R (Holmcroft Properties Limited) v KPMG LLP (First Interested Party: Financial Conduct Authority, Second Interested Party: Barclays Bank PLC) [2016] EWHC 323 (Admin)
In this recently reported judgment, the Administrative Court issued notable commentary on the amenability to judicial review of private bodies in their exercise of functions with a "public law flavour". The decision to grant permission will have been of interest to public lawyers given the identity of the defendant, one of the "Big Four" accountancy firms, an atypical defendant in judicial review proceedings. The judgment presents an interesting discussion of a well-established and relatively rarely considered issue, namely the circumstances in which a private body may be deemed to carry out a function which engages principles of public law sufficiently to establish their amenability to judicial review proceedings[1].
Our earlier analysis of the decision to grant the claimant permission to proceed to a substantive hearing, in which the background facts are recounted in more detail, can be found here. The grounds of claim at the substantive hearing were apparently narrower than those initially pleaded at the permission stage, but arose again from the defendant's decision to approve Barclays' refusal to offer the claimant compensation for consequential loss arising from mis-sold interest rate hedging products in the course of the defendant's role in the voluntary scheme of redress undertaken by the bank. The bank agreed an undertaking with the FCA as to the terms of the redress scheme. The defendant entered into a contractual agreement with the bank to act as an independent reviewer.
The claimant argued that the defendant had reached a decision not properly open to it given Barclays' reliance on material (allegedly partially false) which had not been disclosed to the claimant; in such circumstances, the claimant could not provide an informed response and the defendant ought not to have approved a defective process.
The Court considered that the defendant's duties did not have "sufficient public law flavour" to render it amenable to judicial review, though there were "powerful pointers" to the contrary. The Court accepted that the defendant's role was "woven into" the FCA's regulatory function and also that the defendant was in effect undertaking its duties for both Barclays and for the FCA so as to assist the latter in the effective performance of its regulatory functions. However, the Court was swayed by the counter-arguments brought by the defendant and the two interested parties that the defendant was not, on balance, amenable to judicial review. The Court considered that:
- The FCA had chosen to adopt an essentially voluntary scheme of redress and, as a result of this, it could not have imposed the defendant's role ("as vital as it was") upon Barclays in the exercise of its regulatory powers. The arrangements only directly engaged Barclays, which was able to select a different independent reviewer if it so wished;
- That the defendant's powers were conferred by contract with the bank was "important, albeit not determinative", and it was relevant also that the defendant had no relationship with customers (such as the claimant);
- The defendant was not actually appointed by the FCA, rather the FCA approved its appointment on the basis that it had the skills and experience necessary to carry out functions which Barclays had to secure pursuant to its voluntary undertaking. This was insufficient to "attract public law duties";
- The authorities (Aegon Life[2]and YL[3], particularly) illustrated that the fact that private arrangements used to secure public law objectives do "not bring those arrangements into the public domain sufficient to attract public law principles". The fact that the defendant's role assisted the FCA's (public law) objectives was not enough to make it amenable to judicial review; and
- The FCA could, if it deemed it necessary, take a more active role in proceedings, particularly if a complainant alleged that they had not been treated fairly by both the bank and the defendant. The FCA would, the Court added, potentially be subject to judicial review if it failed to regulate in an appropriate manner.
The Court considered further that even if the defendant were under a public law duty, on the facts there was no unfairness in the evaluation process and there could in turn be no material breach by the defendant of any public law duty to secure fair process. The judicial review claim was, therefore, dismissed.
It is difficult to align the facts of this case closely with those of any of the authorities cited in it, the position is still perhaps best summarised in Datafin[4]:
"if the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then that may…be sufficient to bring the body within the reach of judicial review".
The case will be of interest to private organisations operating in any way on behalf of a public body or in pursuance of its public law functions and duties and will be of relief particularly to companies appointed as independent reviewers in related voluntary redress schemes. Ultimately, whether or not an organisation is amenable to an application for judicial review will be context sensitive and will depend on a close examination of the functions it is discharging in a particular case.
[1] This is considered in detail at paragraphs 23 – 48 of the judgment
[2] R v The Insurance Ombudsman Bureau ex p Aegon Life [1994] CLC 88
[3] YL v Birmingham City Council [2007] UKHL 40
[4] R v Panel on Take-Overs and Mergers ex p Datafin [1987] QB 815