COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM COMPETITION APPEAL TRIBUNAL
London, WC2A 2LL
B e f o r e :
LORD JUSTICE MANCE
LORD JUSTICE CARNWATH
| OFFICE OF FAIR TRADING AND OTHERS
|- and -
|IBA HEALTH LIMITED
Mr. David Anderson QC and Ms Kelyn Bacon (instructed by Messrs Ashurst) for the iSoft Group PLC and Torex PLC the 2nd and 3rd Appellants
Mr. Nicholas Green QC and Mr. Aidan Robertson (instructed by Messrs Macfarlanes) for the IBA Health Ltd, the Respondent.
Crown Copyright ©
"The OFT shall, subject to subsections (2) and (3), make a reference to the Commission if the OFT believes that it is or may be the case that –
(a) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and
(b) the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services."
"OFT does not believe that it is or may be the case that, if carried into effect, the creation of this relevant merger situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods and services."
Accordingly OFT did not refer the proposed merger to the Competition Commission.
"apply the same principles as would be applied by a court on an application for judicial review."
"...we are not satisfied that the OFT applied the right test, or that the OFT reached a conclusion that was reasonably open to them. We are not satisfied that the facts are sufficiently found in the decision or that all material considerations have been taken into account. We are unable to verify whether there was material on which the OFT could reasonably base important findings in the decision."
(1) The proposed merger would result in the loss of direct bidding competition between iSoft and Torex, which, since 1998, had occurred on 21 out of 39 EPR contracts and 16 of 31 LIMS contracts.
(2) Though Torex had not won a relevant contract in the previous three years its updated and extended product range as well as its strong installed or legacy base would enable it to be an active competitor in the future.
(3) iSoft and Torex would between them hold more than 50% of the installed base of EPRs and LIMS thereby giving rise to a significant structural change and substantial lessening of competition in the market because of the smallness of the next competitor and the significant advantages in market coverage and potential incumbency the merged company would enjoy.
(4) As the EPR and LIMS systems were specific to the UK and conversion of foreign systems would be expensive there were high barriers to the entry on the UK market of foreign competition.
(5) It was unclear whether the existing competitors in the market could provide competition to the merged company given their current lack of success in winning contracts.
(6) It might be difficult for an LSP to exercise buyer power with respect to the larger contracts to be expected under NPfIT in view of the existence of the PAPs.
(7) The broader product range of the merged company might encourage "one stop shopping" by NHS hospitals.
(8) It is inappropriate to judge the effects of the proposed merger only by reference to the NPfIT programme as such programme covers only England, will not exclude purchases by individual hospitals and is uncertain both as to timing and effect.
(9) iSoft and Torex are key suppliers of EPRs and LIMS to the National Health Service but, if the merger proceeds, will not compete with each other in the development and supply of new and improved systems.
The letter concluded by inviting the parties to put forward any evidence they wished on any of those issues and to consider appropriate undertakings to remedy the potential competition concerns.
"14. The main suppliers of secondary healthcare software currently installed in UK hospitals are iSOFT, Torex/IBA, McKesson and Siemens. The parties' share of installed ("legacy") systems is significant, with the parties supplying 44 per cent of EPRs and 56 per cent of LIMS to the UK public sector. They are key suppliers in each country of the UK, particularly in the supply of LIMS (where in Scotland and Wales, their legacy systems will account for 100 per cent of the installed base). The pace of innovation in healthcare IT systems and changes to the procurement process suggest, however, that the installed base is not the best guide as to whether the parties will have market power in the future.
15. Since most public sector contracts are awarded following a competitive tender, a better measure of potential market power may be the parties' success in winning competitive bids in the past few years. While the existence of an installed base may give incumbent bidders reputational or informational advantages in bidding for new contracts, if the system required is substantially different from existing systems these advantages are unlikely to be significant. The presence of other bidders should act as a competitive constraint on the parties as they bid for new contracts, requiring them to put forward innovative solutions at competitive prices."
