R (On
The Application Of West) V Lloyd's Of London
COURT OF
APPEAL (CIVIL DIVISION)
[2004]
EWCA CIV 506, [2004] All
ER (D) 270 (Apr), (Approved judgment)
HEARING-DATES:
27 APRIL 2004
27 APRIL 2004
Judicial review -
Availability of remedy - Public body - Lloyd's of London - Regulatory functions
in relation to affairs of members - Functions not amenable to judicial review.
This judgment has
been summarised by LexisNexis UK editors.
By decisions made
pursuant to the Major Syndicate Transactions Byelaw (the MST Byelaw), which was
approved by the Council of Lloyd's in May 1997, the Business Conduct Committee
(BCC) of Lloyd's of London approved four minority buy-outs of the claimant's
memberships, or potential memberships, of four syndicates at Lloyd's. Lloyd's
powers were derived from a number of private Acts of Parliament (the Lloyd's
Acts 1871-1932). Its objects, which were set out in s 10 of the 1871 Act, were
all of a commercial nature.
The claimant's
application for permission to apply for judicial review of those decisions was
refused on the grounds that Lloyd's was not a public authority and that the
decisions of one of its committees were not made in the exercise of a public
function. His appeal against that refusal was allowed, and the court directed
that the question whether Lloyd's was amenable to judicial review, whether by
virtue of s 6 of the Human Rights Act 1998 or otherwise, in relation to its
functions under scrutiny in the instant case, should be reserved to the Court
of Appeal and tried first. The relevant functions were those performed by the
Council and its committees when they were exercising regulatory powers in
relation to the affairs of the members of Lloyd's and of other people, such as
members' agents or managing agents of Lloyd's syndicates, who were involved in
different aspects of the transaction of business at Lloyd's.
The claimant
complained that his share of syndicate capacity had been purchased at an
undervalue. He also complained about his lack of access to a right of appeal
against the BCC's decisions, and his inability, pursuant to s 14(3) of the
Lloyd's Act 1982, to sue the Council for negligence unless it had acted in bad
faith. In those circumstances he wished to invoke the provisions of art 1 of
the First Protocol to and arts 6 and 14 of the European Convention on Human
Rights, which he could not do if Lloyd's was not exercising public functions in
relation to the matters in issue.
The court ruled:
Lloyd's was not
amenable to judicial review, whether by virtue of s 6 of the 1998 Act or
otherwise, in relation to the functions under scrutiny in the instant case.
(i) The fact that
Lloyd's corporate arrangements were underpinned by a private Act of Parliament
and not by the Companies Act 1985 made it in no way unique and was not
dispositive of the matter. The decisions under challenge were solely concerned
with the commercial relationship between the claimant and the relevant managing
agents, which was governed by the contracts into which he had chosen to enter.
Those decisions were of a private, not a public, nature. They had consequences
for the claimant in private, not public law.
R v Lloyd's of
London, ex p Briggs [1993] 1 Lloyd's Rep 176, R v Corp of Lloyd's, ex p Lorimer
(16 December 1992, unreported), R v Council of Society of Lloyd's, ex p Johnson
(16 August 1996, unreported) approved.
(ii) The fact that
Lloyd's regulated its members' activities in the way it did, as a result, in
part, of its desire to avoid a more intrusive governmental regime, could not
possibly convert it into a body exercising public functions itself within the
meaning of Strasbourg case law. It was the Financial Services Authority which
performed governmental functions in such matters, not Lloyd's.
Poplar Housing and
Regeneration Community Association v Donoghue [2001] 4 All ER 604, R (on the
application of Heather) v Leonard Cheshire Foundation [2002] 2 All ER 936,
Aston Cantlow and Wilmcote with Billesley PCC v Wallbank [2003] 3 All ER 1213
considered.
[EDITOR'S NOTE: A
table appeared at this point which could not be reproduced for electronic
purposes. Please see original.]
This is the first
approved version handed down by the court. An edited official transcript or
report will follow.
Gordon Nardell for
the claimant.; Paul Walker QC and Marie-Eleni Demetriou for Lloyd's.
