct or a failure to observe
the basic rules of natural justice, which is probably better described as
“fundamental unfairness,” since justice in nature is conspicuous by its
absence. If authority be required for propositions which are so well
established, it is to be found in the speech of Lord Diptock in Council of
Civil Service Unions v. Minister for the Civil Service [1985] A.C. 374,
410-411.
In the course of the hearing before this court, the applicants sought
and were given leave to amend their grounds of application. As so
RLIT0000457
RLIT0000457
843
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pte. (C.A.) be Se foun
amended, they made three complaints of breaches of the code and of
the panel’s failure so to find. (a) In breach of the code, Norton Opax
failed to increase its offer to McCorquodale shareholders, other than
core sub-underwriters, to reflect the increased consideration paid to core
sub-underwriters and the parent company of the principal core sub-
underwriter for the McCorquodale shares acquired by it from them. (b)
In breach of the code, K.1.O. acted in concert with Norton Opax in
that, irrespective of the reasons for their conduct, they had an agreement
with Samuel Montagu & Co. Ltd., Norton Opax’s merchant banker,
which gave them an incentive to procure that Norton Opax’s offer
should become unconditional and they did so procure by purchasing
shares at a price 12-2p in excess of the cash price offered by Norton
Opax and by assenting those shares to Norton Opax. {c) Having regard
to the timing and price paid by K.I.O. for the McCorquodale shares, the
fact that they were purchased through one of the brokers to Norton
Opax’s offer and the assenting of those shares to that offer, the panel
could not properly have failed to find that K.1.0. and Norton Opax
were concert parties, unless it misdirected itself in law in the erroneous
belief that a finding that there was communication between Norton
Opax and K.I.O. with regard to those share purchases was necessary to
support such a finding.
I can dispose of complaint (a) very quickly. Norton Opax never did
pay an increased consideration for McCorquodale shares to core sub-
underwriters or anyone else. The success of the bid brought with it an
entitlement on the part of the core sub-underwriters to be paid an
increased underwriting fee, but this was not part of the consideration for
McCorquodale shares. It would have been payable to core sub-
underwriters if the same shares had been assented to Norton Opax by
someone other than a core sub-underwriter. Furthermore, this point is
not open, since it was not argued before the panel.
Complaint (b) essentially amounts to an allegation that an agreement
which gives underwriters an interest in the success of a bid makes the
underwriter a concert party if he purchases shares in the target company.
The short answer to this is that “concert party” could be so defined, but
it is not and whether any alteration should be made is a matter for the
panel and not for the court.
Complaint (c) is no doubt based upon the sentence in paragraph 6.3.
of the report of the panel's executive, which I have already quoted,
reading: “Certain of [the core underwriters] met the management for the
standard presentation during the offer in the normal way but in fact
K.1.0. never met the management at all.” Two assumptions are then
made, namely that the executive regarded this as conclusive of the
absence of a concert party situation and that the panel did likewise. We
have in the event had the advantage of affidavit evidence from the
chairman which makes it clear that the panel made no such error. He
has deposed that the panel approached the matter on the basis of the
definition of “concert party” which requires a finding of an agreement or
understanding. It did not regard the fact that there was no contact
between K.I.O. and Norton Opax as an absolute bar to a finding of
concerted action but rightly appreciated that, in the absence of such
RLIT0000457
RLIT0000457
844
Sir Jone aR. Reg. vy. Take-over Panel, Ex p. Datafin Pte. (C.A.) (19873
contact, sufficient evidence to support an agreement or understanding
had to be found elsewhere if such a finding were to be made. There was
no such evidence or none sufficient to satisfy the panel and the evidence
as a whole satisfied it that K.I.O.'s decision to purchase the shares was
made for genuine investment reasons which explained both the purchase
and when it was made.
Whilst this is more than sufficient to dispose of complaint (c), the
chairman’s long, detailed and helpful affidavit well illustrates the need
for the court to avoid underestimating the extent to which expert
knowledge can negative inferences which might otherwise be drawn
from a partial knowledge of the facts and the extent to which a greater
knowledge of the facts can make a decision which at first might seem
faintly surprising, not only explicable, but plainly right. Thus the panel
from its expertise knew that no significance should be attached to the
bare fact that K.I.0. used Greenwell Montagu as their brokers since
“it is common for an investor who wishes to buy shares for which
an offer is current to use one of the brokers to the offer, because
that broker’s knowledge of the market during such period is likely
to be particularly good. Brokers to an offer are regarded as free to
continue their general broking business with other parties throughout
the offer, though they must be careful about disclosure of
information.”
