R v Secretary of State for Trade and Industry, ex parte Lonrho Plc

JurisdictionEngland & Wales
JudgeLord Keith of Kinkel,Lord Templeman,Lord Griffiths,Lord Ackner,Lord Lowry
Judgment Date18 May 1989
CourtHouse of Lords
Regina
and
Secretary of State for Trade and Industry
(Respondent)
Ex Parte Lonrho
(Appellants)
(First Appeal)
Regina
and
Secretary of State for Trade and Industry
(Respondent)
Ex Parte Lonrho
(Appellants)
(Second Appeal)
(Consolidated Appeals)

[1989] UKHL J0518-3

Lord Keith of Kinkel

Lord Templeman

Lord Griffiths

Lord Ackner

Lord Lowry

House of Lords

Lord Keith of Kinkel

My Lords,

1

In this appeal the appellant company, (referred to hereafter as "Lonrho") seeks to set aside two orders made by the Court of Appeal (Dillon, Mustill and Stocker L.JJ.) on 20 January 1989 dismissing the application of Lonrho for judicial review of two decisions of the respondent (referred to hereafter as "the Secretary of State") namely:

  • 1. His refusal made on 29 September 1988 and affirmed on 25 October 1988 to defer publication of the Report of the Inspectors appointed by him to investigate the affairs of the House of Fraser Holdings Plc. until investigations into the subject matter of that report by the Serious Fraud Office and the Director of Public Prosecutions are completed (and if those investigations led to prosecutions, until those prosecutions had been concluded). This is referred to hereafter as the "publication decision." The Divisional Court (Watkins and Mann L.JJ and McCowan J.) had on 17 January 1989 declared that this decision was ultra vires and unlawful and had issued an order of mandamus requiring the Secretary of State to reconsider the matter according to law.

  • 2. The decision of the Secretary of State made on 25 November 1988 not to refer to the Monopolies and Mergers Commission (referred to hereafter as the "M.M.C.") the merger situation relating to the acquisition in 1984 and 1985 by Al Fayed Investment and Trust (U.K.) Plc. (referred to hereafter as "A.I.T.") of the House of Fraser plc, (referred to hereafter as "Fraser") notwithstanding that the report of the inspectors disclosed the existence of previously undisclosed material facts. The Divisional Court had held that this decision was ultra vires and mandamus was issued requiring the Secretary of State to make this reference.

2

The orders of the Divisional Court were set aside by the Court of Appeal. Lonrho now appeal to this House.

3

The Material Facts

4

The material facts are not in dispute. They are set out in detail in the judgment of Watkins L.J. in the Divisional Court and summarised in the judgment of Dillon L.J. in the Court of Appeal. In brief summary, they are as follows:

  • (1) In 1978, Lonrho, having acquired an investment in Scottish and Universal Investments Limited ("S.U.I.T.S.") which in turn held an interest in Fraser made a bid for all the outstanding share capital in S.U.I.T.S. This bid was referred to the M.M.C. which, in March 1979, reported that the bid would not be against the public interest. In due course, and as a result of the bid, Lonrho acquired S.U.I.T.S., thereby securing a holding of 29.9 per cent. of the issued share capital of Fraser.

  • (2) In February 1981, Lonrho made a bid for Fraser which was referred to the M.M.C. Following its finding that the merger situation would operate against the public interest, Lonrho were asked to give and gave to the then Secretary of State an undertaking that it would not seek to increase its interests in Fraser above the 29.9 per cent. interest it already held.

  • (3) In late May 1984, an attempt by Lonrho to reconstitute the board of Fraser gave rise to a merger situation which again resulted in a reference to the M.M.C. On 5 October the M.M.C. sought and obtained an extension of time in which to investigate and report on the merger situation referred to it.

  • (4) In November 1984, Lonrho sold its 29.9 per cent. holding in Fraser to the Al Fayed Brothers for approximately £138m.

  • (5) On 14 February 1985, the M.M.C. reported to the then Secretary of State that the merger situation referred to it in May 1984 did not operate against the public interest. However, this report was not at that stage published and Lonrho remained subject to the undertakings given following the M.M.C.'s report on the reference of February 1981.

  • (6) On 4 March 1985, A.I.T., the vehicle of the Al Fayed brothers, announced a full bid for the share capital of Fraser. This offer was recommended by the Fraser board of directors.

