[COURT OF APPEAL]

MAXWELL v. DEPARTMENT OF TRADE AND INDUSTRY

SAME v. STABLE AND ANOTHER

[1971 M. No. 2901]

[1971 M. No. 3369]

Natural Justice - Company - Investigation of affairs - Inspectors' duty to act fairly - Witness given opportunity to answer allegations made against him at inquiry - Witness not given opportunity to answer inspectors' conclusions before incorporated in report - Whether failure of natural justice - Companies Act 1948 (11 & 12 Geo. 6, c. 38), s. 165 (as amended by Companies Act 1967 (c. 81), s. 38 )

In September 1969 the Board of Trade appointed two inspectors under section 165 of the Companies Act 1948 to investigate and report on the affairs of two limited companies following a statement by the City Panel on Takeovers that the shareholders of one of the companies might not be getting all the information about its affairs which they might reasonably

expect. The plaintiff, who was at the material time chairman and chief executive of the companies, gave evidence at the inquiry and was recalled on a number of occasions so that the inspectors might put to him criticisms of him made by other witnesses or contained in documents and give him the opportunity of dealing with them. In June 1971 the inspectors signed their first interim report which contained conclusions highly critical of the plaintiff. He issued writs against the department and the inspectors, seeking declarations that the inspectors had conducted the inquiry and made their report without regard to the rules of natural justice, and asking for injunctions to restrain the inspectors from proceeding with the inquiry. He also moved the vacation court for an interim injunction in the terms of the writ. Forbes J., while making no order, expressed his view that the inspectors had failed to observe the rules of natural justice because they had not formulated their own tentative criticisms of the plaintiff nor given him an opportunity to deal with them before making their report, and also that having said they would follow that procedure the inspectors had failed to do so.

On the trial of the consolidated actions Wien J. refused the relief asked for, holding, contrary to Forbes J., that the inspectors had been eminently fair by giving the plaintiff proper notice of what was said against him and a fair opportunity of meeting such criticisms; and that their duty to act fairly did not require them to put their proposed conclusions to the person criticised and consider his answers before making their report. He also found that the inspectors had not undertaken to follow that procedure.

On appeal by the plaintiff: -

Held, dismissing the appeal, that when inspectors were holding an inquiry under section 165 of the Companies Act 1948 it was sufficient for them to put to witnesses what had been said against them by other persons or in documents to enable them to deal with those criticisms in the course of the inquiry; that it was not necessary for the inspectors to put their tentative conclusions to the witnesses in order to give them an opportunity to refute them and that the inspectors had not given any undertaking to do so in the present case; that the inspectors had acted with conspicuous fairness in their conduct of the investigation as a whole and had put to the plaintiff all the matters which appeared to call for an answer; and that as they had acted honestly and fairly their report was not to be impugned.

In re Pergamon Press Ltd. [1971] Ch. 388 C.A. considered.

Per curiam. Though the court has jurisdiction to make, and might in the exercise of its discretion grant, bare declarations that natural justice had not been observed in the conduct of an inquiry, the circumstances which would justify the grant of such relief in the context of an investigation under section 165 would have to be of an exceptional kind (post, pp. 536F-G,539A-B, 542C-H).

Decision of Wien J. affirmed.

The following cases are referred to in the judgments:

Board of Education v. Rice [1911] A.C. 179, H.L.(E.).

Ceylon University v. Fernando [1960] 1 W.L.R. 223; [1960] 1 All E.R. 631, P.C.

Kanda v. Government of Malaya [1962] A.C. 322; [1962] 2 W.L.R. 1153. P.C.

Local Government Board v. Arlidge [1915] A.C. 120, H.L.(E.).

Pergamon Press Ltd., In re [1971] Ch. 388; [1970] 3 W.L.R. 792; [1970] 3 All E.R. 535, C.A.

Russell v. Duke of Norfolk [1949] 1 All E.R. 109, C.A.

The following additional cases were cited in argument:

De Verteuil v. Knaggs [1918] A.C. 557, P.C.

Dyson v. Attorney-General [1911] 1 K.B. 410, C.A.

Furnell v. Whangarei High Schools Board [1973] A.C. 660; [1973] 2 W.L.R. 92; [1973] 1 All E.R. 400, P.C.

Pyx Granite Co. Ltd. v. Ministry of Housing and Local Government [1958] 1 Q.B. 554; [1958] 2 W.L.R. 371; [1958] 1 All E.R. 625, C.A.

Ridge v. Baldwin [1964] A.C. 40; [1963] 2 W.L.R. 935; [1963] 2 All E.R. 66, H.L.(E.).

APPEAL from Wien J.

The plaintiff, Ian Robert Maxwell, issued a writ on July 13, 1971, against the Department of Trade and Industry (formerly Board of Trade) in an action numbered 1971 M. No. 2901, claiming (1) declarations that an interim report made by inspectors - Rondle Owen Charles Stable Q.C. and Sir Ronald George Leach - appointed in September 1969 by the Board of Trade to investigate the affairs of two companies, International Learning Systems Corporation Ltd. and Pergamon Press Ltd., purported to be made to the department under section 165 (b) of the Companies Act 1948 and dated June 2, 1961, were prepared and written and made and that the investigation made by the inspectors of the affairs of both companies (on which the purported reports purported to be based) was conducted in breach of the obligation of the inspectors owed to the plaintiff, whether as officer or agent to each of the companies or otherwise, to conduct the investigation and to make their reports thereon fairly and in conformity with the requirements of justice and impartiality; and (2) declarations (a) that each of the purported reports (alternatively all of the contents thereof so far as they touched and concerned the plaintiff or any of his affairs) had been made in breach of duty and unlawfully and were null and void; (b) that any or any further printing or publication or communication by or on behalf of the defendants to any person whatsoever of either of the purported reports (or any of the contents thereof) or any copies, extracts or summaries therefrom or thereof would be an abuse of and beyond the powers of the defendants and unlawful; and (c) that the department was not entitled to bring or to cause or permit or assist any other person to bring any action or proceeding in consequence of or in any way or to any extent in reliance on either of the purported reports or contents thereof or on the investigation (or any part of the investigation which touched and concerned the plaintiff or any of his affairs).

