R v Panel on Take-overs and Mergers, ex parte Guinness Plc
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE LLOYD,LORD JUSTICE WOOLF |
| Judgment Date | 28 July 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0728-8 |
| Docket Number | 88/0691 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 July 1988 |
In The Matter of An Application for Judicial Review By Guinness PLC
and
In The Matter of Decisions of the Panel on Take-Overs and Mergers
[1988] EWCA Civ J0728-8
The Master of the Rolls
(Lord Donaldson)
Lord Justice Lloyd
Lord Justice Woolf
88/0691
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM AN ORDER OF THE DIVISIONAL COURT
(QUEEN'S BENCH DIVISION)
Royal Courts of Justice
MR DAVID OLIVER Q.C., MR RICHARD FIELD Q.C. and MR PATRICK ELIAS, instructed by Messrs Herbert Smith, appeared for the Appellants (Applicants).
MR ROGER BUCKLEY Q.C. and MR PAUL WALKER, instructed by Messrs Lovell White Durrant, appeared for the Respondents (Respondents).
MR FREDMAN ASHE LINCOLN Q.C. appeared on a Watching Brief.
On 25th August 1987, and again on 2nd September, the Panel considered and rejected an application by Guinness that it postpone a hearing concerned with one aspect of the April 1986 take-over bid by Guinness for Distillers. Guinness obtained leave to apply for judicial review of these decisions, but on 29th March 1988 that application was refused by a divisional court of the Queen's Bench Division consisting of Tasker Watkins and Russell L.J.J. and Tudor Evans J. Guinness now appeal to this court.
The Panel is a truly remarkable body whose nature was considered by this court in The Queen v. Take-Over Panel, Ex parte Datafin Plc [1987] 1 Q.B. 815. Part legislator, part court of interpretation, part consultant, part referee, part disciplinary tribunal, its self-imposed task is to regulate and police the conduct of take-overs and mergers in the financial markets of the United Kingdom.
Lacking a statutory base, it has to determine and declare its own terms of reference and the rules applicable in the markets, thus acting as a legislator. It has to give guidance in situations in which those involved in take-overs and mergers may be in doubt how they should act. These doubts may arise because the situation is one which is novel and not covered by the rules. The Panel then acts as the conscience of the markets. This is the consultancy role. Or they may arise out of difficulty in applying the rules literally, in which case the Panel interprets them in its capacity as a court of interpretation. I use the word "interpret" rather than "construe" advisedly because, as noted in Datafin (at page 841), the Panel as legislator tends to lay down general principles on the lines of EEC legislation rather than to promulgate specific prohibitions, although such prohibitions do exist. Where it detects breaches of the rules during the course of a take-over, it acts as a whistle-blowing referee, ordering the party concerned to stop and, where it considers it appropriate, requiring that party to take action designed to nullify any advantage which it has obtained and to redress any disadvantage to other parties. Finally, when the dust has settled, it can take disciplinary action against those who are found to have broken the rules.
In Datafin, at page 843, I said:
"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 passage has, I think, been misunderstood, at least by academic writers. When the take-over is in progress the time scales involved are so short and the need of the markets and those dealing in them to be able to rely upon the rulings of the Panel so great, that contemporary intervention by the court will usually either be impossible or contrary to the public interest. Furthermore it is important that this should be known, as otherwise attempts would undoubtedly be made to undermine the authority of the Panel by tactical applications for judicial review. On the other hand, once the immediate problem has been dealt with by the Panel, no similar objections would apply to a retrospective review of its actions designed to avoid the repetition of error, if error there has been. And when it comes to disciplinary action by the Panel, which necessarily will be taken in retrospect and with all due deliberation, the court will find itself in its traditional position of protecting the individual from any abuse of power.
Until the present problem arose, I imagine that all concerned visualised a complete dichotomy between the contemporaneous refereeing function and the retrospective disciplinary function. However in the instant case the Panel, having failed for lack of evidence to blow the whistle whilst the take-over was in progress, thought it right over a year later to resume its refereeing function on the basis of an "action replay". I am far from saying that it was wrong to do so. Indeed Guinness does not complain of this course being adopted, although it strongly objects to the timing. But it is a novel situation and both the Panel and the court are necessarily breaking new ground.
The court's jurisdiction and limitations upon its exercise are established in Datafin. However the present appeal calls for a further review and, in particular, consideration of whether the separate grounds for granting relief—illegality, irrationality, procedural impropriety and, possibly, proportionality—are appropriate in all situations. Illegality would certainly apply if the Panel acted in breach of the general law, but it is more difficult to apply in the context of an alleged misinterpretation of its own rules by a body which under the scheme is both legislator and interpreter. Irrationality, at least in the sense of failing to take account of relevant factors or taking account of irrelevant factors, is a difficult concept in the context of a body which is itself charged with the duty of making a judgment on what is and what is not relevant, although clearly a theoretical scenario could be constructed in which the Panel acted on the basis of considerations which on any view must have been irrelevant or ignored something which on any view must have been relevant. And similar problems arise with procedural impropriety in the narrow sense of failing to follow accepted procedures, given the nature of the Panel and of its functions and the lack of any statutory or other guidance as to its procedures which are intended to be of its own devising. Similarly, in the broad sense of breach of the rules of natural justice, what is or is not fair may depend upon underlying value judgments by the Panel as to the time scale which is appropriate for decision, the consequences of delay and matters of that kind. Approaching the problem upon the basis of separate grounds for relief may at once bring several interlocking and mutually inconsistent considerations into play—were the underlying judgments tainted by illegality or irrationality? If not, accepting those judgments, was the action unfair? If the underlying judgments were so tainted, was the action unfair on the basis of judgments which might reasonably have been made? The permutations, if not endless, are considerable and confusing.
It may be that the true view is that in the context of a body whose constitution, functions and powers are sui generis, the court should review the Panel's acts and omissions more in the round than might otherwise be the case and, whilst basing its decision upon familiar concepts, should eschew any formal categorisation. It was Lord Diplock who in C.C.S.U. v. Minister for the Civil Service [1985] 1 A.C. 374 formulated the currently accepted categorisations in an attempt to rid the courts of shackles bred of the technicalities surrounding the old prerogative writs. But he added, at page 410, that further development on a case by case basis might add further grounds. In the context of the present appeal he might have considered an innominate ground formed of an amalgam of his own grounds with perhaps added elements, reflecting the unique nature of the Panel, its powers and duties and the environment in which it operates, for he would surely have joined in deploring any use of his own categorisation as a fetter upon the continuous development of the new "public law court". In relation to such an innominate ground the ultimate question would, as always, be whether something had gone wrong of a nature and degree which required the intervention of the court and, if so, what form that intervention should take.
The starting point is December 1985 when Argyll announced an offer for the shares of Distillers and January 1986 when Guinness put forward a rival offer. The Take-Over Rules applied and one such rule, rule 11.1 provided that:
"11.1 WHEN A CASH OFFER IS REQUIRED
Except with the consent of the Panel in cases falling under (a), where:—
(a) the shares of any class under offer in the offeree company purchased for cash by the offeror and any person acting in concert with it during the offer period and within 12 months prior to its commencement carry 15%...
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