England and Wales High Court (Administrative Court) Decisions

as inspectors to investigate the membership of [Parkway] and otherwise with respect to the company for the purpose of determining the true persons who are or have been financially interested in the success or failure (real or apparent) of the company or able to control or materially to influence its policy, and to report thereon in such manner as the Secretary of State may direct.

2. On 9 March 1992 the Inspectors were similarly appointed to investigate the ownership of shares in European Colour plc and Tinsley Robor plc.

3. On 21 February 1992 the Inspectors were also appointed under section 177 of the Financial Services Act 1986 in respect of Parkway. This enquiry was subsumed in the section 442 enquiry.

4. The Inspectors completed their enquiries in April 1998. They produced a single, combined, report ("the Report") that was signed off by them on 21 June 2000. According to the first witness statement of Mr Hanna, a civil servant in the Department of Trade and Industry, on 13 July 2000 ministers decided that the report should be published. It was published on 31 August 2000. There was a print run of 200, and at 21 December 2000 there were about 23 ´ of the report unsold.

5. The Inspectors' report ("the Report") is highly critical of Mr Clegg. Paragraph 11.2 is as follows:

As many previous Companies Act inspectors have discovered, where an individual intent on misleading a company's board of directors and its advisers gains control of a company, there is sometimes very little that can be done to prevent the abuse of that power for personal gain. Mr J M Clegg, as managing director of Wace throughout the relevant period covered by our report, was no exception. Most notably we believe he benefited from substantial secret dealings in the shares of Wace, European Colour, Tinsley Robor and Parkway through bank accounts in his name with Credit Suisse and in the name of William Clegg (the name which he had been given at birth) with Anglo Irish Bank.

6. These proceedings were commenced on 13 October 2000. Sections 6 and 7 of the claim form are as follows:

Section 6.
The Claimant requests permission to proceed with claim for judicial review of the following decisions or acts:
(i) the completion, and submission to the First Defendant, of a report dated 21^st June 2000 by the Second and Third Defendants in respect of investigations under Section 442 of the Companies Act 1985 concerning Wace UK Holdings Limited, European Colour Plc and Tinsley Robor Plc:
(ii) the publication of that report by the First Defendant on 31^st August 2000; and
(iii) the completion, submission and publication of any report in respect of an investigation under Section 177 of the Financial Services Act 1986 concerning Wace UK Holdings Limited.
Section 7
The remedies which are claimed are:
(a) in respect of (i) and (ii) above, quashing orders and a prohibiting order preventing further publication, dissemination or sale of the report:
(b) in respect of (iii) above, a prohibiting order, and
(c) in respect of (i), (ii) and (iii) above, declaratory relief as to the unlawfulness of the same.
Insofar as necessary, an interim remedy in respect of (b) is also sought, restraining the acts referred to in (iii) above.

7. On 30 November 2000, Forbes J gave Mr Clegg permission to apply for judicial review as to the matters set out in paragraphs 6(ii) and (iii) of the Claim Form, and ordered that the claim for permission with regard to paragraph 6(i) be renewed to the judge trying the substantive applications under paragraphs 6(ii) and (iii).

8. I heard the substantive applications in respect of paragraphs 6(ii) and (iii) of the Claim Form together with the application for leave to apply in respect of paragraph 6(i) on 10 and 11 April 2001. In the event, I decided to hear all of the parties' submissions on all of the claims in the Claim Form in order to decide whether to grant leave in respect of paragraph 6(i) and if so whether to grant relief. In this connection, the Defendants submitted that Mr Clegg required an extension of time to apply for relief in relation to the matters set out in that paragraph; that no grounds for an extension of time were in evidence; and that Mr Clegg had not brought these proceedings promptly and was therefore not entitled to such an extension. Mr Collings, for Mr Clegg, submitted that an extension of time should be granted.