The plaintiff also claimed in action 1971 M. No. 3369 injunctions to restrain the inspectors (i) from in any way further proceeding with the investigation under section 165 (b) of the Act of 1948, as amended by section 38 of the Companies Act 1967, into the affairs of the two companies in so far as any such investigation might be concerned with any act or omission on the part of the plaintiff; (ii) from drafting, completing or delivering to the Department of Trade and Industry any report or reports

whether interim or final on the matters aforesaid or any part of them; and (iii) from informing the department otherwise than by way of an interim or final report of matters coming to their knowledge as a result of the investigation tending to show that an offence had been committed by the plaintiff. The two actions were consolidated on August 19, 1971.

The plaintiff also moved the vacation court for an interim injunction in the terms of the writ against the inspectors until judgment could be given in the action against the department. Forbes J. gave judgment on September 30, 1971, refusing to make the injunctions but expressing the view that the inspectors had failed in their duty to observe the rules of natural justice in not putting to the plaintiff their tentative conclusions and giving him an opportunity to answer them.

The plaintiff did not appeal from that judgment but proceeded to trial of the consolidated actions, asking substantially for the same relief as that sought in the writs. In further and better particulars provided by the plaintiff he relied, inter alia, on the facts (a) that in respect of 88 matters particularised in a schedule marked A the defendants failed to give him any warning that they intended to or might make criticisms of him or reach conclusions from which criticisms of him were to be inferred or which were material to conclusions made by them which were critical of him or of the form such criticisms might take so as to give him a fair opportunity to provide answers to such criticisms or possible criticisms or rebut such conclusions and nonetheless made the criticisms of him set out in schedule A; and further that they failed so to do notwithstanding the undertaking given by the defendants to which reference was made in the proceedings in In re Pergamon Press Ltd. [1971] Ch. 388, and notwithstanding requests made by and/or on behalf of the plaintiff at intervals throughout the hearing by the defendants of the evidence of the plaintiff and of submissions made by him and/or on his behalf; (b) that in respect of 30 matters particularised in a schedule marked B the defendants failed to warn the plaintiff of allegations, criticisms or possible criticisms of him and/or facts or matters relevant to possible criticisms of him made or alleged by other witnesses in the course of the investigation and/or contained in documents referred to therein so as to give him a fair opportunity to provide answers to such criticisms or possible criticisms and/or to give or provide evidence related to such allegations, criticisms, facts or matters and nonetheless made the criticisms of the plaintiff referred to in the schedules in reliance on such allegations, criticisms, possible criticisms, facts or matters; and that (c) save as aforesaid the plaintiff would not at the trial rely on any additional matters without notice to the defendants given within a reasonable period after inspection of documents.

By their defence the department and the inspectors admitted, inter alia, that in carrying out the investigations and making the reports it was their duty to act fairly and in conformity with the principles of natural justice, with impartiality and without bias, in accordance with principles laid down by the Court of Appeal in In re Pergamon Press Ltd. [1971] Ch. 388. The inspectors denied and the department did not admit that the inspectors or either of them were in breach of the alleged or any duty or obligation as alleged or at all. They claimed that if (which was denied or not admitted) the inspectors were in breach of their duties or obligations

in the ways alleged or any of them, the investigation was not thereby a nullity, nor were the reports null or void, nor was the publication thereof by the department a nullity.

The consolidated actions were tried by Wien J. in November and December 1972. He gave judgment on December 20, 1972, and ordered that judgment be entered for the defendants.

The plaintiff appealed on the grounds that the judge misdirected himself, decided wrongly in law and wrongly exercised his discretion in the following respects: (i) in holding that the inspectors had, in all the circumstances, satisfied the requirements of natural justice, so far as the plaintiff was concerned, in their conduct of the investigation and in making their reports, namely, the report on the affairs of International Learning Systems Corporation Ltd. and the first interim report on the affairs of Pergamon Press Ltd. dated June 2, 1971; (ii) in holding that the plaintiff had been given proper and sufficient notice of what was said against him by other witnesses or what allegations he had to meet, alternatively in holding that the plaintiff had been told by the inspectors the substance of the evidence which had been given against him and/or what statements had been made affecting him; (iii) in holding that the Court of Appeal in In re Pergamon Press Ltd. [1971] Ch. 388, had rejected the submission that inspectors appointed by the Department of Trade and Industry pursuant to the Companies Acts 1948 to 1967 were never under a duty to put the substance of their proposed or provisional conclusions to a witness whose conduct would or was likely to be severely criticised in such conclusions in the event of their becoming final conclusions; (iv) in failing to hold that in the circumstances of the particular case the rules of natural justice required the inspectors to put their proposed criticisms of the plaintiff or the substance thereof to the plaintiff for his comments or explanations before permitting such criticisms to become final conclusions in their reports document; and (v) in holding in all the circumstances that the inspectors had acted fairly towards the plaintiff and that he had no just cause to complain about the procedure adopted by the inspectors in their preparation and making of the reports document.

Michael Ogden Q.C. and A. S. Grabiner for the appellant. The present proceedings and those before this court in In re Pergamon Press Ltd. [1971] Ch. 388, appear to be the first arising out of an investigation by inspectors under what is now section 165 of the Companies Act 1948; and in the Pergamon case this court laid down the procedure to be followed by inspectors: see per Lord Denning M.R. at p. 400 that they must act fairly although their proceedings were neither judicial nor quasi-judicial, while Sachs L.J. at p. 405 stated the appropriate procedure: "to give... anyone in danger of being criticised notice of the potential criticism in general terms sufficient to enable him to know what the allegation was and to give such explanation as he might wish." It was recognised that this kind of report can ruin a man's "business reputation" and he has no appeal from such a report.

The appellant complains, first, that a number of serious allegations were made against him by witnesses who followed him and that the

inspectors were in breach of the rules of natural justice in not putting those allegations to him for contradiction or explanation or putting them to him in such a way that he did not know what was being said against him; and also that the report contains a number of "proven" findings which were not put to him before the report was signed. It is essential to read the transcript of the evidence in detail and relate it to the findings in order to see what happened.