"29. In terms of their legacy contracts to the UK public sector, iSOFT and Torex are clearly the two leading suppliers of IT software to the healthcare sector in the UK. In a bidding market, competition is for the market rather than in the market so that the competitive advantage acquired from the legacy base is unlikely to be strong, especially where a new procurement strategy is being introduced.
30. The NPfIT has created five LSP regions, and bidders for the five regions have pre-selected their preferred sub-contractors. Torex's products have not been selected (although in line with its claim that its strengths lie in this area it has been selected as a service provider providing support and installation services) (see note 3). Absent the merger, this means that Torex is likely to face significantly reduced opportunities to sell its products (or those of IBA) to hospital users in England. Expenditure elsewhere in the UK is significantly lower and may not justify the costs involved in updating Torex's existing portfolio of products.
31. The NPfIT is a high profile strategy, supported by government, which gives effect to a commitment to increase spending on updating IT healthcare systems in England. The increase in funding has attracted international LSP bids from well known and established global companies and has allowed for partnerships between the LSPs and US IT healthcare providers, Cerner and IDX, as well as iSOFT. The presence of these international competitors makes it likely that competition for future contracts will remain active. There is a reasonable prospect that international competitors with a UK base will bid for contracts in the regions with the likely effect of increased competition for contracts in Northern Ireland, Scotland and Wales.
32. iSOFT and Torex have been the two leading suppliers of IT software to the healthcare sector in the UK. While a strong legacy base may give the parties a large presence it is unlikely, in itself, to confer significant market power in view of the changes being brought about by the NPfIT. Such a fundamental change has altered the future competitive landscape with the effect that competitive constraints must be viewed under a new scenario.
33. For these reasons, the OFT does not believe that it is or may be the case that, if carried into effect, the creation of this relevant merger situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods and services.
34. This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act."
"(a) whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and
(b) if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services."
"whether the OFT believes that it is, or may be, the case that –
[(a) a relevant merger situation has been or will be created]
(b) the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods and services;"
By s.45 power is given to the Secretary of State if he has given an intervention notice and received a report from OFT to make a reference to the Commission
"if he believes that it is or may be the case that –
(a) a relevant merger situation has been created;
(b) the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services;
[(c) [and d[?]] there is a relevant public interest consideration and on balance the merger would be against the public interest.]
"with a view to –
(a) explaining relevant provisions of this Part to persons who are likely to be affected by them; and
(b) indicating how the OFT...expects such provisions to operate."
Such advice may include advice about the factors which the OFT may take into account in considering whether, and if so how, to exercise a function conferred by that part. Clearly such advice cannot control the interpretation of the Act: that is a matter of law for the court. But, given the duty to provide it, the skill and experience of those required to do so and the purpose for which it is to be provided, the court should, in my view, treat with caution any suggestion that the Act should be interpreted in a sense contrary to such advice. S.107(1) requires OFT to publish, inter alia, any decision made by it not to make a reference under s.33. Such obligation includes the obligation also to "publish [OFT's] reasons for the decision...": s.107(4).
"In determining such an application the Competition Appeal Tribunal shall apply the same principles as would be applied by a court on an application for judicial review."
An appeal lies from a decision of the CAT to the Court of Appeal "on any point of law arising" from that decision.
"The test for reference will be met if the OFT has a reasonably held belief that, on the basis of the evidence available to it, there is at least a significant prospect that a merger may be expected to lessen competition substantially. The OFT considers that this threshold is the same as that against which FTA reference advices were prepared. It differs from that used by the CC in its merger enquiries, reflecting the fact that the OFT is a first-phase screen while the CC is determinative: hence, the test for making a merger reference is lower than the CC's test for deciding that a merger may be expected to substantially lessen competition."
Paragraphs 8.3 and 8.4 indicate the view of OFT that undertakings in lieu of a reference authorised by s.73 are only appropriate in cases where both the substantial lessening of competition and the requisite remedy are clear cut.