Again, the panel heard evidence from other institutional purchasers of
McCorquodale shares who bought at the same time and at substantially
the same price as K.1.0., one of whom was not a core sub-underwriter
and could therefore only have been influenced by investment
considerations. They were also able to investigate in depth what were
the investment justifications of the purchases by both that institution and
K.LO.
In conclusion, I should like to make it clear that, but for the issue as
to jurisdiction, this is not a case in which leave to apply should ever
have been given. All that could be said at that stage was that there was
a case for considering whether the advent of core underwriting might
not call for some reconsideration of the definition of “concert party,”
perhaps putting core underwriters in the category of persons in respect
of whom there was a rebuttable presumption of concerted action. That
was plainly a matter for the pane] which was minded to add a rider to its
decision pointing to the fact that core underwriting arrangement might
be subjected to close scrutiny, particularly where they were associated
with market purchases above the level of cash offers. The fact that the
panel’s conclusion might at first have appeared surprising to someone
who was not in day to day contact with the financial markets and who
had heard none of the evidence would not have begun to justify the
grant of leave to apply.
Lioyp L.J. I agree that this appeal should be dismissed for the
reasons given by Sir John Donaldson M.R. I add only a few words on
the important question whether the Panel on Take-overs and Mergers is
a body which is subject to judicial review. In my judgment it is.
RLIT0000457
RLIT0000457
845
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pie. (C.A.) Lloyd L.J.
There have been a number of cases since the decision of the House
of Lords in O'Reilly v. Mackman [1983] 2 A.C. 237 in which it has been
hecessary for the courts to consider the new-found distinction between
public and private law. In most of them, objection has been taken by
the defendant that the plaintiff has sought the wrong remedy. By
seeking a remedy in private law, instead of public law, the plaintiff has,
so it has been said, deprived the defendant of the special protection
afforded by R.S.C., Ord. 53. The formalism thus introduced into our
procedure has been the subject of strong criticism by Sir Patrick Neill in
a Child & Co. Oxford Lecture given in 1985, and by other academic
writers. The curiosity of the present case is that it is, so to speak, the
other way round. The plaintiff is seeking a remedy in public law. It is
the defendant who asserts that the plaintiff's remedy, if any (and Mr.
Alexander for the panel concedes nothing), lies in private law. Mr.
Alexander has cast away the protection afforded by R.S.C., Ord. 53 in
the hope, perhaps, that the panel may in the words of Mr. Lever be
subject to no law at all.
On this part of the case Mr. Alexander has advanced arguments on
two levels. On the level of pure policy he submits that it is undesirable
for decisions or rulings of the panel to be reviewable. The intervention
of the court would at best impede, at worst frustrate, the purposes for
which the panel exists. Secondly, on a more technical level, he submits
that to hold that the panel is subject to the supervisory jurisdiction of
the High Court would be to extend that jurisdiction further than it has
ever been extended before.
On the policy level, I find myself unpersuaded. Mr. Alexander made
much of the word “self-regulating.” No doubt self-regulation has many
advantages. But I was unable to see why the mere fact that a body is
self-regulating makes it less appropriate for judicial review. Of course
there will be many self-regulating bodies which are wholly inappropriate
for judicial review. The committee of an ordinary club affords an
obvious example. But the reason why a club is not subject to judicial
review is not just because it is self-regulating. The panel wields enormous
power. It has a giant’s strength. The fact that it is self-regulating, which
means, presumably, that it is not subject to regulation by others, and in
particular the Department of Trade and Industry, makes it not fess but
more appropriate that it should be subject to judicial review by the
courts.
It has been said that “it is excellent to have a giant’s strength, but it
is tyrannous to use it like a giant.” Nobody suggests that there is any
present danger of the panel abusing its power. But it is at least possible
to imagine circumstances in which a ruling or decision of the panel
might give rise to legitimate complaint. An obvious example would be if
it reached a decision in flagrant breach of the rules of natural justice. It
is no answer to say that there would be a right of appeal in such a case.