The second complaint is that though the inspectors undertook to follow the procedure laid down in In re Pergamon Press Ltd. in relation to their conclusions they later changed that procedure and did not tell the appellant that they had done so. It is not sought to persuade the court that if natural justice had been applied the inspectors would have altered their provisional conclusions but only to show that the appellant was not given a chance to meet a number of serious allegations prejudicial to him. The rules of natural justice are a safeguard for the public and the individual and it will be monstrous if a man can be found guilty of acts of moral turpitude when he has not been given the chance to answer or explain. The directions on natural justice in investigations of this kind have been laid down ever since Board of Education v. Rice [1911] A.C. 179, per Lord Loreburn L.C. at p. 182; and the courts have recommended a flexible application of the rules to the circumstances. [Reference was made to Ceylon University v. Fernando [1960] 1 W.L.R. 223; Kanda v. Government of Malaya [1962] A.C. 322; Ridge v. Baldwin [1964] A.C. 40; and Furnell v. Whangarei High Schools Board [1973] A.C. 660.]

Section 165 is one of a group of sections dealing with policing powers. One purpose of an investigation is to report to the department so that it may decide whether further action by way of civil or criminal proceedings should be taken; another purpose is to let the company know whether its affairs are in order. It follows that as soon as such a report reaches the company its contents will become known in the commercial and financial world. If the court says there is no power to insure that the inspectors obey the rules of natural justice a powerful safeguard for the reputation of an individual will be lost. Though the inspectors remain masters of their procedure, they ought to bear in mind the enormous damage a publication of this kind can do. In the Pergamon case [1971] Ch. 388 the respondents argued that the rules of natural justice did not apply to an investigation under section 165, but that is no longer being claimed. The question is whether in the present proceedings what the inspectors did was sufficient to satisfy the rules. Forbes J., who decided that the inspectors were in breach of the rules, had before him the same material as Wien J. and this court have had before them; the fact that Wien J. reached the opposite conclusion from Forbes J. indicates that there can be more than one view of what was stated in the Pergamon case. [Counsel then dealt with the evidence and the relevant findings in the report.]

On the relief sought by way of declarations as amended the respondents will say that the discretion to grant that relief should not be exercised in this case because nothing has occurred which has in fact caused any injustice to the appellant; that since parts of the report dealt with people

other than him declaration A would be difficult to frame; and other such objections. It would be depressing if those objections were accepted and if the court concluded that even where there had been a breach of natural justice the court was powerless to grant any relief. That that is not so is evidenced in R.S.C., Ord. 15, r. 16 which in form is the same as the original rule in 1883. Though the cases cited in the notes to that rule say that the court will not make an absolutely purposeless declaration, the declarations asked for in their amended form in the present case would not be purposeless for they would tell the world that allegations have been made which the inspectors treated as well founded but that the inspectors acted in breach of natural justice in coming to their conclusions. If a man has been criticised in a report about something in respect of which he cannot complain in an action for damages, he can surely ask for a declaration that the adverse findings were made in the absence of natural justice. Declarations have been used against state officers ever since Dyson v. Attorney-General [1911] 1 K.B. 410, and though under the Crown Proceedings Act 1947, an injunction cannot be granted against the Crown a declaratory judgment is permissible. The category of cases in which such relief is obtainable is not closed. [Reference was made to Pyx Granite Co. Ltd. v. Ministry of Housing and Local Government [1958] 1 Q.B. 554.] In the new Companies Bill now before Parliament no attempt has been made to exclude relief by way of a declaration and there is a well established line of authority that the remedy is available to a party who has no other remedy. The court is not being asked to pass judgment on the merits. [Reference was made in detail to the judgments of Forbes and Wien JJ.] Wien J.'s finding that the plaintiff has no cause for complaint and that everything which should have been put to him was put to him simply brushes aside the detailed complaints repeated in this court which were never put to him at all.

J. G. Le Quesne Q.C., Gordon Slynn, Peter Gibson and David Huntfor the department. The case for the appellant is put in two ways: (1) that there was a general failure to observe the ordinary requirements of the rules of natural justice; and (2) that as a peculiar feature of this case this particular man was denied natural justice because the inspectors said they were going to follow a certain procedure, and then, without telling him, they changed their minds and did not follow it nor tell him that they were doing so.

On (1) it is crucial to establish exactly what the ordinary requirements are. One might think that that would not cause much difficulty when there is already a decision in this very case in this court on the subject. But In re Pergamon Press Ltd. [1971] Ch. 388, does not mean the same to everyone, as is seen from the differing views of Forbes J. and Wien J. In re Pergamon contained nothing new. It followed the law laid down in Board of Education v. Rice [1911] A.C. 179, and said simply that in relation to section 165 of the Act of 1948 natural justice requires that a man shall be told what has been said against him by witnesses or in documents and given a proper opportunity to meet what has been said. The court should bear in mind the purposes of section 165. Limited liability has many advantages but also many temptations to those who

might be inclined to take advantage of it - the possibility of mismanaging companies while shareholders have no knowledge of what is going on. It has been recognised ever since the first Companies Act of 1862 that there must be some power of control over and investigation into a limited company's affairs for the protection of shareholders and the general public good. Though care must be taken to protect a man whose business reputation is at risk in an inquiry, the powers given by Parliament are exercisable on information falling short of what is necessary to found a prosecution. Proceedings under section 165 do not originate in accusations or charges; they are fundamentally different from an inquiry into a specific charge. Mr. Stable was quite right when at an early stage he said that if inspectors were to give undertakings of the kind that were being sought it would amount to converting their investigation into a full scale trial. The question in inquiries under section 165 is "what happened?" Before the inspectors can make any bricks they have to gather their own straw by inviting people to give evidence and collecting documents; and when the evidence has been collected they have to make their report which may well include their conclusions and opinions based on the evidence. If the evidence contains matter which reflects on a man they are bound to tell him what it is and ask him what he has to say about it. It is virtually the same as an inquiry by the fraud squad. It may be unsatisfactory that things should be said publicly in a report about a man who has not the chance to meet them under the protection of a judicial hearing; but Parliament has provided this power for the protection of other people. It is said that justice demands not only that a man should know what has been said but also what the tribunal is proposing to conclude. That view has never been taken by the courts. Though the section 165 procedure goes right back to the first Act of 1862 there has never before been any complaint about an inquiry.