  • (7) on 7 March 1985 the M.M.C's report relating to Lonrho and received by the Secretary of State on 14 February 1985 was published

  • (8) On 14 March 1985, it was announced that the merger situation caused by the A.I.T. bid for Fraser was not to be referred to the M.M.C. The Secretary of State gave, as among his reasons for not so referring on non competition grounds, "the statements made and assurances given by the Al Fayed family about the offer and their intentions with regard to the House of Fraser [and] the support given to those statements and assurances by Kleinwort Benson Ltd."

  • (9) Also on 14 March 1985 Lonrho was released from the undertaking given to the Secretary of State not to increase its Fraser interest to 30 per cent, or more.

  • (10) AIT as a result of its bid announced on 4 March 1985 acquired 100 per cent, of the share capital in Fraser. In due course, A.I.T. changed its name to House of Fraser Holdings plc (referred to hereafter as "Holdings").

  • (11) On 9 April 1987, following a period in which representations had been made principally by Lonrho concerning the circumstances in which Holdings had acquired Fraser, the Secretary of State, pursuant to section 432(2) of the Companies Act 1985, appointed inspectors to inquire into the affairs of Holdings and report thereon. The inspectors appointed were Mr. Philip Heslop Q.C. and Mr. Hugh Aldous F.C.A.. Mr Heslop resigned his appointment on 13 May 1987 and on 15 May 1987 Mr. Henry Brooke Q.C. was appointed in his place. The allegations made by Lonrho were to the effect that the statements and assurances were false, and had been fraudulently made by the Fayeds, with the object (inter alia) of avoiding a reference to the M.M.C. and that, on several grounds, the Fayeds and Holdings were not suitable persons to control Fraser.

  • (12) On 23 July 1988, the inspectors submitted their report to the Secretary of State. Six days later, on 29 July, the Secretary of State sent a copy of the inspectors' report to the Serious Fraud Office (referred to hereafter as "S.F.O."). Under section 1(3) of the Criminal Justice Act 1987, the Director of the S.F.O. "may investigate any suspected offence which appears to him on reasonable grounds to involve serious or complex fraud." On 19 August a copy of the report was sent to the Director General of Fair Trading, Sir Gordon Borrie.

  • (13) On 13 September 1988, the Secretary of State in reply to a letter from Mr. Rowland the Chief Executive of Lonrho stated that "As regards publication, our policy is to publish unless there is a genuine and unavoidable impediment to doing so; this policy will be applied to the report."

  • (14) On 16 September 1988, the Secretary of State personally assured Lonrho's representatives at a meeting that he intended to publish the report, as soon as possible, and that this meant weeks, rather than years.

  • (15) On 29 September 1988, the Department of Trade and Industry (referred to hereafter as "D.T.I.") announced, in a press release, that, because the S.F.O. required further time for investigation and consideration of the case, "the Secretary of State cannot publish the report for the time being, but will do so as soon as circumstances permit." The same press release also announced that the Director General of Fair Trading (referred to hereafter as the "Director General") was considering whether the report demonstrated the existence of new material facts and that, if so, he would advise the Secretary of State whether to refer the merger to the M.M.C.

  • (16) On 5 October 1988, at a meeting attended by representatives of Lonrho and officials of the D.T.I., Lonrho were given an opportunity to put forward submissions as to why the inspectors' report should be published; in the alternative Lonrho submitted that a copy of the report should be divulged to Lonrho. Mr. Mallinson of the D.T.I. informed Lonrho that the Secretary of State still wished to publish the report as soon as possible, but that the position was complicated because the inquiries of the S.F.O. were continuing. Mr. Mallinson said, inter alia:

  • "The needs of the S.F.O. as to publication is a further intervening factor … I am advised … that the Director General is satisfied that he can put you in a position to make full submission, without your seeing the report. I do not expect you to agree, but that is his view. Our discretion to provide the report is governed by the views of the S.F.O. and the Director General."

  • Lonrho's leading counsel said that:

    "In view of the press release … I am asking the Secretary of State to say that he has misdirected himself. He can, and should, publish. There is nothing in the circumstances of the investigation justifying a decision not to publish. This factor does not justify the decision not to refer. In the context of judicial review, I make the argument to try to change his mind."

  • (17) On 12 October 1988 Lonrho submitted to the D.T.I. a copy of a joint opinion signed by three leading and two junior counsel which, so far as relevant, asserted that it was unlikely that the S.F.O. would take statements from witnesses within one year, that "a trial must be several years away," that "it appears that the Serious Fraud Office involvement provides no reasons why" the Secretary of State should not publish the report and that there were a number of enumerated public interest reasons, especially "the public interest in the uncovering of fraud" why the report should be published.

  • (18) On 20 October 1988, a memorandum of submissions on behalf of Lonrho was presented to the D.T.I.,...

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