PANEL:
BROOKE, MUMMERY AND DYSON LJJ
JUDGMENT: APPROVED
BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS)
JUDGMENTBY-1:
BROOKE LJ
BROOKE LJ:
1. Introductory
1. On 23rd December
2002 Dr Julian West issued a judicial review claim form in which he sought to
impugn four decisions of the Business Conduct Committee ("BCC") of
Lloyd's of London to approve four minority buy-outs of his memberships - or
potential memberships - in four syndicates at Lloyd's. These decisions were
made in October and November 2002. On 6th May 2003 Dr West appeared in person
before Keith J who refused him permission to apply for judicial review on the
grounds that Lloyd's was not a public authority and that the decisions of one
of its committees were not made in the exercise of a public function. On 3rd
October 2003 this court (Ward and Latham LJJ) granted him permission to apply
for judicial review and directed that the question whether Lloyd's was amenable
to judicial review, whether by virtue of section 6 of the Human Rights Act 1998
("the HRA") or otherwise, in relation to its functions under scrutiny
in this case, be reserved to this court and tried first.
2. The reason why
the court took this unusual step was that there had been a series of cases in
what is now the Administrative Court which upheld the proposition that Lloyd's
did not operate in the public sphere, at any rate in relation to those of its
functions that were under consideration in those cases, and although the coming
into force of the HRA added a new dimension to the debate, it was thought
inappropriate to remit the issue back to the Administrative Court in the light
of the strong line of earlier authority at that level. This line of authority
starts with R v Lloyd's of London ex p Briggs [1993] 1 Lloyd's Rep 176, and
includes a judgment of mine (when sitting as a single judge of the High Court)
in R v Council of Society of Lloyd's ex p Johnson (COT 16th August 1996).
3. It needs to be
stressed at the outset that this case is concerned only with the functions
performed by the Council of Lloyd's and its committees when they are exercising
regulatory powers in relation to the affairs of the members of Lloyd's and of
other people, such as members' agents or managing agents of Lloyd's syndicates,
who are involved in different aspects of the transaction of business at
Lloyd's. It is not concerned with the exercise of disciplinary functions, nor
with the exercise of regulatory functions for the protection of policy-holders.
2. Lloyd's: (i) its
status, powers and governance arrangements
4. I will start by
giving a brief outline of the issues we have to consider in the context of
their historical and institutional setting. The Society of Lloyd's is an
association of insurance underwriters. As a matter of legal form, it is a
statutory corporation incorporated by a private Act of Parliament, the Lloyd's
Act 1871. The underwriting of insurance business is carried on at Lloyd's by
its members (otherwise known as "Names"). Lloyd's manages and
superintends the Lloyd's insurance market.
5. Lloyd's powers
are derived from a number of private Acts of Parliament (the Lloyd's Acts
1871-1982). Its objects, which are set out in section 10 of the 1871 Act, as
amended by section 4 of the 1911 Act, are all of a commercial nature.
6. Lloyd's is now
governed by the Council of Lloyd's ("the Council"). By section 6(1)
of the Lloyd's Act 1982 ("the 1982 Act") the Council possesses the
powers to regulate and direct the business of insurance at Lloyd's and to
exercise all the powers of the Society. The Council acts through various
committees. At the time of the decisions affecting Dr West these included the
Lloyd's Regulatory Board, which acted through the BCC in relation to the
matters in issue. Section 6(2)(a) of the 1982 Act gives the Council the power
to make bye-laws, as appropriate.
3. Lloyd's: (ii)
the external regulatory regimes
7. Lloyd's has long
been subject to external regulation. At EU level Lloyd's is treated as an
"insurance undertaking" for the purposes of insurance regulation, and
as an "association of undertakings" for the purposes of competition
law. At national level the principal statute governing the regulation of
insurers in recent times was the Insurance Companies Act 1982, which gave the
Department of Trade and Industry power to regulate the insurance market
generally. Special provision was made by section 83 of that Act to regulate the
conduct of insurance business by each individual member of Lloyd's. In
practice, so long as members of Lloyd's complied with the quite limited
requirements of that section, they would not be subject to the detailed
monitoring requirements for insurance companies that are set out in Part II of
that Act. Since 1st December 2000, however, Lloyd's has been subjected to a far
more extensive regulatory regime in which the prudential regulation of all
insurance entities, including Lloyd's, is now exercised by the Financial
Services Authority ("FSA") under the provisions of the Financial Services
and Markets Act 2000 ("FSMA").