The Pergamon decision [1971] Ch. 388, is in line with Board of Education v. Rice [1911] A.C. 179, 182, where Lord Loreburn L.C. said on the facts of that case that the board must act in good faith and fairly and listen to both sides, but was not bound to proceed as if it were conducting a trial. Local Government Board v. Arlidge [1915] A.C. 120; De Verteuil v. Knaggs [1918] A.C. 557; and Ceylon University v. Fernando [1960] 1 W.L.R. 223 are all in line with the first decision. Pergamon, the best authority about natural justice in the very case before this court as to what the requirements are, is in line with all the earlier authorities and the court there rejected the claim made during the argument ([1971] Ch. 388, 394) that the directors who were appealing should see the draft report and any transcript or documentary evidence on which the report was to be based.

The next question is whether the inspectors in the present proceedings applied the guide lines laid down by this court in the Pergamon case. [Counsel then went through the matters of detail of which complaint was made.]

On the alternative complaint that the inspectors undertook to follow the procedure allegedly laid down in In re Pergamon Press Ltd. [1971] Ch. 388 and then changed their minds without telling the appellant, the transcript of

what the inspectors said they were going to do, part of which is cited with approval in the Pergamon case per Sachs L.J. at p. 405, is before this court and shows that the inspectors did not at any time undertake to put their tentative conclusions to the appellant. The reason why Forbes J. came to a wrong conclusion was because he confused two types of procedure, those which originate in a charge and those which do not. The appellant cannot complain that there was one piece of evidence which was not put to him, unless it is a very serious piece. The question is "did he have sufficient notice of what was being alleged against him and an opportunity to answer?" That is a matter which must be answered by looking at the inquiry as a whole and asking "has he been treated in a way which conforms with natural justice?" If relevant evidence is found which was not put to him the court should ask "how much was it? Does it impair the validity of the report in any particular respect?" The answer on a detailed examination must be "No." If an inquiry of this complexity could be upset simply by finding that one or two matters were not put the inspectors' task would become impossible. The detailed examination in this court makes clear that the inspectors put to the appellant everything in the evidence which they thought prejudicial to him. That is what they tried to do and what they did. The matters not put directly were few and do not amount to a failure of natural justice. The inspectors were at no time under any duty to put to the appellant the conclusions to which they eventually came.

On the relief sought, the respondents have shrunk from submitting that there is no jurisdiction to make the declarations asked for; but the matters to be weighed against exercising the discretion to grant declarations in this case are important. No case has been found in which the court has made a bare declaration on the ground of a departure from the rules of natural justice. It was not done in the Kanda case [1962] A.C. 322: see the declaration at p. 339. Though it may be said that a man who has been unjustly criticised in a public inquiry and report ought to have some relief although he has no remedy by action, that is the state of affairs which arises frequently. A man may suffer even though no legal right has been infringed; but the important point in practice is that no precedent has been found for the court making a bare declaration. It is undesirable to have that kind of declaration. There are many types of inquiry nowadays where the names of individuals are canvassed: compare inquiries by the Monopolies Commission. If one person can complain to the courts others may also do so. To grant a bare declaration that there has been an infringement of natural justice would open a very wide door. It is conceded that that will mean that some people will have no remedy for what is said about them in such an inquiry; but that is a situation which is familiar in other branches of the law. Until now declarations have been granted only to aid someone who has had some legal right infringed because of the absence of natural justice; but the remedy is not available to a person who can use it only as a counterweight to what is said in a report. Though the department does not wish to succeed in this appeal on this ground alone it is an important aspect of the case.

Raymond Kidwell Q.C., Gordon Slynn, Peter Gibson and David Hunt

for the inspectors. The inspectors sought to comply with the directions stated in In re Pergamon Press Ltd. [1971] Ch. 388 and the transcript shows that they said on many occasions that they wished to defer to the applicant in a difficult and complex inquiry. They have succeeded in complying with the principles laid down in the Pergamon case. In two interim reports and in the final report they carried out their task in accordance with those principles. All the reports have now been published at large and all are under attack by the applicant. The inspectors have finished their task and it is clear that they have tried to be and have been fair. What has been said on behalf of the department is adopted on behalf of the inspectors. There has been no breach of the rules of natural justice.

Ogden Q.C. replied.

January 25. The following judgments were read.

LORD DENNING M.R. The Pergamon Press affair still goes on. Three and a half years ago we laid down some guide lines for the inspectors to follow in In re Pergamon Press Ltd. [1971] Ch. 388. The inspectors have since then held their investigation. They have made two interim reports and a final report. Their reports are very critical of Mr. Robert Maxwell. He is very upset by these criticisms. So much so that he has launched attacks against all of the reports and against the inspectors themselves. Today we are concerned with his attack on the first interim report. Mr. Maxwell says that many of the criticisms were made in disregard of the rules of natural justice. He asks us to declare accordingly.

The matter has already been considered by two of the judges of the High Court. The first interim report was signed on June 2, 1971. Mr. Maxwell applied to Forbes J. for an interim injunction to restrain the inspectors from proceeding with their investigation. After a hearing which lasted several days, on September 30, 1971, Forbes J. refused the injunction: but in the course of his judgment he expressed the view that the inspectors had failed in their duty. He said:

"At no time did they formulate their tentative criticisms and give Mr. Maxwell an opportunity of dealing with them. It follows that, in my judgment, the probability is that the trial judge would find a failure by the inspectors to direct themselves properly as to the rules of natural justice which should govern their investigations."

He went on to say that in that event the trial judge might hold the report to be a nullity.

But, although he expressed that interim view, Forbes J. thought that the investigation should go on: because the inspectors could still remedy their failure by putting their criticisms to Mr. Maxwell. So the judge refused an injunction. Mr. Maxwell did not appeal from that refusal. Encouraged, no doubt, by the opinion that Forbes J. expressed, he took the case on to trial.

In December 1972 the case was tried before Wien J. It lasted several days. At first Mr. S. C. Silkin Q.C. appeared for Mr. Maxwell. Next Mr. Maxwell conducted it himself. Afterwards he instructed Mr. Ogden Q.C.

Eventually Wien J. came to a conclusion which was entirely opposite to the opinion reached by Forbes J. Wien J. said:

"I am quite satisfied that in every instance the inspectors gave proper and sufficient notice to Mr. Maxwell of what was said against him or what it was that he had to meet.... I consider that they succeeded in being eminently fair and that the plaintiff has no just cause for complaint."