Did CAT correctly interpret and apply s.33(1) EA?
"190. The use of the word "may" in the second line of section 33(1) seems to us to signify that, even if those responsible at the OFT are themselves of the view that a merger may not be expected to result in a substantial lessening of competition, it still "may be the case", within the meaning of section 33(1), that the merger may be expected to lead to a substantial lessening of competition, if there is, in fact, an alternative credible view that cannot be reasonably rejected by the OFT on the basis of a "first screen".
191. In other words, putting the matter less technically, if there is genuinely "room for two views" on the question whether there is at least a significant prospect that the merger may be expected to lead to a substantial lessening of competition, then in our opinion the requirement in section 33 (1) that "it may be the case" that … [the merger] may be expected to lead to a substantial lessening of competition, is satisfied.
192. In our opinion, in such circumstances, the statutory duty of the OFT under section 33(1) is not to decide, definitively, which of those two views, it, the OFT, prefers. Under the scheme of the Act, the definitive decision maker, in a case where there is room for two views, is not the OFT but the Commission. If there is room for two views, the statutory duty of the OFT is to refer the matter to the Commission, whose duty is to decide on the question whether the merger may be expected to lead to a substantial lessening of competition, as section 36(1) expressly provides.
193. When we refer to the possibility of there being "room for two views" in a given case, we do not envisage a case in which the alternative view is merely fanciful, or far fetched. We envisage a case in which the alternative view is credible. It must be a view which cannot be confidently dismissed on the basis of a "first screen" investigation.
194. There is also in our view a certain asymmetry under section 33(1) between the situation which arises when the OFT makes a reference, and the situation which arises when the OFT decides not to do so. Even in a case where a substantial lessening of competition seems a likely outcome, in making a reference the OFT does not decide whether, in fact, a substantial lessening of competition may be expected. The OFT simply "believes" that such "may be the case", without prejudging or pre-empting the Commission's investigation.
195. Where, however, the situation is the other way round, and the OFT decides not to make a reference it is deciding that the merger does not even reach the threshold of "it may be the case". In other words in such circumstances the OFT decides that the merger does not even reach "the grey area" where there may be room for more than one view. In its practical effect, a decision not to make a reference effectively decides the issue of substantial lessening of competition in the negative. It not only prejudges, but also excludes, any further investigation by the Commission.
196. In the vast majority of cases no practical consequences arise from this asymmetry. An initial search by the Tribunal showed 56 published merger cases considered by the OFT under the Act, of which 21 did not qualify and 31 were cleared in short, clear decisions. Similarly, in the decisions made to refer (such as Unum/Swiss Life and P&O/Stena) the OFT shows shortly and clearly why the OFT felt that it was under a duty to refer.
197. What is the correct approach in cases in the "grey area" in between? In a case where real issues as to the substantial lessening of competition potentially arise, it seems to us that the words "it may be the case" imply a two-part test. In our view, the decision maker(s) at the OFT must satisfy themselves (i) that as far as the OFT is concerned there is no significant prospect of a substantial lessening of competition and (ii) there is no significant prospect of an alternative view being taken in the context of a fuller investigation by the Commission. These two elements may resemble two sides of the same coin, but in our view they are analytically distinct.
198. It is, as we have said, implicit that the OFT in any event must have sufficient material to support its view. It also seems to us implicit in the second limb of the test that the OFT must be able reasonably to discount the possibility of the Competition Commission coming to a different view after a more in-depth investigation. It must be borne in mind throughout that the role of the OFT under the Act is "a first screen"."
"228. Secondly, on the proper construction of section 33(1), and in particular the words "it may be the case", the OFT had to satisfy itself not only (i) that in its own mind there was no significant prospect of a substantial lessening of competition, but also (ii) there was no significant prospect of the Competition Commission reaching an alternative view on the basis of a fuller investigation.