4. Lloyd's: (iii)
its members, syndicates and managing agents: minority buy-outs
8. The underwriting
syndicates at Lloyd's are composed of members of Lloyd's. They are managed by
managing agents. The members can now be corporate or non-corporate. Membership
of Lloyd's is entirely voluntary, and every member enters into a contract with Lloyd's
which contains the following express obligations:
(a) Throughout the
period of their membership, to comply with the provisions of the Lloyd's Acts
1871-1982, any subordinate legislation made or to be made thereunder, and any
direction given or provision or requirement made or imposed by the Council or
any person or body acting on its behalf;
(b) To become a
party to, perform and observe all the terms and provisions of any agreements or
other instruments as may be prescribed and notified to the Member or his
underwriting agent by or under the authority of the Council.
It follows that
Lloyd's byelaws are binding on each member in contract.
9. At the heart of
the present dispute is the relationship between the members of a syndicate and
the syndicate's managing agent. The extent of a member's right to participate
in a syndicate is governed exclusively by the terms of his contract with the
managing agent. Before 1994 the managing agent could simply terminate the
agreement by notice expiring at the end of an underwriting year, but Lloyd's
turbulent experiences in the late 1980s and early 1990s led not only to the
introduction of corporate membership but also to the introduction of a new
regime with effect from January 1995 whereby if a managing agent proposed to
terminate a member's participation in a syndicate it was obliged to obtain the
prior consent of the Council. The effect of this change was to give a member
the right in certain circumstances to participate in the syndicate for the
following year of account. A system of "auctions" of syndicate
participations was also introduced by which members could "sell" that
right.
10. The reforms at
Lloyd's included the development of what became known as an integrated Lloyd's
vehicle ("ILV"), being a single corporate member managed by an
affiliated managing agent. In order to facilitate the growth of ILVs, Lloyd's
created a framework by which a corporate member under common ownership with a
syndicate's managing agent, might offer to acquire the participation of members
of that syndicate. It also developed rules which obliged a member with more
than 75% of a syndicate's capacity to make an offer to buy the capacity of the
other members of the syndicate, and other rules which permitted minority
buy-outs by managing agents or corporate members who acquired 90% or more of a
syndicate's capacity.
11. The minority
buy-out rules are contained in the Major Syndicate Transactions Byelaw
("the MST Byelaw"), which was approved by the Council in May 1997.
Under this byelaw, a minority buy-out must be preceded by an offer (whether
mandatory or voluntary). Where 50% or more of offerees have accepted the offer
and the offeror and his associates hold at least 90% of the syndicate capacity,
the MST Byelaw permits an offeror to buy-out the remaining minority, subject to
the approval of the Council.
5. The impugned
decisions: Dr West's claims
12. The decisions
which Dr West seeks to impugn in these proceedings were made by the BCC
pursuant to the MST Byelaw. By the first decision, made on 3rd October 2002,
the BCC gave final approval to a proposal by Catlin Underwriting Agencies Ltd,
as managing agents of syndicate 1003, to terminate its contracts with syndicate
members. By the second decision, made on 11th October 2002, similar approval
was given to a proposal by Amlin Underwriting Ltd in relation to syndicate
2001. Dr West was a member of both these syndicates.
13. The third and
fourth decisions, made on 8th November 2002, gave similar approval to a
proposal by St Paul Syndicate Management Ltd in relation to syndicate 340 and
to a proposal by Faraday Underwriting Ltd in relation to syndicate 435. Dr West
had participated in an "auction" process in which the
"right" to join these syndicates for the 2003 year of account was
being "purchased" subject to the possibility of a minority buy-out.
We were told by Mr Nardell, who appeared for Dr West, that his client knew that
buy-out applications had been made when he placed his bid in these auctions.
14. In these
proceedings Dr West complains that his share of syndicate capacity was
purchased at an undervalue. He also complains about his lack of access to a
right of appeal against the BCC's decisions, and his inability to sue the
Council of Lloyd's for negligence unless it acted in bad faith (see section
14(3) of the 1982 Act). In these circumstances he wishes to invoke the
provisions of Article 1 of the First Protocol and Articles 6 and 14 of the
European Convention on Human Rights ("ECHR"). If Lloyd's was not
exercising public functions in relation to these matters, these avenues of
complaint will not be available to him. Hence the importance of the present
application.
