R v. The Council of Lloyd's EX PARTE CUTHBERT HEATH UNDERWRITING LIMITED

[1998] EWHC Admin 415 (7th April, 1998)

IN THE HIGH COURT OF JUSTICE No. CO/246/98
QUEENS BENCH DIVISION
CROWN OFFICE LIST

Royal Courts of Justice
Strand,
London, WC2.
Tuesday, 7th April 1998
Before:
MR JUSTICE SEDLEY

R E G I N A
- v -
The Council of Lloyd's
EX PARTE CUTHBERT HEATH UNDERWRITING LIMITED

MR J. FLAUX QC AND MR S. PHILLIPS appeared on behalf of the Applicant. 
The Respondent did not appear and was not represented. 

Computerised transcript of Smith Bernal Reporting Ltd. 
180 Fleet Street, London, EC4A 2DH 
Telephone: 0171 421 4040 
(Official Shorthand Writers to the Court) 

PROCEEDINGS 
Tuesday, 7th April 1998 
MR FLAUX: My Lord, I appear with my learned friend, 
Mr Stephen Phillips, on behalf of Cuthbert Heath Underwriting Limited. 

1. My Lord, the applications before the court are the application for leave to bring judicial review of the decision by Lloyd's to commence disciplinary proceedings against Cuthbert Heath, whom I will refer to if I may as CHUL, under the Lloyd's Disciplinary Committee byelaw, and there is combined with that, if the application for leave is successful, an application for stay of the proceedings before the Disciplinary Tribunal. 

2. MR JUSTICE SEDLEY: Are Lloyd's on notice of this application? 

3. MR FLAUX: They are, my Lord. The position is this: If I may just explain to your Lordship where the matter stands? 

MR JUSTICE SEDLEY: Yes. 

4. MR FLAUX: The disciplinary proceedings, as you will have seen I hope from the form 86A, were commenced on 23rd December 1997, and the substantive complaint on behalf of our clients concerns the delay in deciding to bring those proceedings. Under the rules, the disciplinary rules pursuant to the byelaw there is a provision for the service of a defence within 28 days. My clients did not serve a defence within 28 days because they made this application for leave to bring judicial review and there was then a certain amount of discussion between my instructing solicitors and the solicitors for Lloyd's as to the effect of that, and the solicitors for Lloyd's ultimately invited the Disciplinary Board to appoint a Disciplinary Tribunal under the byelaw and the rules, and I can show your Lordship the relevant provisions. 

5. MR JUSTICE SEDLEY: Yes, I see that that has been done. 

6. MR FLAUX: What happened was there was a hearing on 24th March at which I attended in order to seek to persuade the Disciplinary Board not to appoint a tribunal. The argument by Lloyd's was essentially that that was seeking to in effect usurp the jurisdiction of this court. Whether that argument is right or not, the Disciplinary Board decided to appoint the Tribunal. 

7. The position is that the Tribunal has been appointed, but Lloyd's inevitably, because it arose during the context of that hearing, Lloyd's is aware of the present application and, indeed, your Lordship may have seen that there was a second affidavit sworn by Mr Hazlewood, who is the Director, the remaining Director of CHUL which exhibited various correspondence with Lloyd's in which they had raised various objections to the present application. 

8. MR JUSTICE SEDLEY: Yes, but are they on notice in the sense that they have been told that you will be applying this morning? 

MR FLAUX: Indeed, my Lord. 

MR JUSTICE SEDLEY: And for a stay? 

MR FLAUX: Yes my Lord. 

9. MR JUSTICE SEDLEY: They elected not to appear? 

10. MR FLAUX: Indeed, my Lord. What has happened, if I can just complete the picture, is that yesterday my instructing solicitors received from the solicitor for Lloyd's a letter which drew attention to the fact that there was various material that had not been put before the court and inadvertently there were a few matters which were not before the court. We have endeavoured to remedy that by Mr Hazlewood swearing a further affidavit, and with your Lordship's leave, if I may I will pass that up and just explain to your Lordship what the material is. (Handed) 

11. My Lord, the body of the affidavit essentially just apologises to the court for having inadvertently not exhibited all the material, but the exhibit, which is exhibit DH5, consists, firstly, of the decision of the appeal tribunal in the case of Cowen, which your Lordship may have seen referred to in our outline submissions. This is a case which Lloyd's in correspondence and, indeed, at the hearing on 24th March has placed considerable reliance upon, saying that in effect this application should be being made to the Disciplinary Tribunal, and your Lordship will have seen how we deal with that in our skeleton. This is the actual decision. It is a very lengthy decision, my Lord, and I was not proposing to read it all to your Lordship. So far as necessary there are one or two passages that you may -- 

12. MR JUSTICE SEDLEY: Which are the passages that relate to this issue? 

13. MR FLAUX: My Lord, paragraph 8, or paragraph 6 rather on the bottom of page 10 of the text, page 11 of the bundle, your Lordship has a heading, "Abuse of process". This was the argument that was raised that continued prosecution of the proceedings would be an abuse of the process, and Mr Southwell, who was the Deputy President of the Appeal Tribunal, has set out the two cases in which there have been authority for guidance, and then in paragraph 8 states the principle, and he says: 

"There is a heavy burden on the defendant to show on the balance of probabilities that, if the prosecution were to proceed he would suffer serious prejudice to the extent that a fair trial cannot be held...", et cetera. 