For a complainant has no right to appeal where the decision is that there
has been no breach of the code. Yet a complainant is just as much
entitled to natural justice as the company against whom the complaint is
made.
RLIT0000457
RLIT0000457
846
Lloyd LJ. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) [1987]
Nor is it any answer that a company coming to the market must take
it as it finds it. The City is not a club which one can join or not at will.
In that sense, the word “self-regulation” may be misleading. The panel
tegulates not only itself, but all others who have no alternative but to
come to the market in a case to which the code applies.
Mr. Alexander urged on us the importance of speed and finality in
these matters. I accept that submission. I accept also the possibility that
unmeritorious applications will be made from time to time as a harassing
or delaying tactic. It would be up to the court to ensure that this does
not happen. These considerations are all very relevant to the exercise of
the court’s discretion in particular cases. They mean that a successful
application for judicial review is likely to be very rare. But they do not
mean that we should decline jurisdiction altogether.
So long as there is a possibility, however remote, of the panel
abusing its great powers, then it would be wrong for the courts to
abdicate responsibility. The courts must remain ready, willing and able
to hear a legitimate complaint in this as in any other field of our
national life. 1 am not persuaded that this particular field is one in which
the courts do not belong, or from which they should retire, on grounds
of policy. And if the courts are to remain in the field, then it is clearly
better, as a matter of policy, that legal proceedings should be in the
realm of public law rather than private law, not only because they are
quicker, but also because the requirement of leave under R.S.C., Ord.
53 will exclude claims which are clearly unmeritorious.
So I turn to Mr. Alexander’s more technical argument. He starts
with the speech of Lord Diplock in Council of Civil Service Unions v.
Minister for the Civil Service {1985] A.C. 374, 409:
“For a decision to be susceptible to judicial review the decision-
maker must be empowered by public law (and not merely, as in
arbitration, by agreement between private parties) to make decisions
that, if validly made, will lead to administrative action or abstention
from action by an authority endowed by law with executive powers,
which have one or other of the consequences mentioned in the
preceding paragraph. The ultimate source of the decision-making
power is nearly always nowadays a statute or subordinate legislation
made under the statute; but in the absence of any statute regulating
the subject matter of the decision the source of the decision-making
power may still be the common law itself, i.e., that part of the
common law that is given by lawyers the label of ‘the prerogative.’
Where this is the source of decision-making power, the power is
confined to executive officers of central as distinct from local
government and in constitutional practice is generally exercised by
those holding ministerial rank.”
On the basis of that speech, and other cases to which Mr. Alexander
referred us, he argues (i) that the sole test whether the body of persons
is subject to judicial review is the source of its power, and (ii) that there
has been no case where that source has been other than legislation,
including subordinate legislation, or the prerogative.
RLIT0000457
RLIT0000457
847
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) Lioyd LJ.
I do not agree that the source of the power is the sole test whether a
body is subject to judicial review, nor do I so read Lord Diplock’s
speech. Of course the source of the power will often, perhaps usually,
be decisive. If the source of power is a statute, or subordinate legislation
under a statute, then clearly the body in question will be subject to
judicial review. If, at the other end of the scale, the source of power is
contractual, as in the case of private arbitration, then clearly the
arbitrator is not subject to judicial review: see Reg. v. National Joint
Council for the Craft of Dental Technicians (Disputes Committee), Ex
parte Neate [1953] 1 Q.B. 704.
But in between these extremes there is an area in which it is helpful
to look not just at the source of the power but at the nature of the
power. If the body in question is exercising public law functions, or if
the exercise of its functions have public law consequences, then that
may, as Mr. Lever submitted, be sufficient to bring the body within the
reach of judicial review. It may’ be said that to refer to “public law” in
this context is to beg the question. But I do not think it does. The
essential distinction, which runs through all the cases to which we
Teferred, is between a domestic or private tribunal on the one hand and
a body of persons who are under some public duty on the other. Thus in
Reg. v. Criminal Injuries Compensation Board, Ex parte Lain [1967] 2
Q.B. 864 Lord Parker C.J., after tracing the development of certiorari
from its earliest days, said, at p. 882:
“The only constant limits throughout were that [the tribunal] was
performing a public duty. Private or domestic tribunals have always
been outside the scope of certiorari since their authority is derived
solely from contract, that is, from the agreement of the parties
concerned.”