6. The obligations
owed by Lloyd's to its members
15. In Society of
Lloyd's v Clementson [1995] CLC 117 this court considered the nature of the
obligations owed by Lloyd's to its members in relation to the regulation and
direction of insurance business at Lloyd's. It concluded that the contract of
membership contained no implied obligations on Lloyd's, although independent of
contract a member might assert against Lloyd's obligations not to act
unlawfully, ultra vires, for an improper purpose, or in bad faith. Furthermore
a member might rely on EU law to impugn a decision of Lloyd's as an association
of undertakings if an impugned decision might affect trade between member
states and had as its object or effect the prevention, restriction or
distortion of competition within the common market.
16. Dr West,
however, asserts two more species of obligations: an obligation founded on
public law which renders Lloyd's amenable to judicial review, and an obligation
imposed on Lloyd's as a public authority by section 6(1) of the HRA.
7. Lloyd's and judicial
review: the Administrative Court decisions
17. There have
been, as I have said, a number of decisions of the Administrative Court in
which it was said that the decisions impugned in those proceedings were not
amenable to judicial review. In R v Lloyd's of London ex p Briggs [1993] 1
Lloyd's Rep 176 the Divisional Court was concerned with a case in which members
of Lloyd's challenged the legal validity of cash calls made on them by the
managing agents of their syndicates. The court's conclusions on the issues that
are relevant in the present proceedings were set out crisply by Leggatt LJ at p
185:
"It does not
help to refer to the respondents as regulators or to describe the system
administered by the Corporation of Lloyd's as a regulatory regime as is done in
the form 86 in these proceedings. The fact is that even if the Corporation of
Lloyd's does perform public functions, for example, for the protection of
policy holders, the rights relied on in these proceedings relate exclusively to
the contract governing the relationship between Names and their members'
agents. We do not consider that that involves public law. That is consonant
with Mr Justice Saville's conclusion that a Name was not entitled to disregard
a cash call made in good faith by the members' agents. We accordingly endorse
[counsel's] submission that 'all of the powers which are the subject of
complaint in the present application are exercised by Lloyd's over its members
solely by virtue of the contractual agreement of the members of the Society to
be bound by the decisions and directions of the Council and those acting on its
behalf'.
Lloyd's is not a
public law body which regulates the insurance market. As [counsel] remarked,
the Department of Trade and Industry does that. Lloyd's operates within one
section of the market. Its powers are derived from a private Act which does not
extend to any persons in the insurance business other than those who wish to
operate in the section of the market governed by Lloyd's and who, in order to
do so, have to commit themselves by entering into the uniform contract
prescribed by Lloyd's. In our judgment, neither the evidence nor the
submissions in the case suggest that there is such a public law element about
the relationship between Lloyd's and the Names as places it within the public
domain and so renders it susceptible to judicial review."
18. That decision
was followed by Pill J in R v Corporation of Lloyd's ex p Lorimer (COT 16th
December 1992, a case concerned with a public law challenge to a decision by
the Lloyd's Members' Hardship Committee) and by myself in ex p Johnson (see
para 2 above) which was a public law challenge to certain features of Lloyd's
Renewal and Reconstruction Plan. I noted in my judgment that in R v Insurance
Ombudsman Bureau ex p Aegon Life Assurance Ltd [1995] IRLR 101 Rose LJ, sitting
in the Divisional Court, had said that he could see no basis for counsel's
criticism of the judgment in Briggs. I also referred to the fact that Saville
and Cresswell JJ (at first instance) and Sir Thomas Bingham MR, Steyn and
Hoffmann LJJ (in this court) had all been involved in Society of Lloyd's v
Clementson [1995] CLC 117 (see para 15 above), and none of them had apparently
suggested that that dispute, which concerned the powers of Lloyd's in
connection with claims to reimbursement of its Central Fund, belonged properly
to the field of public rather than private law.