14. Really we would draw your Lordship's attention to points (a) and (b): 

15. The serious prejudice 

"could not be remedied by exercise of the trial judge's powers in relation to the trial." 

And (b) 

"Would outweigh the interests of the public in charges, which have properly been brought, being duly determined in a trial of the defendant." 

16. It is essentially that, in my submission, which echoes the point that we have made in our skeleton that the Tribunal has obviously been set up pursuant to the byelaw and the rules and we would respectfully submit it does not have jurisdiction to determine whether the decision by Lloyd's to bring the disciplinary proceedings at all is or is not a proper decision. It must proceed on the basis those proceedings have properly been brought. 

17. Now I quite accept that there must be an element of overlap, because no doubt if our application to the court is unsuccessful and if these disciplinary proceedings go ahead, there may very well come a time in the context of those proceedings where we would be saying that it is unjust for the proceedings to continue because we are prejudiced in presenting our defence, but that may or may not be the case, but the real point is that what we seek to attack by way of our application for judicial review is the decision to bring the proceedings in the first place and, in my submission, that is a matter for this court and not for the Tribunal itself. 

18. MR JUSTICE SEDLEY: The reason why you attack the decision to bring the proceedings is that they relate to matters in part so old that you cannot fairly be expected to deal with them? 

19. MR FLAUX: Partly that; partly, as your Lordship will have seen from the form 86A grounds, one of the major matters on which we rely is that the prejudice we suffer because the proceedings are brought after the Lloyd's settlement in R v R in which we have effectively been obliged as part of the overall settlement package to enter into settlement agreements with the syndicate auditors, Arthur Andersen, and therefore what we face is potential disciplinary proceedings which may eventuate in considerable legal costs and, at the end of the day, a large fine in circumstances where, had the proceedings been brought at an earlier stage, before settlement we would certainly submit that we would have a strong arguable case against the syndicate auditors for some form of contribution or indemnity. That is now a matter which is not open to us at all as a consequence of the delay in bringing the disciplinary proceedings. 

20. MR JUSTICE SEDLEY: Is there any indication of what Mr Southwell means by the phrase, "Charges which have been properly brought"? Does he mean more than that they have come before the Tribunal at the instance of the Disciplinary Board in due form? 

21. MR FLAUX: I believe that is right, my Lord, and he does not discuss the question of whether they were properly brought. 

22. MR JUSTICE SEDLEY: Properly in the sense of brought without improper motive. 

23. MR FLAUX: Without improper motives. 

24. MR JUSTICE SEDLEY: Do you accept that if, for example, in trying to stop disciplinary proceedings you were able to bring evidence that there was bad faith in the initiation of the proceedings you could legitimately do so and the Tribunal would have to listen to you? 

25. MR FLAUX: My Lord, I am not sure that I do accept that. 

26. MR JUSTICE SEDLEY: Well, why not? You see, it seems to me that the real hurdle you face in this application does not have to do with this court's jurisdiction -- I think you have a cogent argument for distinguishing the no jurisdiction cases. It is whether you are using as a first resort a court which is, which can only offer remedies of last resort and whether your proper first resort either was, or if you get over the 28 day barrier still is to the very tribunal which is there to try the case. In other words, it can entertain everything that this court should entertain and should first entertain it. 

27. MR FLAUX: My Lord, I do not accept that the Tribunal has jurisdiction to determine whether or not the decision by Lloyd's to initiate the proceedings was or was not a fair and proper decision. The Tribunal is essentially a creature of statute. There is a distinction, in my submission, between, for example, the cases of Justices who determine whether or not a prosecution has properly been brought that there the particular bench of magistrates, obviously, has an existence separate of the case which they are hearing. In this instance this Disciplinary Tribunal is an ad hoc tribunal set up for the purposes of determining these disciplinary proceedings, so it only has an existence and therefore only has a jurisdiction if the proceedings are properly brought. That is why we say the question whether or not it is a proper decision by law is a matter for the court in the first instance, otherwise what one would potentially face is having to go through the hurdle of the disciplinary proceedings and any appeal proceedings. At the end of the day, in relation to a fundamental prior question as to the validity of the decision that had been made to initiate the proceedings at all, and if we are right in saying that that decision is capable of being impugned before the court then the Disciplinary Tribunal ought not to be in existence at all. 

28. MR JUSTICE SEDLEY: Yes, but equally, if it is an issue which is within the competence of the Disciplinary Tribunal itself then do you accept that it is there rather than here that you should be first raising the challenge? 