Each of the judges had substantially the same material before him. The difference between them is this: Forbes J. thought that, at the inquiry before inspectors, there were three stages:

"First, the hearing of evidence (including Mr. Maxwell's) and the study of documents; secondly, the inspectors coming to a conclusion (necessarily tentative in the circumstances); and thirdly, putting the substance of that conclusion to the witness."

Wien J. held that natural justice did not require those three stages. In particular, it did not require the third stage. All that was required was that the inspectors should give Mr. Maxwell "a fair opportunity of correcting" what is said against him. An outline of the case is enough.

In view of this difference between the judges, I will try to state the considerations which are to be borne in mind in respect of an inquiry under the Companies Act 1948. First and foremost: when a matter is referred to an inspector for investigation and report, it is a very special kind of inquiry. It must not be confused with other inquiries which we have had to consider. Remember what it is not. It is not a trial of anyone, nor anything like it. There is no accused person. There is no prosecutor. There is no charge. It is not like a disciplinary proceeding before a professional body. Nor is it like an application to expel a man from a trade union or a club, or anything of that kind. It is not even like a committee which considers whether there is a prima facie case against a person. It is simply an investigation, without anyone being accused.

Second: there is no one to present a case to the inspector. There is no "counsel for the commission." The inspector has to do it all himself. He has himself to seek out the relevant documents and to gather the witnesses. He has himself to study the documents, to examine the witnesses and to have their evidence recorded. He has himself to direct the witnesses to the relevant matters. He has himself to cross-examine them to test their accuracy or their veracity. No one else is there to cross-examine them. Even if a witness says things prejudicial to someone else, that other does not hear it and is not there to cross-examine him.

Third: the investigation is in private. This is necessary because witnesses may say something defamatory of someone else, and it would be quite wrong for it to be published without the party affected being able to challenge it. The only persons present are the inspectors and their staff, the shorthand writer, the witness and his lawyers, if he desires them.

Fourth: the inspectors have to make their report. They should state their findings on the evidence and their opinions on the matters referred to them. If their report is to be of value, they should make it with

courage and frankness, keeping nothing back. The public interest demands it. It may on occasion be necessary for them to condemn or criticise a man. Before doing so, they must act fairly by him. But what does fairness demand? That is the question.

Forbes J. thought that, in order to do what was fair, after hearing the evidence and studying the documents, the inspectors ought to come to a conclusion (which was necessarily tentative) and put the substance of that conclusion to the witness. He was led to that view by the observation of Sachs L.J. in In re Pergamon Press Ltd. [1971] Ch. 388, 405. I do not think that is right. Just think what it means. After hearing all the evidence, the inspectors have to sit down and come to tentative conclusions. If these are such as to be critical of any of the witnesses, they have to reopen the inquiry, recall those witnesses, and put to them the criticisms which they are disposed to make. What will be the response of those witnesses? They will at once want to refute the tentative conclusions by calling other witnesses, or by asking for further investigations. In short, the inquiry will develop into a series of minor trials in which a witness will be accused of misconduct and seek to answer it. That would hold up the inquiry indefinitely. I do not think it is necessary. It is sufficient for the inspectors to put the points to the witnesses as and when they come in the first place. After hearing the evidence, the inspectors have to come to their conclusions. These need not be tentative in the least. They can be final and definite, ready for their report.

Mr. Michael Ogden, for Mr. Maxwell, realised that we might not accept the view of Forbes J. So he put a lesser alternative. He submitted that, in order to do what was fair to a witness, the inspectors ought to take all the relevant statements made by other witnesses - or contained in documents - which were prejudicial to the man and put them to him, so as to give him an opportunity of answering them. If the inspectors failed to do this on matters of substance, they failed to observe the rules of natural justice and the court should declare accordingly.

In support of this submission, Mr. Ogden treated us to a detailed analysis of the voluminous documents in the case. On the one hand he took the report of the inspectors with all the many criticisms they made of Mr. Maxwell. On the other hand, he took the transcripts of the evidence given by Mr. Maxwell before the inspectors. The report was long and detailed. It covered 209 pages of close type. The transcripts were even longer. They covered 12 days of evidence and contained 366 pages of closely typed questions and answers. Mr. Ogden took each of the criticisms in the report, one by one. He then went to the transcripts of evidence to see if each criticism had been put to Mr. Maxwell. In all he took us through some 30 criticisms contained in the report and the transcripts. He asserted that in about three-fourths of the cases the criticisms had not been put - or not fully put - to Mr. Maxwell. In answer Mr. Le Quesne, for the department, followed the same course. He took us through the criticisms. He showed that in nearly every one the inspectors had put the point to Mr. Maxwell or had indicated it in such a way that he must have known what was troubling them. Mr. Le Quesne acknowledged that there were a few criticisms in which the precise point

had not been put to Mr. Maxwell: but he asserted that these were covered by the general line of questions put to him.

I will give two or three illustrations to show the sort of criticisms which were made of the report.

Conclusion (a) was

"Mr. Maxwell obtained information which was confidential to Caxton Holdings from a former secretary of Caxton Holdings and used the information to damage Caxton Publishing's business in South Africa, so as to strengthen his position in the negotiations which he was about to open with the object of acquiring Caxton Holdings for Pergamon."

The transcript of evidence shows that the inspectors put it fairly and squarely to Mr. Maxwell that he employed the former secretary of Caxton Holdings and sent him and another man to South Africa so as to depress the business of Caxton Holdings in South Africa, and succeeded to such an extent that Caxton in South Africa lost the entirety of their sales force as the result of the activities of Pergamon. The only part which was not put in terms was that Mr. Maxwell obtained from the former secretary information that was confidential. The inspectors appear to have got that from the former secretary himself, who gave evidence before them.

Conclusion (c) was

"... the offer document containing the offers which Ansbachers, on behalf of Pergamon, made for the preference and ordinary shares of Caxton Holdings contained a false statement: 'There is no agreement or arrangement whereby any share of Caxton acquired pursuant to the offers will or may be transferred to any other person' which was false to the knowledge of Mr. Ormrod of Ansbachers and Mr. Maxwell."

