R v Monopolies and Mergers Commission, ex parte Argyll Group Plc
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE DILLON,LORD JUSTICE NEILL |
| Judgment Date | 14 March 1986 |
| Judgment citation (vLex) | [1986] EWCA Civ J0314-4 |
| Docket Number | 86/0257 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 March 1986 |
and
[1986] EWCA Civ J0314-4
The Master of the Rolls
(Sir John Donaldson)
Lord Justice Dillon
and
Lord Justice Neill
86/0257
CO/293/86
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(Crown Office List)
Royal Courts of Justice,
MR. A. HEYMAN, Q.C., MR. C. BELLAMY and MR. N. PAINES (instructed by Messrs. D.J. Freeman & Co., London, E.C.4.) appeared on behalf of the Appellant (Applicant).
MR. J. MUMMERY (instructed by The Treasury Solicitor, London, S.W.I.) appeared on behalf of the First and Second Respondents (First and Second Respondents).
MR. P. SCOTT, Q.C. and MR. P. GOLDSMITH (instructed by Messrs. Freshfields, London, E.C.I. appeared on behalf of Guinness PLC.
MR. D. OLIVER (instructed by Messrs. Herbert Smith & Co., London, E.C.4.) appeared on behalf of Distillers Company PLC.
This appeal arises in the context of a mega-merger dispute between the Argyll Group of Companies and Guinness, they being rival suitors for the hand (and commercial activities) of the Distillers Company. The bidding was opened by Argyll in December 1985 and Guinness made its bid in January 1986. Argyll countered with an increased offer on 6th February and no doubt the shareholders of Distillers had high hopes of further, and better, overtures from Guinness. Instead, on 13th February, the Secretary of State for Trade and Industry referred the Guinness proposal to the Monopolies & Mergers Commission for inquiry and report, thus apparently taking Guinness out of the race for some months.
The disablement of the rival suitor cannot but have been a source of quiet satisfaction to the Argyll Group, but it was short-lived, for one week later the Chairman of the Commission successfully sought the consent of the Secretary of State to the laying aside of the reference upon the ground that "the proposal to make arrangements such as were mentioned in the reference had been abandoned". Guinness then submitted a revised bid.
Argyll sought judicial review on 21st February. Leave to move was granted promptly, and Macpherson J. refused the substantive application on 6th March. Argyll appealed and the hearing began on 10th March. Let no one say that the courts cannot act quickly, if there is a proven need for such expedition.
There are four issues: (a) Did the Chairman of the Commission correctly direct himself in law when he concluded that "the proposal to make arrangements such as are mentioned in the reference" had been abandoned within the meaning of that phrase in section 75(5) of the Fair Trading Act, 1973 ("the Act")?
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(b) Did the Chairman have power to act alone on behalf of the Commission?
(c) Had Argyll a sufficient interest in the matter to which the application related within the meaning of Rules of the Supreme Court Order 53 rule 3(7)?
(d) Judicial review being a discretionary remedy, how should that discretion be exercised?
The Abandonment Issue.
For the purposes of considering this issue, it is necessary to revert to the facts in rather greater detail.
The first Argyll offer, announced on 2nd December 1985 was for the whole of the issued share capital of Distillers, not already owned by Argyll, on terms said to be equivalent to 513p per share, thus valuing Distillers at £1,864 million.
The first Guinness offer, announced on 20th January 1986, was also for the whole of the issued share capital of Distillers on terms said to be equivalent to 625p per share, thus valuing Distillers at £2,270 million.
The second Argyll offer, announced on 6th February 1986, was, so far as is material, the same as its first offer, save that the revised terms were said to be equivalent to 645p per share, thus valuing Distillers at £2,343 million.