The facts relevant to the application for judicial review

9. In June 1991, Mr Clegg went to live in the USA. Mr Clegg attended for an informal interview with the Inspectors on 10 March 1992. On 27 March 1992 he was examined on oath. Norton Rose acted on his behalf, and one of their solicitors accompanied him at his interview. Following the second interview, on 21 May 1992 Norton Rose sent a long letter to the Inspectors in the course of which they stated:

Mr Clegg accepts that what he said about his connections with the account in the name of William Clegg during his interview with the Inspectors was wrong and he is concerned therefore now to correct the record as soon as possible and give a full explanation to the Inspectors in person.

The account in the name of William Clegg was with Anglo Irish Bank, and was associated with dealings in shares relevant to the Inspectors' enquiry.

10. By letter dated 11 June 1992, Norton Rose informed the Inspectors that Mr Clegg had withdrawn his instructions. On 23 June 1992, Mr Clegg himself wrote to the Inspectors, enclosing amendments to the transcript of his formal interview and 13 pages of comment on matters referred to in his interview, and stating that he would contact the Inspectors "shortly in relation to a further interview". By 28 July 1992, no date for a further interview had been suggested by Mr Clegg, and by letter of that date the Inspectors formally required him, pursuant to section 434(1)(b) of the Companies Act 1985, to attend before them on 21 August 1992 to give evidence as to the matters set out in an enclosed schedule. Paragraphs 1 to 4 of that schedule concerned the takeover of Parkway, the bank account in the name of William Clegg that had been referred to in the letter and dealings in shares in Wace in the names of persons who, it was thought, might have been nominees for Mr Clegg. In his letter dated 8 August 1992, Mr Clegg, while professing continued co-operation, refused to attend on that date for reasons he set out, and stated:

I am currently preparing detailed replies to the Schedule enclosed with your letter of July 28^th, which I will send you within the next few days and which I trust will be of assistance to you in the meantime.

The "meantime" referred to the time until his next interview.

11. On 11 August 1992 Mr Clegg sent to the Inspectors information on the matters referred to in the schedule. In relation to paragraphs 1 to 4 of the schedule, his document began with the statement:

These matters were extensively covered in the two interviews to date and in the various correspondence and other written information provided. If there are any specific issues to clarify or answer, I would be pleased to deal with them.

I take this to be an offer to provide information and comments in writing.

12. A meeting with Mr Clegg was arranged for 21 August 1992. However, on 20 August he sent a fax informing the Inspectors that he would be unable to attend "owing to a number of commitments in the U.S." that he did not specify. He added:

However, you should have received my letters of 8^th and 11^th August, the latter providing answers to the questions you wished to ask at tomorrow's interview.

This indicated that Mr Clegg considered that the further interview was unnecessary.

13. On 27 August 1992, the Inspectors sent to Mr Clegg a list of questions they required him to answer. On 5 September Mr Clegg replied with his answers. On 9 September 1992, the Inspectors sent further questions and certain comments on the information he had provided, and stated that he had failed to attend for interview despite having been required to do so. The correspondence continued with complaints by Mr Clegg as to the manner in which his evidence was being treated, but with no agreement to attend to be interviewed again on oath. The Inspectors concluded that he would not return to England to give evidence and set about preparing their report.

14. On 25 May 1995 the Inspectors sent to Mr Clegg a 10-page schedule of provisional criticisms. Their Secretary's letter stated:

I would stress that the Inspectors' views are only provisional and, even at this late stage, any evidence which you wish to give to the Inspectors will be carefully considered by them. The Inspectors have asked me to indicate that they do not think that it has been in your best interests to fail to attend before them to give evidence.
Should you wish to produce any evidence or comment on any item in the schedule please do so within 21 days of the date of this letter.