29. MR FLAUX: My Lord, subject to the point that is raised by in the Court of Appeal in R v Chief Constable of Merseyside ex parte Calveley [1986] 1 QB 424 that we have referred to in our skeleton argument -- 

30. MR JUSTICE SEDLEY: You have quoted Calveley sufficiently there, have you? 

31. MR FLAUX: It is the point we make in paragraph 7 on page 4 where we say in effect even if we are wrong about the alternative remedies argument, the existence of an alternative remedy is not the end of the matter where the course which weseek to pursue is by far the most efficacious and convenient manner of proceeding and, my Lord, perhaps I can just show your Lordship the passage from the Court of Appeal judgment in Calveley. We do have photocopies of the cases which in turn does actually quote sufficiently the judgment of the Lord Chief Justice in the Hillingdon Borough Council case. I do not know if your Lordship needs to be reminded of the facts of Calveley. 

32. MR JUSTICE SEDLEY: I remember what Calveley was about. Which is the passage? 

33. MR FLAUX: It is the passage in the judgment of May LJ which begins at page 436. He is referring here to the normal rule that the applicant should exhaust his remedies before the relevant tribunal before coming to court to seek judicial review, and he then says at the top of 436 that there will be exceptions, and he cites the judgment of the Lord Chief Justice between (b) and (c): 
"Lord Widgery considered in his judgment whether judicial review would go at all to control the activity of a local planning authority. He concluded that it would and said: 'in particular, it has always been a principle that certiorari will go only where there is no other equally effective and convenient remedy'. However, in my view it would be wrong to conclude from this dictum that in every case where there is an alternative remedy, but one which is not as effective or convenient as certiorari, this alone is enough to enable the court to put the alternative remedy on one side and to grant judicial review." 

34. Then he refers to the passage from Lord Widgery's judgment, and between E and F, having referred to the facts, the Lord Chief Justice said: 
"Given those facts I can well see that it may be more efficient, cheaper and quicker to proceed by certiorari, and in those cases when they arise it seems to me proper that that remedy should be available." 

35. What the Court of Appeal decide in this case is that notwithstanding that the police officers in question could have pursued the matter through the appeal procedure it was a convenient and efficient way of proceeding to bring the matter before the court. That is a case where they were in effect seeking to challenge the decision of the Chief Constable in relation to those proceedings. 

36. My Lord, we do say if we are wrong in the argument that I have addressed to your Lordship about alternative remedies, and even if the Tribunal does have the jurisdiction which we say it does not have, what one potentially faces, in my submission, is a hearing before the Tribunal in which the Tribunal may or may not be inclined to take this as a preliminary point. They may, on the other hand, wish to proceed with the hearing; one simply does not know. One has to go through potentially that hoop and the hoop of the appeal tribunal in circumstances where if we are right we can obtain a remedy here which prevents any of that taking place at all. 

37. MR JUSTICE SEDLEY: Is the 28-day period a period which the tribunal can enlarge at its discretion? 

38. MR FLAUX: My Lord, the way in which it works is that Lloyd's may invite the Tribunal to make a ruling, which is rather like a judgment in default of service of defence, and it is then open to the applicant in the position of my client to apply to the tribunal to set aside the ruling. 

MR JUSTICE SEDLEY: I follow. 

39. MR FLAUX: So we would have to show that we had an arguable defence to the allegations which one hopes that one could demonstrate without too much difficulty. So the 28-day provision, although it is an absolute provision, the Board and the Tribunal have no discretion under the disciplinary rules to extend that period of time. The route by which one sets aside the ruling is a route which effectively gives one the same remedy. 

40. MR JUSTICE SEDLEY: On the same basis as the court knows, that is if merits are shown. 

41. MR FLAUX: Yes, that is essentially how it proceeds, my Lord. 

42. MR JUSTICE SEDLEY: Yes. Well, in that case as I say, you accept that you have to deal with this and get over this hurdle of the alternative remedy by recourse of the Tribunal itself. I do not need to trouble you at this stage on susceptibility to judicial review. Is there anything else you wish to add then? I have read the commended reading list, which if I may say so is commendably brief and to the point and I am most grateful for it. It is customary sometimes to be told to read the whole bundle. So I have the picture. 

43. MR FLAUX: My Lord, the essence of the argument we have set out in writing and I have reiterated it before your Lordship. Unless your Lordship is going to be assisted by looking at the byelaws themselves. 

44. MR JUSTICE SEDLEY: No, I take them from your account; they are clear enough. 

45. MR FLAUX: My Lord, so far as the application for a stay is concerned, that essentially follows. If your Lordship is minded to grant leave we would submit that it is the convenient course that there should be a stay of disciplinary proceedings. 

46. MR JUSTICE SEDLEY: I hear you on that. Thank you. 

47. Thank you very much then, Mr Flaux.