To the same effect is a passage from a speech of Lord Parker C.J. in an
earlier case, to which we were not, I think, referred, Reg. v. Industrial
Court, Ex parte A.S.S.E.T. [1965] 1 Q.B. 377, 389:
“It has been urged on us that really this arbitral tribunal is not a
private arbitral tribunal but that in effect it is undertaking a public
duty or a quasi-public duty and as such is amenable to an order of
mandamus. I am quite unable to come to that conclusion. It is
abundantly clear that they had no duty to undertake the reference.
if they refused to undertake the reference they could not be
compelled to do so. I do not think that the position is in any way
different once they have undertaken the reference. They are clearly
doing something which they are not under any public duty to do
and, in those circumstances, I see no jurisdiction in this court to
issue an order of mandamus to the industrial court.”
More recently, in Reg. v. British Broadcasting Corporation, Ex parte
Lavelle [1983] 1 W.L.R. 23, Woolf J. had to consider an application for
judicial review where the relief sought was an injunction under R.S.C.,
Ord. 53, r. 1(2). The case was brought by an employee of the B.B.C. In
refusing relief, Woolf J. said, at p. 31:
RLIT0000457
RLIT0000457
848
Lioyd L.J. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.} {1987}
“Ord. 53, r. 1(2) does not strictly confine applications for judicial
review to cases where an order for mandamus, prohibition or
certiorari could be granted. It merely requires that the court should
have regard to the nature of the matter in respect of which such
relief may be granted. However, although applications for judicial
review are not confined to those cases where relief could be granted
by way of prerogative order, 1 regard the wording of Ord. 53,
r. 1{2) and section 31(2) of the Act of 1981 as making it clear that
the application for judicial review is confined to reviewing activities
of a public nature as opposed to those of a purely private or
domestic character. The disciplinary appeal procedure set up by the
B.B.C. depends purely upon the contract of employment between
the applicant and the B.B.C., and therefore it is a procedure of a
purely private or domestic character.”
So I would reject Mr. Alexander’s argument that the sole test
whether a body is subject to judicial review is the source of its power.
So to hold would in my judgment impose an artificial limit on the
developing law of judicial review. That artificiality is well illustrated in
the present case by reference to the listing regulations issued by the
Council of the Stock Exchange. As the foreword to the current edition
makes clear, a new edition of the regulations became necessary as the
result of the Stock Exchange (Listing) Regulations 1984. Those
Regulations were made as the result of a requirement of an E.E.C.
Council directive. Mr. Alexander conceded that the listing regulations
are now the subject of public law remedies. By contrast (if his submission
is correct) the code, which is the subject not of a Council directive, but
of a Commission recommendation, is not.
IT now turn to the second of Mr. Alexander’s two arguments under
this head. He submits that there has never been a case when the source
of the power has been other than statutory or under the prerogative.
There is a certain imprecision in the use of the term “prerogative” in
this connection, as Professor Sir William Wade makes clear in another
Child & Co. Oxford Lecture, “Procedure and Prerogative in Public
Law” (1985) 101 L.Q.R. 180. Strictly the term “prerogative” should be
confined to those powers which are unique to the Crown. As Professor
Wade points out, there was nothing unique in the creation by the
government, out of funds voted by Parliament, of a scheme for the
compensation of victims of violent crime. Any foundation or trust, given
sufficient money, could have done the same thing. Nor do [ think that
the distinction between the Criminal Injuries Compensation Board and a
private foundation or trust for the same purposes lies in the source of
the funds. The distinction must lie in the nature of the duty imposed,
whether expressly or by implication. If the duty is a public duty, then
the body in question is subject to public law.
So once again one comes back to what I regard as the true view, that
it is not just the source of the power that matters, but also the nature of
the duty. I can see nothing in Reg. v. Criminal Injuries Compensation
Board, Ex parte Lain [1967] 2 Q.B. 864 which contradicts that view, or
compels us to decide that, in non-statutory cases, judicial review is
RLIT0000457
RLIT0000457
849
1Q8B. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) Lioyd LJ.
confined to bodies created under the prerogative, whether in the strict
sense, or in the wider sense in which that word has now come to be
used. Indeed, the passage from Diplock L.J.’s judgment, at p. 884,
which Sir John Donaldson M.R. has already read, points in the opposite
direction.