The evidence shows that the inspectors put it fairly and squarely to Mr. Maxwell that that statement was false. He answered that it was true, and argued about the meaning of it. The inspectors did not in terms put it to him that he knew it was false, but it was clearly to be implied from the way they questioned him.

Conclusion (h) was

"that there were irregularities in the procedures surrounding the increasing of the capital of I.L.S.C. from £1,000,000 to £2,000,000 including the creation of minutes signed by Mr. Maxwell purporting to be minutes of a meeting of the board of I.L.S.C.... which never took place.... We think that the minutes... were brought into existence to clothe with some semblance of formality a decision between Mr. Maxwell, whose signature appears on the minutes, and B.P.C., taken without any regard to the restrictions on the powers of the directors of I.L.S.C. as set out in the articles of association, without regard to the method of altering the capital as set out in the articles of association and without regard to the views of other members of the board of I.L.S.C."

The evidence shows that the inspectors put it fairly and squarely to Mr. Maxwell that the minute book was not properly kept and that a minute might be prepared purely for the record without there having been a meeting. But this particular minute for this particular meeting was not put to him. It would not seem to me necessary to put this particular minute to him, seeing that there were the questions relating to the minutes in general.

I am not going further into all the details to which we have been subjected, for this reason: I think this line of attack is entirely misconceived. It must be remembered that the inspectors are doing a public duty in the public interest. They must do what is fair to the best of their ability. They will, of course, put to a witness the points of substance which occur to them - so as to give him the chance to explain or correct any relevant statement which is prejudicial to him. They may even recall him to do so. But they are not to be criticised because they may on occasion overlook something or other. Even the most skilled advocate, expert in cross-examination, forgets now and again to put this or that point to a witness. And we all excuse him, knowing how difficult it is to remember everything. The inspector is entitled to at least as much consideration as the advocate. To borrow from Shakespeare, he is not to have "all his faults observed, set in a notebook, learn'd, and conn'd by rote," to make a lawyer's holiday. His task is burdensome and thankless enough as it is. It would be intolerable if he were liable to be pilloried afterwards for doing it. No one of standing would ever be found to undertake it. The public interest demands that, so long as he acts honestly and does what is fair to the best of his ability, his report is not to be impugned in the courts of law.

This disposes also of Mr. Ogden's other complaint. He said that, early on in the inquiry, the inspectors gave an assurance that they would put their tentative conclusions to the witness - and nevertheless failed in the later stages to do so, without giving any warning. But Mr. Le Quesne pointed out that, when the passages were read at large in their context, the inspectors gave no such assurance. In any case, any failure to do so was an oversight which did not result in any unfairness.

I would only say one word about the relief asked. Mr. Ogden recognised that the court could not set aside the report, in whole or in part. It could not declare it, or any part of it, to be null and void. At most he asked for a declaration that natural justice had not been observed in the making of it. Whilst I would not restrict in any way the court's jurisdiction to grant a declaration, the case must be very rare in which it would be right to make such a bare declaration in the air. This is certainly not a case for it.

In conclusion, I would say this: I have studied all the points of detail which have been put to us. And I have read the judgment of Wien J. upon them. I would like to express my appreciation of it and endorse all that he said. This is nothing more nor less than an attempt by Mr. Maxwell to appeal from the findings of the inspectors to the courts. But Parliament has given no appeal. So Mr. Maxwell has tried to get round it by attacking the conduct of the inspectors themselves. In this he has failed utterly. To my mind the inspectors did their work with conspicuous fairness. They investigated all the matters with the greatest care. They

went meticulously into the details of these complicated transactions. They put to Mr. Maxwell all the points which appeared to call for an explanation or an answer. They gave him every opportunity of dealing with them. If there were one or two points which they overlooked, these were as nothing in relation to the wide field which they covered. I regret that, having done their work so well, they should now be harassed by this attack upon them. It has never been done before in all the many inquiries under the Companies Acts. And I hope it will never happen again. I would dismiss the appeal.

ORR L.J. I agree with the judgment delivered by Lord Denning M.R. and only add a brief judgment of my own because of the very different views expressed by Forbes J., who heard the application for an interim injunction, and Wien J., who tried the action, as to the extent of the obligations which natural justice imposes on inspectors conducting an investigation under section 165 of the Companies Act 1948 and as to the allegation that the inspectors in this case, having said they would follow a certain course, later failed to do so.

As to the first of these matters, Forbes J. took the view that natural justice, as applied to such an investigation, requires the adoption of a three-stage procedure of which the third stage is that the inspectors, having heard the evidence and studied the documents, and having come to tentative conclusions, should, if any of those conclusions involves a criticism of anyone, put the substance of it to him. On the second question he took the view, on the evidence before him, that the inspectors in the present case had announced that they would follow this procedure but in the event failed to do so. Wien J., however, held that natural justice does not in this form of investigation require that a three-stage procedure should be followed, and further that the inspectors had never said that they would follow such a procedure.

In holding that natural justice required a three-stage procedure, Forbes J. founded his conclusion on two short passages, one in the judgment of Sachs L.J., and the other in that of Buckley L.J., in In re Pergamon Press Ltd. [1971] Ch. 388, 405G, 407C. But these passages, in my judgment, even if considered in isolation, by no means unambiguously support the alleged three-stage procedure. Buckley L.J. says, at p. 407:

"... the inspectors should give him, if he has not already had it, such information of the complaint or criticism which they may make of him in their report and of their reasons for doing so,..."

which seems to me to imply that it is sufficient if he has been given the relevant information as it emerged from the evidence of witnesses or the study of documents before the inspectors formed their tentative conclusion, and the same qualification may well, as it appears to me, be implied in the corresponding passage from the judgment of Sachs L.J. Moreover both passages must be considered in the context of the judgments as a whole, in which there is no indication that the other members of the court disagreed with the conclusion of Lord Denning M.R. who had firmly rejected, as going too far, submissions on behalf of different appellants that, whenever the inspectors thought of making adverse criticisms of someone

one they should draft the proposed passage of their report and put it before the party for his comments, or alternatively that those concerned ought to see any proposed finding against them before it was included in the report. Finally, the statement of Lord Denning M.R., at pp. 399-400:

"The inspectors can obtain information in any way they think best, but before they condemn or criticise a man, they must give him a fair opportunity for correcting or contradicting what is said against him. They need not quote chapter and verse."

follows closely the language used by Lord Loreburn L.C. in Board of Education v. Rice [1911] A.C. 179, 182, and quoted with approval in subsequent cases; and we have been referred to no authority, apart from the above passages, which indicates that in a procedure such as that with which we are here concerned, which has been in existence since the Companies Act 1862, any higher duty is laid on the inspectors. As Tucker L.J., also quoted with approval in subsequent cases, pointed out in Russell v. Duke of Norfolk [1949] 1 All E.R. 109, 118:

"The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with, and so forth."

and in my judgment a clear distinction exists for the present purpose between an inquiry based on a charge or accusation and an investigation such as the present in which the inspectors are required in the public interest to find out what has happened, and in the course of so doing form certain views or conclusions. In the former case it is essential that the person against whom the accusation or charge is made should know its terms. In the latter, on the authority to which I have referred, the only requirement is, in my judgment, as stated by Lord Denning M.R. in the passage quoted above.

For these reasons I am satisfied that Wien J. was right in his conclusion on this issue and in my judgment he was also right, considering the matter on rather fuller material than had been before Forbes J. in finding that the inspectors had throughout the investigation consistently and carefully stopped short of saying that they would adopt the three-stage procedure. In this, for the reasons I have given, they were fully justified and I would only add that if they had acceded to some of the requests made to them at different stages the investigation would have been prolonged indefinitely and a procedure which Parliament has considered necessary in the public interest might well have been frustrated.

The remaining issue in the appeal is whether the inspectors fairly put to the plaintiff the substance of the evidence on the basis of which various criticisms were made of him in the interim report. These matters were considered carefully and in detail by Wien J., but in the end the question to be answered was whether in this respect the plaintiff was fairly treated. For the reasons given by the judge I am satisfied that he was.

In the result the question of relief does not arise. Mr. Ogden did not

in any event pursue the claim for injunction or for a declaration that the report was a nullity, but argued that if there had been a failure of natural justice there should be a declaration in some limited form. I accept that this court would have jurisdiction to grant relief by way of a bare declaration, but agree with Lord Denning M.R. that the circumstances which would justify the grant of such relief in the context of an investigation under section 165 would have to be of a very exceptional kind. I also would dismiss this appeal.

LAWTON L.J. For many decades now the British public have become accustomed to reading about inquiries started by the government of the day or a Minister. Sometimes the inquiries are held, as was the one in this case, under powers given by a statute; others are held because a Minister wants to find out something. The subject matter of inquiry may range from questions touching the integrity of Ministers (the Lynskey inquiry), and national security (the Vassall inquiry), to questions whether a youth was assaulted by two police officers (the Thurso inquiry). Some inquiries are held in public and a few take on some of the characteristics of a state trial; others are held in private. Whenever inquiries are held the British public expects them to be conducted fairly; and on many occasions in the past 60 years the courts have said that they must be conducted fairly.

From time to time during that period lawyers and judges have tried to define what constitutes fairness. Like defining an elephant, it is not easy to do, although fairness in practice has the elephantine quality of being easy to recognise. As a result of these efforts a word in common usage has acquired the trappings of legalism: "acting fairly" has become "acting in accordance with the rules of natural justice," and on occasion has been dressed up with Latin tags. This phrase in my opinion serves no useful purpose and in recent years it has encouraged lawyers to try to put those who hold inquiries into legal strait jackets. It is pertinent in this connection to recall what Lord Shaw of Dunfermline said in Local Government Board v. Arlidge [1915] A.C. 120, 138:

"And the assumption that the methods of natural justice are ex necessitate those of courts of justice is wholly unfounded... In so far as the term 'natural justice' means that a result or process should be just, it is a harmless though it may be a high-sounding expression; in so far as it attempts to reflect the old jus naturale it is a confused and unwarranted transfer into the ethical sphere of a term employed for other distinctions; and, in so far as it is resorted to for other purposes, it is vacuous."

For the purposes of my judgment I intend to ask myself this simple question: did the inspector act fairly towards the plaintiff?

This question cannot be answered without knowledge of what the inspectors were inquiring into. They had been appointed by the Department of Trade and Industry to investigate the affairs of International Learning Systems Corporation Ltd. and Pergamon Press Ltd. and to report thereon: see section 165 (a) of the Companies Act 1948. The department

made the appointment not because there were circumstances suggesting that the businesses of these companies were being conducted dishonestly or that those connected with their management had been guilty of fraud (see section 165 (b) (i) and (ii)) but because it had been suggested by the Take-over Panel that Pergamon Press Ltd.'s shareholders might not have been given all the information with respect to its affairs which they might reasonably have expected: see section 165 (b) (iii).

In their terms of reference the inspectors were specifically instructed to report on this matter of information. It followed that they had to find out first what information had been given and then to express their opinion as to whether enough had been given. What was to be done if they were of the opinion that not enough information had been given, or the affairs of the two companies were in disorder, was not for them to decide. The inspectors were not instructed to investigate any charge against the plaintiff or any other officer of these companies: their duty was to find out what had happened, and to report their opinion. This was a very different task from that which is sometimes imposed on those holding inquiries when they are asked to decide whether allegations of specific misconduct have been made out: for examples see Ceylon University v. Fernando [1960] 1 W.L.R. 223 and Kanda v. Government of Malaya [1962] A.C. 322. That which fairness calls for in one kind of inquiry may not be called for in another. Those conducting an inquiry are in the best position to decide what fairness calls for.

In all these cases there are, in my judgment, two facets of fairness: what is done and how it is done. Doing what is right may still result in unfairness if it is done in the wrong way.

As to what was done, once it became apparent to the inspectors that the plaintiff might be open to criticism in their report, on many occasions they put to him the substance of what other witnesses had said about him which could, if they accepted the evidence, be the basis for criticism. On a few occasions they did not, and by the standards of perfection it might have been better if they had. In putting the substance of what had been said by other witnesses the inspectors were, no doubt, trying to do what those holding inquiries had been enjoined to do by Lord Loreburn L.C. in Board of Education v. Rice [1911] A.C. 179, 182, namely, to give any one in the plaintiff's position a fair opportunity for correcting or contradicting any relevant statement prejudicial to his view.