19. I went on to
say (transcript pp 66-68):
"I am
certainly willing to accept that in some contexts judicial review may be available
even if the relationships in question are founded in contract, if the body
whose actions are sought to be reviewed is performing a function that can
properly be described as governmental, although the normal rule is that the
express or implied terms of the agreement should govern the matter - see de
Smith, Woolf and Jowell ... at p 170 - but I am quite unable to see how this
epithet 'governmental' can be ascribed to Lloyd's relationships with its
members. As [counsel] observed, if the DTI was not satisfied with the Lloyd's
system of self-regulation, the upshot would not be a situation in which Lloyd's
would become a governmental regulatory authority, or one in which the DTI would
regulate the way in which Lloyd's members were obliged to subscribe funds or to
embark on reinsurance of old liabilities. The DTI would continue to be the
authorising body, and it would be for it to decide what conditions it should
impose on former Lloyd's underwriters before granting them authority to carry
on insurance business if the blanket exemptions for members of Lloyd's no
longer existed."
20. In
Doll-Steinberg v Society of Lloyd's [2002] EWHC 419 (Admin), a case concerned
with a decision of the Lloyd's Settlement Offer Panel, Stanley Burnton J, while
regarding himself bound by the decision of the Divisional Court in Briggs, and
finding himself unable to distinguish the functions of the Panel from the
functions considered in Briggs (and even more obviously in Lorimer) said (at
para 27):
"Indeed, quite
apart from these authorities, I should have held that the function of the Panel
is a private law function, and not a public function. The indebtedness of the
claimant is a private law indebtedness: it relates to a reinsurance premium
which she has been held liable to pay. The fact that the claimant's liability
may have involved the exercise of powers conferred by statute does not affect
the intrinsic nature of that liability. The function of the Panel is to
consider the acceptance by Lloyd's of a lesser sum in settlement of that
private law liability. I see no public law function involved in its
decisions."
8. Lloyd's: the
regulatory regime under FSMA
21. FSMA introduced
a new regulatory regime, so far as Lloyd's was concerned. By section 19(1) of
that Act, no person may carry on a regulated activity in the United Kingdom
unless he is an "authorised person" or "an exempt person"
(a concept which can be disregarded in the present context). It was not in
issue that underwriting business conducted at Lloyd's is a regulated activity,
as is apparent from section 315 of the Act, which provides, so far as is
material:
"(1) The
Society is an authorised person.
(2) The Society has
permission to carry on a regulated activity of any of the following kinds:
(a) arranging deals
in contracts of insurance written at Lloyd's ('the basic market activity');
(b) arranging deals
in participation in Lloyd's syndicates ('the secondary market activity');
(c) an activity
carried on in connection with, or for the purposes of, the basic or secondary
market activity."
22. Section 315(4)
has the effect of giving the FSA power to vary or cancel any of Lloyd's
permissions, and by section 318(1) the FSA may give a direction to Lloyd's in
order to achieve any objective specified by the FSA. Sections 316-7 give the
FSA the power to give directions to a member or the members of Lloyd's
collectively of the types described in those provisions. We were told that an
insurance market direction has been given pursuant to section 316 which has the
effect of providing that each member of Lloyd's is individually subject to the
rules contained in a FSA handbook which relates to firms' complaint-handling
processes.
23. We were also
referred to S1 2001 No 544 which by regulation 56 identifies the relevant
regulated function for a member's agent at Lloyd's ("advising a person to
become, or continue or cease to be, a member of a particular Lloyd's
syndicate") and by regulation 57 performs the same role in relation to a
managing agent at Lloyd's ("managing the underwriting capacity of a
Lloyd's syndicate as a managing agent at Lloyd's"). It is therefore
apparent that as authorised persons within the meaning of FSMA Lloyd's
underwriting agents are subject to the full scope of the supervisory and enforcement
powers of the FSA which are set out in that statute, even if the FSA may leave
it, at any rate for the time being, to the Council of Lloyd's to regulate
Lloyd's underwriting agents.
24. It is
unnecessary for the purposes of this judgment to describe in any greater detail
other facets of the evolving relationship between the FSA and Lloyd's which are
set out in paragraphs 54 to 67 of the witness statement of Mr Sean McGovern,
who is a director and general counsel (legal services) at Lloyd's. A FSA
Consultation Paper, issued in April 2003, explained the way in which the FSA
proposed at that time to develop prudential requirements which would apply
directly both to the Society of Lloyd's as a corporate entity and to Lloyd's
managing agents.