But suppose I am wrong: suppose that the courts are indeed confined
to looking at the source of the power, as Mr. Alexander submits. Then I
would accept Mr. Lever’s submission that the source of the power in the
present case is indeed governmental, at least in part. Mr. Alexander
argued that, so far from the source of the power being governmental,
this is a case where the government has deliberately abstained from
exercising power. I do not take that view. I agree with Mr. Lever when
he says that there has been an implied devolution of power. Power
exercised behind the scenes is power nonetheless. The express powers
conferred on inferior tribunals were of critical importance in the early
days when the sole or main ground for intervention by the courts was
that the inferior tribunal had exceeded its powers. But those days are
long since past. Having regard to the way in which the panel came to be
established, the fact that the Governor of the Bank of England appoints
both the chairman and the deputy chairman, and the other matters to
which Sir John Donaldson M.R. has referred, I am persuaded that the
panel was established “under authority of the Government,” to use the
language of Diplock L.J. in Lain’s case. If in addition to looking at the
source of the power we are entitled to look at the nature of the power,
as I believe we are, then the case is all the stronger.
Before leaving Mr. Alexander’s second argument, I should mention
one last point. The jurisdiction of the court to grant relief. by way of
judicial review is now, of course, recognised by section 31 of the
Supreme Court Act 1981. Section 31(1)(a) refers specifically to the old
prerogative writs, namely mandamus, prohibition and certiorari. Section
31(1)(6) and (2) provide that in an application for judicial review, the
court may grant a declaration or injunction if it is just or convenient to
do so, having regard to various matters, I have already referred to the
passage in Woolf J.’s judgment in Reg. v. British Broadcasting
Corporation, Ex parte Lavelle [1983] 1 W.L.R. 23, 31, in which he says
that applications for judicial review under R.S.C., Ord. 53, r. 1(2) are
not confined to those cases where relief could be granted by way of
prerogative order. As at present advised, I would agree with that
observation. I would only add as a rider that section 31(1) of the
Supreme Court Act 1981 should not be treated as having put a stop to
all further development of the law relating to the prerogative remedies.
I do not accept Mr. Alexander’s submission that we are here extending
the law. But if we were, I would not regard that as an insuperable
objection. The prerogative writs have always been a flexible instrument
for doing justice. In my judgment they should remain so.
NicHouts L.J. 1 entirely agree with the judgments of Sir John
Donaldson M.R. and Lloyd L.J. which I have had the advantage of
reading in draft. 1 add only a few supplementary observations of my
own.
RLIT0000457
RLIT0000457
850
Nicholls L.J. Reg. v. Take-over Panel, Ex p. Datafin Plc. (C.A.) (1987)
Jurisdiction
I take as my starting point Reg. v. Criminal Injuries Compensation
Board, Ex parte Lain [1967] 2 Q.B. 864, 882, where Lord Parker C.J.
noted that the only constant limits of the ancient remedy of certiorari
were that the tribunal in question was performing a public duty. He
contrasted private or domestic tribunals whose authority is derived solely
from the agreement of the parties concerned.
With that in mind, one looks at the Panel on Take-overs and
Mergers (“the panel”). The panel promulgates the City Code on Take-
overs and Mergers. As its name implies, the code is concerned with
take-over and merger transactions. Its ambit is very wide indeed. Among
the companies to which it applies are all listed public companies
considered by the panel to be resident in the United Kingdom.
Despite the wider range of the companies and persons it directly
affects, the panel submitted that it is not performing a public duty and
that none of its activities is susceptible to judicial review. The only
jurisdiction which the panel has is derived from the consent of its
members. It is, in the terms of Lord Parker’s dichotomy, a private or
domestic tribunal whose authority is derived solely from the agreement
of the bodies concerned. It was submitted that the activities of the panel
constitute self-regulation, and self-regulation involves a voluntary
submission of those who deal in the market to the rules laid down by
the panel and a commitment to accept the decisions of the panel.
