R v Panel on Take-overs and Mergers, ex parte Datafin plc

Facts

Datafin plc, which was involved in a contested take-over, complained to the Panel on Take-overs and Mergers that a rival bidder for the target company was acting in concert with another company in breach of the City Code on Take-overs and Mergers. The Panel, an unincorporated body that administered the Code, rejected the complaint. The Panel had no statutory basis for its powers and its authority came from the consent of the City institutions that it regulated, although it enjoyed the practical backing of the Bank of England and Parliament, which had legislated on the assumption of its existence. Datafin sought judicial review of the Panel's decision.

History

The Divisional Court dismissed the application and Datafin appealed to the Court of Appeal.

Issue

Whether a self-regulating body with no statutory or prerogative source of power can be subject to judicial review, and if so, whether the Panel acted unlawfully in rejecting the complaint.

Held

Appeal dismissed. The Panel was in principle amenable to judicial review, but its decision was not shown to be unlawful and no relief was granted.

Ratio

• A body is subject to judicial review not only where its power derives from statute or the prerogative, but also where it exercises public law functions, assessed by looking at the nature of the power and its place in a system that has a public dimension.
• The Panel was an integral part of a system of regulation of the securities market, performing a function that the state would otherwise have had to perform, and was therefore subject to review.

The judgments

Key reasoning

• The question of amenability turns on a functional analysis of what the body does, not on its legal form or source of authority.
• The Panel wielded considerable power over those in the market, was backed by statutory recognition and by the Bank of England, and operated in the absence of any alternative statutory regulator, so it exercised power with a public dimension.
• Although reviewable, the Panel was entitled to considerable latitude in applying its own Code, and its interpretation of the rules on acting in concert was not shown to be wrong.

Obiter

• The court recognised that, given the nature of take-overs and the need for speed, a court should be slow to intervene and might withhold relief or confine itself to declaratory guidance for the future.

Where it fits in the module

In the FHS topic on private bodies and judicial review, Datafin presents a functional test of public function in place of a formal source-of-power test. Later courts qualified it: R v Disciplinary Committee of the Jockey Club, ex p Aga Khan [1993] 1 WLR 909 held that a body whose authority is wholly contractual is not reviewable, even if it regulates an important sport. The test was applied in a modern setting in R (Beer) v Hampshire Farmers Markets Ltd [2003] EWCA Civ 1056 and in R (Weaver) v London and Quadrant Housing Trust [2009] EWCA Civ 587. The Panel itself was placed on a statutory footing by the Companies Act 2006. The central tutorial question is how far a public function can be identified without an agreed definition and whether private-law remedies already suffice.

Criticisms

• The test of public function is vague and circular, because a function is public if it is something the government would otherwise do, but what government would do is a political question.
• The decision draws a line between functions that attract review and those based on contract, and the line is hard to justify in principle when the practical power over the individual is similar.
• Judicial review of self-regulatory bodies may chill flexible market regulation or substitute court oversight for specialist judgment, a concern that the Court of Appeal itself acknowledged by urging restraint.
• The Court of Appeal undertook an analysis of public law features without clear criteria, which led to inconsistent later decisions on bodies such as sporting regulators and private housing providers.