25. The FSA has
issued a document known as the "Lloyd's sourcebook" which forms part
of the FSA Handbook. This sourcebook contains a number of material rules and
requirements. They include solvency requirements at member level and the
maintenance by Lloyd's of a prescribed level of "net central assets".
The FSA and Lloyd's have also agreed a memorandum of understanding which
relates to the operation of certain of their respective supervisory and
enforcement functions. The purpose of this memorandum is to avoid duplication
of effort, to ensure that there is efficient and effective supervision of
underwriting agents, and to achieve close, co-operative and effective working
relationships between the FSA and Lloyd's in their respective enforcement
roles. A document published by the FSA and Lloyd's sets out in detail the
arrangements that have been agreed for these purposes. It states in unequivocal
terms (in para 3):
"Under the
Financial Services and Markets Act 2000 (the Act'"), the FSA is the
primary regulator for all financial services business in the UK. Its general
duties and regulatory objectives are set out in sections 2 to 6 of the Act. It
also has a general duty under section 314 of the Act with respect to the market
at Lloyd's. It has concluded these arrangements for the reasons set out in
paragraph 1 above. However, nothing in these arrangements can fetter its
discretion with respect to carrying out its statutory duties and
function."
26. All this
evidence clearly shows that the FSA is now the statutory regulatory authority
clothed with governmental powers in the area of Lloyd's business which is under
scrutiny in this case.
9. Lloyd's and the
exercise of power under the MST Byelaw: amenability to judicial review
27. Mr Nardell, who
has appeared for Dr West in this court, submits, however, that notwithstanding
the FSA's role, Lloyd's is itself performing a governmental function in these
matters. It is therefore, he says, to be regarded as susceptible to judicial
review in relation to the exercise of its functions under the MST Byelaw, and
in the same context it must be regarded as a public authority within the
meaning of section 6(1) of the HRA.
28. As is customary
on these occasions, he took us back to R v Panel on Take-overs and Mergers, ex
p Datafin plc [1987] QB 815. He argued that this case established that a body
like Lloyd's, which is essentially private or non-governmental, will
nevertheless be amenable to judicial review in respect of functions with a
"public" element. In the same way that Government had in effect
devolved on the Take-over Panel powers which it could ordinarily have been
expected to retain for itself, so, he argued, Lloyd's were performing functions
under its powers contained in the MST Byelaw which formed part of its
regulation in the public interest of an important section of the UK insurance
market.
29. It was an
important, but not an essential, part of his submissions that Lloyd's derived
its powers from an Act of Parliament. He encouraged us to read parts of the
seminal reports by Sir Henry Fisher and Sir Patrick Neill QC which formed some
of the catalysts for change in Lloyd's regulatory arrangements over the last 25
years. And while he referred us back in history to the enactment of the Lloyd's
Act 1982 and the Insurance Companies Act 1982 (which largely excluded Lloyd's
from the statutory regulatory regime it created), he submitted that the FSMA
preserved the same regulatory pattern. While the FSA now possessed extensive
reserve powers, Lloyd's was itself exercising regulatory powers for the
protection of its members qua consumers of financial services which government
would be exercising itself if Lloyd's fell short in the way it exercised its
powers.
30. I cannot accept
these submissions. The fact that Lloyd's corporate arrangements are underpinned
by a private Act of Parliament and not by the Companies Acts makes it in no way
unique and is certainly not dispositive of the matter. Mr Walker QC, who
appeared for Lloyd's, told us that a number of insurance companies were
incorporated by private Act of Parliament, and he showed us one such example. I
am entirely satisfied that the line of cases at Divisional Court level which
related to the private law status of Lloyd's in relation to functions such as
are in issue in this case were correctly decided. The logic behind Leggatt LJ's
approach in ex p Briggs (see para 17 above) is in my judgment unassailable. The
coming into force of the FSMA, with its altogether more intrusive regulatory
regime (so far as Lloyd's is concerned) makes the position even clearer, if
greater clarity were required.