I am unable to accept this as an accurate analysis of the panel’s
authority and functions. The panel is an unincorporated association. Its
members comprise a chairman and a deputy chairman appointed by the
Governor of the Bank of England, and representatives of the 11 bodies
mentioned by Sir John Donaldson M.R. at the beginning of his
judgment. On a day-to-day basis the panel works through its executive,
headed by the director general. He also is appointed by the Governor of
the Bank of England, and so is the chairman of an appeal committee
which hears appeals against rulings given by the executive.
Beyond this the panel seems to have no formal constitution. Whether
there is a contract between its members, or between the Bank of
England and the bodies which appoint representatives, and, if so, what
are its terms, were not matters in evidence or explored before us.
Presumably, therefore, the code and amendments to it require the
approval of all the members of the panel. However, it seems clear that,
whether or not there is a legally binding contract, there is an
understanding between the bodies whose representatives are members of
the panel that they will take all such steps, by way of disciplinary
proceedings against their members or otherwise, as are reasonably and
properly open to them to ensure that the code and the rulings of the
panel are observed. Similarly with the Bank of England: its weighty
influence in the City of London is directed to the same end. Indeed, the
leading part played by the Bank of England in setting up and running
the panel is one of the matters which must be kept in mind if the true
role of the panel is to be evaluated.
Another matter which must be noted is the involvement of the Stock
Exchange, one of the bodies appointing a representative on the panel.
RLIT0000457
RLIT0000457
851
1Q3B, Reg. v. Take-over Panel, Ex p. Datafin Ple, (C.A.). Nicholls LJ.
Since the code is concerned with take-overs and many, if not most, of
the important take-overs will be of companies whose shares are listed on
the Stock Exchange by companies whose shares are similarly listed, the
Stock Exchange is much concerned with the matters which the code
seeks to regulate. In turn, a major element in the enforcement of these
regulations is the sanctions which the Stock Exchange possesses over
listed companies.
In this regard it is important also to note that, whatever may have
been the position in the past, it is clear that today the Council of the
Stock Exchange is performing a public duty when deciding whether or
not to admit a security to official listing and whether or not to
discontinue such a listing. There is no longer a formal listing agreement
entered into by companies seeking a listing of their securities. The
council now has all the power required or permitted to be conferred on
“the competent authorities” by, inter alia, the admission directive of the
Council of the European Communities of 5 March 1979 (79/279/E.E.C.):
see the Stock Exchange (Listing) Regulations 1984. Article 15 of that
directive expressly provides that member states shall ensure that decisions
of the competent authorities refusing the admission of a security to
official listing or discontinuing such a listing shall be subject to the right
to apply to the courts. Such an application, in this country, would take
the form of an application for judicial review.
From this it is evident that the activities of the council of the Stock
Exchange in laying down requirements which a company must observe
if it is to obtain and retain an official listing, and in interpreting
those requirements, and adjudicating upon alleged breaches of those
requirements, are activities which are subject to judicial review.
Today those requirements include observing the code. In paragraph
6.15 of its official! publication “Admission of Securities to Listing,” the
council states that it attaches “great importance” to observance of the
code.
The code contains a statement of general principles. For example,
that all shareholders of the same class of an offeree company must be
treated similarly by an offeror, and that during the course of a take-over
or when one is in contemplation neither the offeror nor the offeree nor
their advisers may furnish information to some shareholders which is not
made available to all. The code also contains some detailed rules. Some
of these are far reaching. Thus a company can be compelled, in certain
circumstances, to make an offer, or to increase the amount of an offer it
has made. Under rule 9 a person who acquires shares carrying 30 per
cent. or more of the voting rights of a company is required to make an
offer to purchase all the equity capital of the company. Rule 6(2)
provides that if while an offer is open the offeror or any person acting in
concert with it purchases shares at above the offer price the offeror shall
increase its offer to not less than the highest price paid for the shares so
acquired. I do not suggest for one moment that these obligations are
other than fair‘and reasonable and necessary. But, nonetheless, they are
far reaching, and the sanctions for their enforcement are also formidable:
they include suspension of a listing by the Council of the Stock
Exchange, in performance of its public duty in that regard.