15. On 12 July 1995, new solicitors instructed by him, Peters & Peters, sent a holding response to this letter. The Inspectors agreed to extend Mr Clegg's time to respond to the provisional criticisms. On 11 August Peters & Peters sent a long letter to the Inspectors requesting what would appear to be all of the material on the basis of which they had arrived at their provisional criticisms of their client, including transcripts of witnesses. The Inspectors responded on 16 August 1995. Relying on Re Pergamon Press [1971] 1 Ch 388, they refused to comply with Peters & Peters' request, stating:

Your client has received a detailed schedule of matters possibly critical of him. Those points on which your client was unsure have been amplified to him in a telephone conversation.

Parenthetically, in their letter of 16 August 1995 Mr Clegg's solicitors took issue with the second sentence. The letter continued:

Even at this late stage the Inspectors are prepared to offer your client the opportunity to give evidence before them as he has been required to do. ... The Inspectors have indicated that they would be prepared to treat the provisional criticisms as an agenda.

The letter included a formal requirement that Mr Clegg attend for interview.

16. Mr Clegg did agree to attend for interview again. His solicitors' letter to the Inspectors of 4 September 1995 stated:

We wish to make it clear, for the avoidance of doubt, that the purpose of the interview is not simply that our client should be required to answer the provisional criticism on oath. ...

17. In their letter of 11 September 1995 the Inspectors agreed to make available to Peters & Peters copies of documents which Mr Clegg would or might have seen at the times relevant to their enquiry. They also stated:

18. In their letter of 15 September 1995, Mr Clegg's solicitors stated:

We note that the main areas which the inspectors will wish to cover are those identified in the provisional criticisms, and that you accept that such provisional criticisms may well have to be amended in the light of the interview. We repeat the reservation of our client's rights in the penultimate paragraph of our letter dated 4^th September.

I recall that at the telephone conversation on Monday 13 November 1995 Miss Warren (of Peters & Peters) mentioned that Mr J M Clegg will be submitting further substantive comments following his interview. I would be grateful if you would inform me when this submission may be expected.

21. Peters & Peters replied on 4 December:

22. However, Peters & Peters changed their mind. On 13 December 1995 they wrote again to the Inspectors, complaining that their client had not had access to the underlying material relied upon by the Inspectors, reiterating their request for that material in the event of the Inspectors deciding to make any provisional criticisms of Mr Clegg, and stating:

But if the Inspectors still propose to criticise our client in their Report, we await amended provisional criticisms.

23. There followed correspondence between the Inspectors and Peters & Peters in which the Inspectors tried unsuccessfully to obtain from Mr Clegg an authority that would be accepted by the Enge, Switzerland, branch of Credit Suisse as authority to give them information concerning an account which they suspected, and he denied, was his. Regrettably, no response was sent to the sentence from the letter of 13 December 1995 quoted in the previous paragraph. An appropriate response, insisting on immediate submission of any further comments on the provisional criticisms, was called for and should have avoided these proceedings.

24. There appears to have been no communication between the Inspectors and Mr Clegg or Peters & Peters between May 1996 and July 2000. By letter dated 27 July 2000 the Department of Trade and Industry asked Peters & Peters whether they still represented Mr Clegg, and if not for his address. On 7 August Peters & Peters replied that the fee earner dealing with the matter had left, that they were arranging to recover their files, and asked for the purpose of the enquiry. By letter dated 9 August they were informed that the Inspectors had reported and "we wish to get in touch with them with a view to making arrangements as regards access to the report prior to publication".

25. The report was published on 30 August 2000. Peters & Peters and Mr Clegg were unaware of this at the time. In their letter of 22 August 2000, Peters & Peters stated that they would endeavour to contact Mr Clegg. Mr Clegg learnt of the Report on 25 August. Curiously, Peters & Peters again wrote on 6 September, stating that they hoped to respond to the letter of 9 August within 7 days. Two days later, on 8 September, they replied substantively. They referred to their letter of 11 August 1995 and the interviews in October 1995 and stated:

Thereafter we were expecting you

(i) to revise (or confirm) the Inspectors' provisional views,

(ii) to address our letter of 11^th August and provide the materials, and

(iii) to receive our client's response to the provisional views.