"232. In this case, the Tribunal is unable to be satisfied, on the material before it, that the OFT asked itself the right question, namely whether the OFT was satisfied not only that there was no significant prospect of a substantial lessening of competition, but also that there was no significant prospect of the Competition Commission reaching an alternative view after a fuller investigation. There is no indication in the decision that the OFT considered the second limb of that test.
233. In the Tribunal's view, the tenor of the decision read as a whole is that the OFT decided that the effect of the NPfIT was to rebut the inference of a substantial lessening of competition resulting from the increase in market share of the parties following the merger. In other words, the OFT's approach was to seek to decide which of two plausible views the OFT preferred, rather than adopting the correct approach, namely to ask whether there were, reasonably, two views which could be taken. By failing to ask itself that latter question, the OFT failed correctly to ask itself whether "it may be the case" that the merger may be expected to result in a substantial lessening of competition within the meaning of section 33(1)."
"The second use of the word "may" in section 33, together with the context in which section 33 operates, (as descriptive of the test of a first phase assessor) led the Tribunal to express its conclusions, derived from an analysis of the statutory language, in broader and less technical terms. Accordingly, in paragraph 191 the Tribunal adopts the perfectly sensible "room for two views" test. This formulation or pithy encapsulation of the statutory test fits neatly and accurately into the statutory framework. It has explained that this alternative second view must be a credible view and one which the CC could reasonably adopt. When such a case arises the OFT must refer. This, it is submitted, is entirely logical and consistent with the statutory language."
In oral argument counsel for IBA accepted that there was a problem of expression, as he described it, with paragraph 197 of the judgment of CAT. He supported a single test.
"whether OFT believes that it is or may be the case that the [merger] may be expected to result in a substantial lessening of competition…"
Thus the relevant belief is that the merger may be expected to result in a substantial lessening of competition, not that the Commission may in due course decide that the merger may be expected to result in a substantial lessening of competition. Further, the body which is to hold that belief is OFT not the Commission.
"where it appears to him that it is or may be the fact that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a merger situation qualifying for investigation".
The test he adopted was that the Secretary of State might make a merger reference "if he knows or suspects" that a merger qualifying for investigation has been created or is in contemplation. In my view the slightly different wording of s.33(1) and the different context of EA, in particular the imposition of a duty rather than the conferment of a power and the distinction drawn in ss.42 and 131, do not warrant paraphrasing "believes it ...may be the case that" as "or suspects".
"This form of section is quite well known, and at first sight might seem to exclude judicial review. Sections in this form may, no doubt, exclude judicial review on what is or has become a matter of pure judgment. But I do not think that they go further than that. If a judgment requires, before it can be made, the existence of some facts, then, although the evaluation of those facts is for the Secretary of State alone, the court must inquire whether those facts exist, and have been taken into account, whether the judgment has been made upon a proper self-direction as to those facts, whether the judgment has not been made upon other facts which ought not to have been taken into account."
It was not disputed that the belief must be reasonably held as accepted in paragraph 3.2 of OFT guidance quoted in paragraph 30 above.
"The courts have repeatedly warned against the dangers of taking an inherently imprecise word, and by redefining it thrusting on it a spurious degree of precision."
"is in contrast to the more normal situation where a non-specialised court is called upon to review the decision of a specialised decision maker. For that reason we are unpersuaded that there is necessarily a direct "readover" to section 120 from cases such as Cellcom, Interbrew, T-Mobile, and the Rail Regulator that have been cited to us."
"214. If the above analysis is correct, it also seems to us that where there is a real issue as to substantial lessening of competition, the onus is firmly on the OFT to satisfy the Tribunal that it had solid, logical and properly reasoned grounds for not complying with its duty to refer under section 33(1). That involves showing with a sufficient degree of certainty that it was entitled to come to the view that even the lower "may be the case" threshold was not met. In other words, the OFT must show that it had good grounds for believing that the matter was not even "grey", but "white"."
"230. Fourthly, in a case such as the present, where there is a real issue as to substantial lessening of competition, the onus is on the OFT to satisfy the Tribunal that it applied the right test, and that it had solid, sufficiently certain, and properly reasoned grounds for deciding that the relatively low threshold of "may be the case" under section 33(1), was not met."