RLIT0000457
RLIT0000457
852
Nicholls L.J. Reg. v. Take-over Panel, Ex p. Datafin Pic. (C.A.) (1987)
Thus the system which has evolved, on the point I am now
considering, is indistinguishable in its effect from a delegation by the
Council of the Stock Exchange to the panel, a group of people which
includes its representative, of its public law task of spelling out standards
and practices in the field of take-overs which listed companies must
observe if they are to enjoy the advantages of a Stock Exchange listing
and of determining whether there have been breaches of those standards
and practices. As is stated in the code, those who do not conduct
themselves in matters relating to take-overs according to the code cannot
expect to enjoy the facilities of the securities market in the United
Kingdom.
In my view, and quite apart from any other factors which point in
the same direction, given the leading and continuing role played by the
Bank of England in the affairs of the panel, the statutory source of the
powers and duties of the Council of the Stock Exchange, the wide-
ranging nature and importance of the matters covered by the code, and
the public law consequences of non-compliance, the panel is performing
a public duty in prescribing and operating the code (including ruling on
complaints).
The particular facts
I am not without sympathy for the applicants. The Kuwait Investment
Office stood to receive about £300,000 in additional underwriting fees
from Norton Opax Ple. if the Norton Opax bid for McCorquodale Plc.
was successful and thus, depending upon one’s view of the likely trend
in the price of Norton Opax shares, that might have given K.I.O. a
significant financial interest in the success of the Norton Opax bid. Then
at a critical time in the course of the contest between the rival bids,
when Datafin Ple. was precluded from buying McCorquodale shares at
above 315p per share and Norton Opax was precluded from buying
McCorquodale shares at over 303-3p per share, K.I.O, bought, through
the brokers who were joint brokers to the Norton Opax offer, a
substantial number of McCorquodale shares at 315-5p. I can well
understand why the applicants felt aggrieved.
But the difficulties confronting the applicants on this judicial review
application are manifestly insuperable. The panel, correctly, approached
the matter on the basis of the code’s definition of “acting in concert.”
The panel heard evidence from a K.1.O. representative, and accepted
that K.1.O. treated investment and underwriting as separate businesses
and that genuine investment reasons explained why K.I.O. had not
bought earlier and why it bought when it did. These, par excellence,
were matters for the panel.
Any lingering concern about the scope for abuse of core underwriting
agreements, and whether any steps should be taken to prevent a
recurrence of this type of situation where suspicion and distrust are
RLIT0000457
RLIT0000457
oy]
we
1Q.B. Reg. v. Take-over Panel, Ex p. Datafin Pie. (C.A.)
853
Nicholls L.J.
bound to breed, are matters for the panel. The evidence of the chairman
shows that the panel have these considerations well in mind.
Leave to apply for judicial review
granted.
Declaration that court had jurisdiction
to hear application.
Substantive application dismissed.
No order for costs of panel.
Applicants to pay costs of interveners.
Solicitors: S. J. Berwin & Co.; Freshfields; Hepworth & Chadwick,
Leeds; Ashurst Morris Crisp & Co.
[court oF APPEAL]
REGINA v. SHARP
P.M.
1987 April 7 Lord Lane C.J., Farquharson
and Gatehouse JJ.
Crime—~Duress—Homicide—Person voluntarily joining gang of armed
robbers—Reluctant participation in robbery when victim shot and
killed—Conviction for manslaughter—Whether defence of duress
available
The appellant, who joined a gang of robbers, knew that they
used firearms and he participated in a robbery during which the
gang leader shot and killed the victim. The appellant was tried
on a count charging murder. He submitted that the defence of
duress was available to him since he had wished to pull out of
the robbery but had participated in fear because a gun had been
pointed at his head by the gang leader with a threat to blow it
off if the appellant did not participate. The submission was
rejected by the trial judge and the appellant was convicted of
manslaughter.
On appeal against conviction:—
Held, dismissing the appeal, that the defence of duress was
not available to a person who voluntarily and with knowledge of
its nature joined a criminal organisation or gang, which he knew
might bring pressure on him to commit an offence, and was an
active member when he was put under such pressure; and that,
accordingly, the trial judge was correct in his decision to reject
the appellant’s submission (post, p. 861F~).
Dicta in Director of Public Prosecutions for Northern Ireland
v. Lynch [1975] A.C. 653, 670, 679, 687, H-L.(N.I.) applied.
Reg. v. Hurley and Murray [1967] V.R. 526 and Reg. v.
Fitzpatrick (1977I N.I. 20 considered.
RLIT0000457
RLIT0000457