31. The decisions
under challenge were concerned solely with the commercial relationship between
Dr West and the relevant managing agents, and this was governed by the
contracts into which he had chosen to enter. Those decisions were of a private,
not a public, nature. They have consequences for Dr West in private, not
public, law. For these tests, see R (Tucker) v National Crime Squad [2003] EWCA
Civ 599 at [16]; [2003] ICR 599.
32. I intend no
discourtesy to Mr Nardell if I do not refer to any more of his detailed
submissions, all of which I have considered with care. It seems to me that the
functions of Lloyd's which are under review in this case are totally different
from the functions of the Takeover Panel that were under consideration in ex p
Datafin. The Panel exercised regulatory control in a public sphere where
governmental regulatory control was absent. This case is concerned with the
working out of private contractual arrangements at Lloyd's which is itself
subject to external governmental regulation.
10. Lloyd's and the
exercise of power under the MST Byelaw: section 6(1) of the HRA
33. I turn
therefore to Mr Nardell's submissions about the effect of section 6 of the HRA.
That section provides, so far as is material, that:
"(1) It is
unlawful for a public authority to act in a way which is incompatible with a
Convention right.
...
(3) In this section
'public authority' includes -
(b) Any person
certain of whose functions are functions of a public nature ...
...
(5) In relation to
a particular act, a person is not a public authority by virtue only of
subsection (3)(b) if the nature of the act is private."
34. There have been
two recent decisions of the Court of Appeal and one of the House of Lords which
have shone light on the meaning of these provisions. In Poplar Housing
Association Ltd v Donoghue [2001] EWCA Civ 595; [2002] QB 48 a local authority
had transferred to the defendant housing association a substantial proportion
of its housing stock, and the question arose whether the defendants were
performing functions of a public and not a private, nature for the purposes of
section 6 of the HRA. It is possible to derive the following principles from
paragraphs 65 and 66 of the judgment of the court, given by Lord Woolf CJ:
(i) While section 6
of the Human Rights Act 1998 requires a generous interpretation of who is a
public authority, it is clearly inspired by the approach developed by the
courts in identifying the bodies and activities subject to judicial review;
(ii) The emphasis
on public functions reflects the approach adopted in judicial review by the
courts and textbooks since the decision of the Court of Appeal (the judgment of
Lloyd LJ) in ex p Datafin plc (see para 28 above);
(iii) What can make
an act, which would otherwise be private, public is a feature or a combination
of features which impose a public character or stamp on the act;
(iv) Statutory
authority for what is done can at least help to mark the act as being public:
so can the extent of control over the function exercised by another body which
is a public authority;
(v) The more
closely the acts that could be of a private nature are enmeshed in the
activities of a public body, the more likely they are to be public;
(vi) The fact that
the acts are supervised by a public regulatory body does not necessarily
indicate that they are of a public nature. (This is analogous to the position
in judicial review, where a regulatory body may be deemed public, but the
activities of the body which is regulated may be categorised private);
(vii) After
identifying the most important factors in any given case, it is desirable to
step back and look at the situation as a whole.
(viii) As is the
position on applications for judicial review, there is no clear demarcation
line which can be drawn between public and private bodies and functions. In a
borderline case the decision is very much one of fact and degree.
35. In R (Heather)
v Leonard Cheshire Foundation [2002] EWCA Civ 366; [2002] 2 All ER 936 this
court was concerned with a case involving claimants to whom the local authority
owed a duty to provide accommodation under section 21 of the National
Assistance Act 1948. The authority performed that duty by making arrangements
at public expense for the accommodation to be provided at a Leonard Cheshire
home by the defendants, a private charitable foundation. When the foundation
decided to close the home, the claimants maintained that it had been exercising
functions "of a public nature" (see HRA s 6(3)(b) above) and was
therefore amenable to a challenge on Convention grounds. The effect of
paragraph 35 of the judgment of the court, given by Lord Woolf CJ, is
accurately distilled in the summary contained in the headnote of the case:
(i) The role that
the foundation was performing manifestly did not involve the performance of
public functions;
(ii) The fact that
it was a large and flourishing organisation did not change the nature of its
activities from private to public;
(iii) While the
degree of public funding of the activities of an otherwise private body was
relevant to the nature of the functions performed, it was not by itself determinative
of whether the functions were public or private;
(iv) The foundation
was not standing in the shoes of the local authority. (Section 26 of the
National Assistance Act 1948 provided statutory authority for the actions of
the local authority, but provided the foundation with no powers);
(v) The foundation
was not exercising statutory powers in performing functions for the claimants;
(vi) The fact that
if the foundation were not performing a public function, the claimants would
not be able to rely on ECHR Article 8 as against it could not change the
appropriate classification of the foundation's function.