On 13th February 1986 the Secretary of State for Trade and Industry exercised his powers under sections 69(2) and 75 of the Act and made a reference to the Monopolies & Mergers Commission. Although this was, and had to be, expressed as the action of the Secretary of State, he felt it right for personal and family reasons to disqualify himself from taking any part in the matters with which we are concerned and all decisions were made by or with the authority of the Minister of State, Mr. Geoffrey Pattie, M.P. The full terms of the reference were as follows: "Whereas it appears to the Secretary of State that it is or may be the fact that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a merger situation qualifying for investigation as defined in section 64(8) of the Fair Trading Act 1973 ('the Act'), in that:
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(a) enterprises carried on by or under the control of The Distillers Company PLC (a body corporate incorporated in the United Kingdom) will cease to be distinct from enterprises carried on by or under the control of Guinness PLC; and
(b) the value of assets which will be taken over exceeds £30 million.
"Now, therefore, the Secretary of State in exercise of his powers under sections 69(2) and 75 of the Act hereby refers the matter to the Monopolies and Mergers Commission for investigation and report within a period of six months beginning with the date of this reference.
"In relation to the question whether a merger situation qualifying for investigation will be created if the arrangements herein referred to are carried into effect the Commission shall exclude from consideration section 64(1)(a) of the Act."
The Commission consists of 1 whole time member, who is the Chairman, and 31 part time members. The present Chairman, who took office in November 1975, Sir Godfray Le Quesne, Q.C. It has a full time secretary and supporting staff. As might be expected, there is a routine procedure for dealing with merger references. The Act (Schedule 3, paragraph 10) empowers the Chairman to select a group of not less than 5 members to perform the functions of the Commission in relation to any investigation under the Act. The invariable practice is for this power to be exercised. As finding out which members are able and willing to serve as part of the group takes some time, the practice is also for the Chairman meanwhile to write to the companies involved in the merger informing them of the Commission's procedures and asking them to provide extensive information by a given date. The Chairman wrote accordingly in this case, but the process of selecting the group to undertake the investigation was overtaken by events and was never completed.
Under the terms of the City Take-Over Code an offer, such as that made by Guinness, has to be conditional upon there being no reference to the Commission and, if such a reference is made, it lapses. Furthermore, no new offer can be made during the pendency of the reference, which can last up to six months. In these circumstances, their offer having lapsed, it appears that Guinness entered into discussions with the Take-Over Panel to see whether a new offer could be made and that this was approved by the Panel, subject to the extant reference being first laid aside pursuant to section 75(5) of the Act. I will return to the terms of the subsection hereafter.
On the morning of 17th February 1986, representatives of Guinness met the Chairman at their request and indicated what was in their minds in general terms. The Chairman explained the provisions of section 75(5) and that, before these poweres could be exercised, it would have to appear to the Commission that "the proposal to make arrangements such as are mentioned in the reference has been abandoned". For that purpose he would need to know the nature of any proposal to make different arrangements to bid for Distillers. A further meeting took place on 18th February. On 19th February the Chairman had a telephone conversation and two meetings with representatives of Guinness during which he was given further information which was later confirmed in writing.
Some of the written matter has not be disclosed in open court because of its confidential nature in terms of commercial sensitivity, but we have seen it during a sitting in camera. Mr. Allan Heyman, Q.C., appearing for Argyll, sought to raise an issue not raised before the learned judge of whether it was " Wednesbury unreasonable" for the Chairman to conclude on the information given to him that the proposal to make arrangements such as are mentioned in the reference had been abandoned. This issue was quite distinct from the issue of whether the Chairman had misconstrued section 75(5) and we refused to allow it to be raised. Had it been raised, the Chairman might well have wished to place much fuller information before the court as to what precisely he was told.
That issue having been exlcuded, and it therefore being accepted that if the Chairman's and the Commission's construction of section 75(5) is correct, but not otherwise, it did appear to the Chairman that the conditions required by the subsection were met, we are able to treat the terms of the subsequent offer announced by Guinness as representing the information available to the Chairman.
On the evening of 19th February the Chairman was satisfied that "the proposal to make arrangements such as had been mentioned in the reference had been abandoned" and that, subject to the consent of the Secretary of State, it would be appropriate that the reference be laid aside. He so informed the Secretary of State in writing. After a telephone conversation with a Parliamentary Under Secretary, who sought clarification of one part of that letter, the Chairman wrote a further...
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