"253. In those circumstances the Tribunal is simply not in a position to find that the OFT has discharged the burden of satisfying the Tribunal that there was material on the basis of which it could reasonably have come to the conclusion that it did in the decision."
"176. Nonetheless the OFT decided, apparently at a decision meeting on 8 October 2003, just over a week after sending the issues letter, that it was under no duty to make a reference to the Commission under section 33 of the Act. That decision was taken following a meeting with the parties on 2 October and a submission made by the parties on 6 October. As appears from the decision, the basis of the OFT's conclusion was, in broad terms, that the potential competition concerns did not after all arise, as a result of the countervailing effects of the NPfIT interpreted by the OFT.
177. We are not required to decide, and should not decide under section 120, whether the OFT's decision was correct on its merits. We do, however, have to decide whether the decision was lawful."
"223. As far as the specific context of a decision by the OFT not to make a reference under section 33(1) is concerned, it seems to us that, unlike Wednesbury itself and many leading cases on judicial review, the issue before us does not involve controlling the exercise of a discretion. Hence a test geared to controlling a discretionary power does not seem to be appropriate. The issue before us is whether the OFT has complied with a duty, and in particular whether the OFT acted unlawfully in taking the view that the underlying circumstances giving rise to the duty were not present.
224. Moreover, in the present context, the Tribunal's task is not to take a decision itself, but primarily to decide which of two other specialised decision makers, the OFT or the Commission, should take the decision. As already emerges from the earlier part of this judgment, we see this case primarily in terms of statutory construction and the process to be followed, and not in terms of deciding factual disputes.
225. As a matter of general approach, the broad question we ask ourselves is whether we are satisfied that the OFT's decision was not erroneous in law, and was one which it was reasonably open to the OFT to take, giving the word "reasonably" its ordinary and natural meaning."
"233. ...In other words, the OFT's approach was to seek to decide which of two plausible views the OFT preferred, rather than adopting the correct approach, namely to ask whether there were, reasonably, two views which could be taken. By failing to ask itself that latter question, the OFT failed correctly to ask itself whether "it may be the case" that the merger may be expected to result in a substantial lessening of competition within the meaning of section 33(1)."
"234. Secondly, if, which is not established before the Tribunal, the OFT believed not only that there was no significant prospect of the merger resulting in a substantial lessening of competition, but also that there was no significant prospect of the Commission coming to an alternative view after a fuller investigation, the Tribunal is not satisfied that was a view that the OFT could reasonably have reached."
This idea is carried forward into subsequent passages in which CAT considers not whether they can interfere with OFT's decision as being unreasonable but whether OFT asked itself the right questions and gave adequate reasons for its answer.
"we are not satisfied that the OFT applied the right test, or that the OFT reached a conclusion that was reasonably open to them."
"In practice they merge into one another and ultimately it becomes a question whether for one reason or another the Minister has acted unlawfully in the sense of misdirecting himself in law, that is, not merely in respect of some point of law but by failing to observe the other headings I have mentioned.
In the circumstances of this case, which I have sufficiently detailed for this purpose, it seems to me quite clear that prima facie there seems a case for investigation by the committee of investigation. As I have said already, it seems just the type of situation for which the machinery of section 19 was set up, but that is a matter for the Minister.
He may have good reasons for refusing an investigation, he may have, indeed, good policy reasons for refusing it....So I must examine the reasons given by the Minister, including any policy on which they may be based, to see whether he has acted unlawfully and thereby overstepped the true limits of his discretion, or as it is frequently said in the prerogative writ cases, exceeded his jurisdiction. Unless he has done so, the court has no jurisdiction to interfere."
Lord Upjohn then proceeded to consider the Minister's various reasons individually and in detail.