Instead, it now appears that the Inspectors have reported.

They asked for a pre-publication copy of the report.

26. Over the following days a number of press articles appeared based on the Inspectors' report, as a result of which Peters & Peters and Mr Clegg learnt of its publication. In their letter to the Department of Trade and Industry of 15 September 2000, Peters & Peters asked a number of questions, including the reasons for the completion of the report without addressing the matters referred to in their letter of 8 September and the reasons for the publication of the report. They asked for confirmation whether the Department would halt distribution of the report. They stated:

A report highly critical of our client, which we are instructed contains many demonstrable inaccuracies, has been produced, published and publicised in a manner completely at variance with the usual and established procedures, and is totally in breach of natural justice.

27. On 22 September 2000, that letter was answered by Mr Hanna of the Department of Trade and Industry. He stated that he had no reason to believe, and that Peters & Peters' letter gave no him no reason to believe, that the provisional criticism process had not been fully carried out, or that a decision was taken by the Inspectors to report without addressing the necessary matters. He stated that Peters & Peters had not explained their allegations and:

Nor, incidentally, have you provided any details of the "many demonstrable inaccuracies" that you allege, although ... the content of the report was a matter for the inspectors, and not the Department.

28. As mentioned above, these proceedings were commenced on 13 October 2000. Subsequently, the Department of Trade and Industry stated that there will be no criminal proceedings or proceedings under the Companies Directors Disqualification Act 1986 against Mr Clegg in relation to the matters referred to in the Report.

The basis of the claim for judicial review

29. Mr Clegg contends that in conducting their investigations and making their report the Inspectors acted unfairly in relation to him, and failed to comply with the principles laid down by the Court of Appeal in Re Pergamon Press Ltd and Maxwell v Department of Trade and Industry [1974] 1 QB 523. The alleged unfairness arose as a result of the correspondence in 1995 to which I referred in paragraphs [20] to [22] above. In essence, it is claimed that Mr Clegg was deprived by the Inspectors of the opportunity of addressing and commenting on, and presenting further information and evidence, in response to the amended provisional criticisms envisaged in Peters & Peters' letter of 13 December 1995. Mr Collings put it this way in his skeleton argument:

30. In his first witness statement, Mr Clegg said:

But much of the report is simply wrong and can easily be proved to be.

He complained of the possibility of criminal proceedings based on the report, the possibility of directors' disqualification proceedings, and the "appalling publicity" given to the criticisms of him in the report.

The relief sought

31. Section 6(iii) and Section 7(b) of Mr Clegg' Claim Form relate to the envisaged report under section 177 of the Financial Services Act. There is to be no such separate report. It is therefore unnecessary to discuss this aspect of the case further.

32. In paragraph (a) of section 7 of his claim form, Mr Clegg sought a prohibiting order in respect of the publication, dissemination or sale of the report. Given that nearly all of the copies of the report have already been distributed, there would be little point in making such an order, and it was not pursued by Mr Collings.

33. In any event, the decision to publish the report was made by Ministers, not by the Inspectors, and there is no evidence that that decision was made with knowledge of the unfairness alleged by Mr Clegg. Although there are contacts between the Inspectors and the Department of Trade and Industry during an enquiry, the Report and the opinions set out in it are the Inspectors', not the Department's or any Minister's. Contrary to Mr Collings' submission, there is no evidence from which the Court can, or should, draw the inference that the minister or ministers responsible or their civil servants knew of the alleged unfairness when the decision to publish was made. Furthermore, I see no basis on which the minister is required to consult the persons referred to in a report before deciding whether or not to publish it. In this case, as is the practice, contact was made before publication not to ascertain whether there were objections to publication, but as a matter of courtesy to enable Mr Clegg to prepare himself for publication, with its likely attendant publicity. No grounds have been established to impugn the decision to publish the report. It follows that Mr Clegg could not be entitled to an order quashing that decision.