36. Finally, in
Aston Cantlow PCC v Wallbank [2003] UKHL 37; [2003] 3 WLR 283 the House of Lords
interpreted section 6 of the HRA for the first time. I take its main
conclusions from the speeches of Lord Nicholls of Birkenhead (at paras 6 and
7), Lord Hope of Craighead (at para 52), Lord Hobhouse of Woodborough (at para
88) and Lord Rodger of Earlsferry (at para 171):
(i) The purpose of
section 6(1) of the HRA is that those bodies for whose acts the state is
answerable before the European Court of Human Rights ("ECtHR") shall
in future be subject to a domestic law obligation not to act incompatibly with
Convention rights (para 6);
(ii) Conformably
with this purpose, the phrase "a public authority" in section 6(1) is
essentially a reference to a body whose nature is governmental in the broad
sense of that expression (paras 7, 88 and 117);
(iii) Although the
domestic case-law on judicial review may provide some helpful assistance as to
what does and what does not constitute a "function of a public
authority" within the meaning of section 6(3)(b), this case-law must be
examined in the light of the jurisprudence of the Strasbourg court as to those
bodies which engage the responsibility of the State for the purposes of the
Convention (para 52).
37. In that case
the House drew support from the opinion of the European Commission on Human
Rights in Hautanemi v Sweden (1996) 22 EHRR CD 155, and, more particularly,
from the judgment of the ECtHR in Holy Monasteries v Greece (1994) 20 EHRR 1 at
para 49 where the court said that the objectives of the monasteries -
essentially ecclesiastical and spiritual ones, but also cultural and social
ones in some cases - were not such as to enable them to be classed with
governmental organisations established for public administration purposes.
38. The objectives
of Lloyd's are wholly commercial. The nature of Lloyd's is not governmental,
even in the broad sense of that expression. If any question arises as to the
performance of any obligation on the part of the state to protect investors, it
is the FSA which is the governmental organisation which will be answerable to
the Strasbourg court, and not Lloyd's. The sixth of the principles identified
by Lord Woolf in the Poplar case (see para 34 above) is particularly in point.
39. Although, as
Lord Hope observed in the Aston Cantlow case, the caselaw on judicial review
does not provide a conclusive answer to the applicability of section 6 of the
HRA, there is nothing for Mr Nardell's comfort in any of the three decisions on
the effect of that section to which I have referred in paras 34-36 above. It is
the FSA which performs governmental functions in these matters, not Lloyd's.
The fact that Lloyd's regulates its members' activities in the way it does as a
result, in part, of its desire to avoid a more intrusive governmental
regulatory regime cannot possibly convert it into a body exercising public
functions itself within the meaning of Strasbourg caselaw.
11. Conclusion
40. For these
reasons I have reached the same conclusion as Keith J (see para 1 above) and
would make a declaration that Lloyd's is not amenable to judicial review,
whether by virtue of section 6 of the HRA or otherwise, in relation to those of
its functions that are under scrutiny in this case.
12. Transfer,
retention in the Administrative Court, or a new start?
41. Finally, while
I would usually be keen to transfer proceedings wrongly started as CPR Part 54
proceedings to the division of the court which handles private law actions of
the relevant type, or to retain in the Administrative Court cases that might
appropriately be retained there, I do not consider it to be practicable to take
either of these courses in the present case. If Dr West wished to pursue a
private law remedy against Lloyd's, those proceedings properly belong to the
Chancery Division, and he must entirely reshape his case so as to identify the
private law causes of action on which he intends to rely. Amendment simply is
not practical here: he will have to begin again, if so advised.
JUDGMENTBY-2:
MUMMERY LJ
MUMMERY LJ:
42. I agree.
JUDGMENTBY-3:
DYSON LJ
DYSON LJ:
43. I also agree.
Bindman &
Partners; Lloyd's Legal Services Department