"The present matter is a case of a direct merger between two companies who compete horizontally and who are identified in the decision as numbers 1 and 2 in the market, with combined market shares in the 45%/55% range. A decision by the OFT to the effect that on no reasonable view could such a merger be expected to lead to a substantial reduction of competition in our view needs a proper factual basis and exceptional clarity of analysis. We do not find such a basis in the decision."
"Self evidently, issues like these cannot be resolved, or even gone into, on an application for judicial review. But the resulting picture the Tribunal has is one of considerable confusion, in which the exact nature of the competitive process in relation to new, extended or upgraded contracts, and the significance of incumbency, is far from clear. Particularly in a sector of national importance, where large amounts of public money are at stake, a decision such as the present should in our view clearly set out the OFT's reasoning on issues such as these, together with sufficient material to show that the conclusion can be supported and that the matter has been properly investigated. The Tribunal has been unable to satisfy itself that such is the case here."
"Where the existence or non-existence of a fact is left to the judgment and discretion of a public body and that fact involves a broad spectrum ranging from the obvious to the debatable to the just conceivable, it is the duty of the court to leave the decision of that fact to the public body to whom Parliament has entrusted the decision-making power save in a case where it is obvious that the public body, consciously or unconsciously, is acting perversely."
Equally it is appropriate to bear in mind that by perversity is meant that class of case which Lord Radcliffe described in Edwards v Bairstow  AC 14, 36 as those where
"...the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination."
Later he described such a case as one where "the only reasonable conclusion contradicts the determination". By those standards I consider that CAT's conclusion should be upheld. I can explain my reasons relatively shortly.
"the competitive advantage acquired from the legacy base is unlikely to be strong, especially where a new procurement strategy is being introduced" (para 29)
"Absent the merger, Torex is likely to face significantly reduced opportunities to sell its products to hospital users in England" (para 30)
"The presence of these international competitors makes it likely that competition for future contracts will remain active." (para 31)
"There is a reasonable prospect that international competitors with a UK base will bid for contracts in the regions with the likely effect of increased competition for contracts in Northern Ireland, Scotland, and Wales." (para 31)
"While a strong legacy base may give the parties a large presence it is unlikely, in itself, to confer significant market power in view of the changes being brought about by NPfIT." (para 32)
"Such a fundamental change (NPfIT) has altered the future competitive landscape with the effect that competitive constraints must be viewed under a new scenario."
But that does not, in my view, justify the further conclusion that such a scenario overcomes the anti-competitive features which do exist to such an extent as to remove the requisite likelihood of a significant lessening of competition.
a) the two-stage test formulated by CAT is not the test of likelihood required by s.33(1);
b) CAT did not wrongly reverse the burden of proof;
c) CAT did not wrongly apply the Wednesbury test of unreasonableness;
d) CAT were right to conclude that either OFT had applied the wrong test as to likelihood or they had failed adequately to explain or justify their conclusion in accordance with the right test.
I would dismiss this appeal.
Lord Justice Mance:
Lord Justice Carnwath:
"First the Secretary of State is removed from the process. Under the previous position the OFT merely referred cases to the Secretary of State who made the final decision whether to refer. Second, the previous 'public interest' test is replaced with a 'competition-based' substantial lessening of competition test."
(The latter test is referred to in the annotations as the "SLC test". For convenience I shall follow the same approach and use the term "SLC" to mean "a substantial lessening of competition". This is perhaps one of those rare cases where such shorthand is permissible as an aid to finding a way through the density of the statutory language.)
"5.20 The new regime retains a two-stage approach to merger investigations. The OFT will conduct the first-stage investigation to decide whether a reference is necessary. The Competition Commission will continue to carry out such references via a second-stage, in-depth investigation."
The material placed before the Tribunal represented the results of the first-stage investigation. The issue for the Tribunal was whether on that material the OFT could reasonably take the view that the issues (so clearly identified by it in the "issues letter") had been sufficiently resolved for it to be satisfied that there would not be SLC. If not, it was its duty to refer the matter for "in-depth" investigation by the Commission.
