Datafin Redux: Administrative Law Values and the Boundaries of Judicial Review

In area of judicial control of non-statutory powers, the “boundaries” of judicial review are “uncertain” (Wade & Forsyth, Administrative Law, 11th ed. (Oxford University Press, Oxford, 2014), at p. 532. There have been various efforts to shed light on them over the years. Particularly useful illumination can be provided by the underlying purposes and values of judicial review of administrative action. I have argued, as readers surely well know by now, that the best explanation of modern administrative law is that it is structured by four values: the rule of law, good administration, democracy and separation of powers. These values provide structure too to the law relating to judicial review of non-statutory powers.

It has been said that what must be identified to distinguish private matters from public matters (subject to judicial review) “is a feature or a combination of features which impose a public character or stamp on the act” (Poplar Housing and Regeneration Community Association Ltd v Donoghue [2002] QB 48, at para 65, per Lord Woolf CJ). What is needed, however, is some guidance as to what “public” might mean in this context.

As Dyson LJ has explained:

the question whether the decision of a body is amenable to judicial review requires a careful consideration of the nature of the power and function that has been exercised to see whether the decision has a sufficient public element, flavour or character to bring it within the purview of public law. It may be said with some justification that this criterion for amenability is very broad, not to say question-begging (R (Beer t/a Hammer Trout Farm) v Hampshire Farmers’ Markets Ltd [2004] 1 WLR 233, at pp. 240-241).

Taking a fresh look at the seminal case in the area of de facto powers may be useful: R v Panel on Takeovers and Mergers, ex parte Datafin plc [1987] QB 815. Sir John Donaldson MR’s description bears quoting at length:

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… 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… 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 legally enforceable base… 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 (at pp. 824-826).

The Court of Appeal held that the Panel was subject to judicial review. Several reasons were given. One can perceive the influence of administrative law values.

First, “[a]s 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 [European Union] requirements called for statutory provisions” (at p. 835). Relatedly, the Panel was “without doubt performing a public duty”, as evidenced by 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” (at p. 838). That Parliament and the executive had consciously interwoven the non-statutory body into a broader statutory scheme was a justification for subjecting the body to judicial review as any statutory body would be.

Second, the “rights of citizens are indirectly affected” by decisions of the Panel; “some, but by no means all of whom, may in a technical sense be said to have assented to this situation” (at p. 838). As Lloyd LJ put it: “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” (at p. 846). Rule of law considerations can certainly be perceived to be at play here.

Third, considerations of separation of powers were invoked by Lloyd LJ:

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 less but more appropriate that it should be subject to judicial review by the courts (at p. 845).

On the one hand, private clubs can generally be left to their own devices as far as public law is concerned (certainly as long as there are robust private law remedies available to their members). On the other hand, the need for checks and balances – for the courts to fill an accountability gap – was a reason for judicial oversight in this case.

Note, though, Sir John Donaldson MR’s insistence that judicial review of the panel would be somewhat attenuated, for reasons of good administration:

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 (at p. 841).

Similarly, Lloyd LJ accepted that there are good reasons for judicial reticence. But these could taken into account in conducting the court’s oversight function. Good reasons for restraint “do not mean that we should decline jurisdiction altogether” (at p. 846). Indeed, Sir John Donaldson MR suggested, “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” (at p. 842). Here, as is often the case, administrative law values play a complementary role, separation of powers pushing courts towards exercising an oversight function, but good administration causing them to discharge that function with caution.

This content has been updated on December 23, 2016 at 18:55.