What they did not do was to give the plaintiff an opportunity of correcting or contradicting the opinions which they were minded to report to the department as to what evidence they thought credible and what inferences they should draw from such evidence. The plaintiff submits they should have done so, and that their omission constituted unfairness. I do not agree. The plaintiff's submission was founded on some observations made by Sachs L.J. during the hearing of what was the first of a series of proceedings which have been started by the plaintiff in respect of this inquiry: see In re Pergamon Press Ltd. [1971] Ch. 388, 405. Sachs L.J. was there commenting on what the court, of which he was a member, had been told the inspectors had promised to do. The inspectors

had said more than what had been reported and that which had not been reported altered the sense. Further, endorsing with his approval what the inspectors were reported to have said was not necessary for the purpose of deciding the appeal. The researches of counsel have not produced any other case which has suggested that at the end of an inquiry those likely to be criticised in a report should be given an opportunity of refuting the tentative conclusions of whoever is making it. Those who conduct inquiries have to base their decisions, findings, conclusions or opinions (whichever is the appropriate word to describe what they have a duty to do) on the evidence. In my judgment they are no more bound to tell a witness likely to be criticised in their report what they have in mind to say about him than has a judge sitting alone who has to decide which of two conflicting witnesses is telling the truth. The judge must ensure that the witness whose credibility is suspected has a fair opportunity of correcting or contradicting the substance of what other witnesses have said or are expected to say which is in conflict with his testimony. Inspectors should do the same but I can see no reason why they should do any more.

There was little criticism of the way the inspectors had done what they did. It was submitted, however, that when putting to the plaintiff for his comments the substance of what witnesses had said they did not make plain what was the sting of their questions, with the result that the plaintiff was deprived of an opportunity of refuting any injurious criticism which was founded on his answers. An example was said to be provided by conclusion (c) in paragraph 319 of the inspectors' report which was to the effect that the plaintiff knew that an offer document contained a false statement. In order to deal with this kind of criticism it is necessary to consider how the inquiry was conducted. Both the inspectors were distinguished professional men. The plaintiff is clearly intelligent and quick-witted; he has had an exceptionally wide experience of life and when the inquiry started he was a Member of Parliament. He did not have to have spelt out to him the relevance and point of every question he was asked. The inspectors must have appreciated this. It is manifest from the transcript that they treated him throughout with courtesy and patience; and Mr. Owen Stable Q.C., who asked nearly all the questions, was clearly most anxious to avoid any kind of aggressive, hectoring cross-examination. For my own part I can but admire the way he dealt with a witness who tended to be verbose and irrelevant. I am satisfied that the plaintiff was able to appreciate, and nearly always did appreciate, what was the point of the questions put to him.

I come now to what, in my judgment, should be the approach of the court to the criticisms which have been made of the conduct of the inspectors. The plaintiff submitted that many, but not all, of the specific criticisms of him which they put into their report were made unfairly. This was enough, it was submitted, to justify the court finding and declaring that the inquiry had been conducted unfairly. Alternatively, it was submitted that the court could find that some of the criticisms were unfair and specify in the declaration which they were. If a declaration is an appropriate remedy in a case of this kind, and I am doubtful whether it

is, for reasons which I will state later, the proper approach, so it seems to me, is that which is followed in the criminal division of this court when exercising its jurisdiction under section 2 of the Criminal Appeal Act 1968. When it is submitted that a verdict should be quashed because of alleged irregularities in the course of a trial the proceedings have to be considered as a whole and the question asked whether the verdict was unsafe or unsatisfactory. In this ease the question is whether this inquiry, considered as a whole, was conducted fairly. It would be wrong to treat the inquiry as raising a series of issues, some of which could be said to have been fairly determined, some not. To do anything of the kind would get close to giving dissatisfied witnesses a right of appeal when Parliament has not done so. For my part, I have no hesitation in finding that it was conducted fairly. I would adopt the detailed reasoning set out in Wien J.'s judgment.

I should say in conclusion that I am doubtful whether, even if I had found on the merits in favour of the plaintiff, I would have adjudged that he was entitled to a declaration that the inquiry had been conducted unfairly or that specified criticisms had been made unfairly. That was the only relief he asked for from this court. Below he had asked for an injunction against the department to restrain further publication of the report, but this he could not get because the department represents the Crown. He had also asked for a declaration that the report was null and void; but before this court, without abandoning this, his counsel did not ask for such a declaration. For my part I cannot see how any such declaration could ever be made in respect of a report made to the Minister under section 165. The courts cannot declare null and void events which have happened. What they can do is to declare that the making of a report shall have no legal consequences, as was done in Kanda's case [1962] A.C. 322. The report in this case itself neither produced, nor could directly produce, any legal consequences. On receiving it the Minister had to decide what action to take; and even if the inquiry had been conducted unfairly the report might have contained information which the Minister would be under a duty to consider for the purpose of performing his statutory duty to safeguard the interests of shareholders. The fact is that a declaration to the effect that the inquiry had been conducted unfairly or that specified criticisms had been made unfairly would produce no practical result. The Minister would not be stopped from initiating proceedings if he thought that the facts justified such a course. It was submitted that such a declaration would protect the plaintiff's reputation. It might; but the protection would only be temporary if the Minister initiated proceedings; and in any proceedings the fact that the inquiry had been conducted unfairly would be irrelevant. In my judgment a man who has been unfairly criticised in a report made under section 165 is in the same position as one who had been unfairly criticised in a speech made in Parliament. He has suffered "damnum" but not "injuria." Cases may occur (although they are unlikely to do so as long as the Minister appoints competent and experienced professional men as inspectors) in which the inspectors had behaved so unfairly that the public interest requires a court to say so. In my judgment, even if there had been unfairness in the conduct of this

inquiry, which there was not, this is not such a case. I would dismiss the appeal.

Solicitors: Lewis Silkin & Partners; Treasury Solicitor; Treasury Solicitor.

M. M. H.

April 25. The Appeal Committee of the House of Lords (Viscount Dilhorne, Lord Kilbrandon and Lord Salmon) dismissed the plaintiff's petition for leave to appeal.