"Review is stricter and the courts ask the question posed by the majority in Brind, namely, "whether a reasonable Secretary of State, on the material before him, could conclude that the interference with freedom of expression was justifiable." (De Smith para 13-060, citing Brind –v- Secretary of State  AC 696)."
"Such questions are to be answered not by reference to Wednesbury unreasonableness, but 'in accordance with the principles of fair procedure which have been developed over the years and of which the courts are the author and sole judge'" (R –v- Takeover Panel ex parte Guinness plc  1QB 146, 184, per Lloyd LJ).
"… a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it."
However, his reference to Edwards –v Bairstow was simply in relation to his view that "irrationality" could now "stand upon its own feet", without resort to the inference of a mistake of law. The actual decision in Edwards –v- Bairstow could certainly not be described as "outrageous" in any sense (at least without gross unfairness to the Tax Commissioners who made it). The issue was whether a particular transaction was "an adventure in the nature of trade". Although the House of Lords accepted that this was "an inference of fact", they held that on the primary facts as found by the Commissioners "the true and only reasonable conclusion" contradicted that decision ( AC at p36 per Lord Radcliffe).
"As I see it, the reason why the courts do not interfere with the Commissioners' findings or determinations when they really do involve nothing but questions of fact is not any supposed advantage in the Commissioners of greater experience in the matters of business or any other matters. The reason is simply that by the system that has been set up the Commissioners are the first tribunal to try an appeal, and in the interest of the efficient administration of justice their decisions can only be upset on appeal if they have been positively wrong in law. The Court is not a second opinion where there is a reasonable ground for the first. But there is no reason to make a mystery about the subjects that Commissioners deal with or to invite the courts to impose any exceptional restraint on themselves because they are dealing with cases that arise out of facts found by the Commissioners. Their duty is no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado." (pp 38-9, emphasis added).
(In fact, his comments on the Wednesbury test, though of course of great authority, were not essential to the decision. This turned on a pure issue of construction: whether the term "accommodation" was to be read as qualified by some word such as "appropriate" or "reasonable". The House of Lords answered that question in the negative, holding that Parliament had "plainly and wisely" added no such qualifying adjective, and none was to be implied (p 517E). The difficulty of divining the Parliamentary intention in such cases is underlined by the fact that the decision was reversed later the same year by a statutory amendment adding the word "suitable": Housing and Planning Act 1986, s 14(2)).)
"he considers best calculated to secure… such telecommunications services as satisfy all reasonable demands for them…" (Telecommunications Act 1984, s 3(1)).
Lightman J held that the section drew a distinction between "means" and "ends":
"… whilst the Director is expressly made the arbiter of the means to the ends, he is not made the arbiter of the ends. Section 3 recognises that there is a public interest in reasonable demands for telecommunications services being met and the court is intended to be the guardian of that public interest." (p 330.)
His subsequent exposition of Wednesbury principles (p 331) was directed only to the policy issues (relating to "means") on which the decision-making power was conferred on the Director, rather than the court.
"the question whether the facts as found fall on one side or the other of a conceptual line by the law is a question of fact"
and that, on an appeal limited to questions of law, the court was able to interfere if the decision –
"falls outside the bounds of reasonable judgment" (para 25).
In his view the lack of a clear division caused no difficulty –
"… as long as it is understood that the degree to which an appellate court will be willing to substitute its own judgment for that of the tribunal will vary with the nature of the question." (para 27, citing his own judgment in In re Grayan Building Services  Ch 241, 254-5).
"the Court should at the very least be circumspect about allowing material gaps to be filled by affidavit evidence or otherwise" (para 257, citing R–v- Westminster City Council ex parte Ermakov  2AllER 302, 312E per Hutchinson LJ).
"If a material element is not set out in the decision, it is very difficult for the reviewing court or tribunal to be satisfied that the matter was properly investigated or that the supplementary reasons did in fact form part of the decision making process." (para 258).
In other parts of the judgment, the Tribunal criticised the failure of the OFT to set out all the underlying material (see para 211, 252).