34. The remainder of the relief sought by Mr Clegg relates to the completion and submission of the Report. As mentioned above, I heard the application for permission to apply for such relief together with the substance of the application and the rival claims in respect of delay.

35. So far as delay is concerned, in a sense it may be said that the decision of the Inspectors to complete their Report without responding to Peters & Peters' letter of 11 August 1995 or asking for Mr Clegg's further comments must have been made long ago. Mr Clegg states (unconvincingly, given his background as a commercial solicitor and the wide experience of his solicitors in matters such as this) that as a result of the Inspectors' failure to provide amended provisional criticisms he came to believe that "the inquiry had died a death", and that "The inquiry appeared to be an internal DTI one, and it would have been no surprise, given the delay and the (I believed) valid criticisms made of the process, had it been buried." Nonetheless, it seems to me that the substance of his complaint is the Inspectors' completion of their Report without obtaining his further comments and any further evidence that he wished to provide. If they were at fault in not informing him of any amended criticisms, or if there were no amendments to their criticisms in not informing him of that fact, and in either case giving him an opportunity to respond, it was a continuing fault until their Report was completed. I shall treat the relevant date for the purposes of judicial review as the date of the completion of the Report.

36. Since the Report had been completed on 21 June 2000, the application for judicial review was presented outside the 3-month time limit stipulated by Part 54.5. Mr Hildyard pointed out that no evidence had been put in on behalf of Mr Clegg specifically addressing the question of delay. However, given that Mr Clegg did not know of the completion of the Report until, it would appear, after 22 August, by which time 2 months had elapsed, the Court should be tolerant of some delay beyond the 3 month limit. Mr Clegg could be forgiven for not instructing his solicitors to bring proceedings (assuming he had grounds for judicial review) until receipt of the letter of 22 September 2000. The 3 weeks between receipt of that letter and the filing of the Claim Form were generous and unexplained in evidence, but given the time necessarily involved in preparing proceedings, if the claim were otherwise meritorious I should not shut it out for failure to act promptly.

The merits of the claim for judicial review

37. I therefore turn to consider the merits of the claim for judicial review of the Report. The orders sought are a quashing order and a declaration of its unlawfulness.

I would only say one word about the relief asked. Mr. Ogden (counsel for Mr Maxwell) recognised that the court could not set aside the report, in whole or in part. 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.

Lawton LJ stated at 542 that a report by company inspectors of itself has no legal consequences:

40. As in Maxwell, it seems to me that the principal, if not the sole, remedy available in the present case is a declaration that the Inspectors acted unfairly, or that the requirements of natural justice have not been complied with. In their judgments in that case, the Court of Appeal made it clear that a declaration in a case such as the present is even more of an exceptional remedy than is normal in judicial review. Lord Denning MR said at [1974] 1 QB 536:

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.
...
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.

Orr LJ said, at 538G:

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.

Lawton LJ said, at 542, immediately after the passage cited at paragraph [39] above:

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.

41. Mr Collings submitted that the Court of Appeal were not suggesting that no remedy would be available if any breach of the requirements of natural justice were established; and that the references in the above judgments to a declaration being an exceptional remedy did not go beyond the normal rule that judicial review remedies are exceptional remedies. He relied in this connection on the submissions of the UK Government in Fayed v UK (1994) 18 EHHR 393, referred to in the report of the Commission at paragraph 45 and in the judgment of the European Court of Human Rights at paragraph 78. The Court summarised the position as follows:

While Inspectors are accorded broad freedom in reporting on the affairs of public companies, the performance of their investigative functions is attended by not inconsiderable safeguards intended to ensure a fair procedure and reliability of facts.

Maxwell was referred to in the judgment of the Court, but in a footnote and without comment. Mr Collings also referred to a letter dated 10 September 1994 to Mr Clegg from Mr Neil Hamilton, then Parliamentary Under-Secretary of State for Corporate Affairs in the Department of Trade and Industry, in which the Minister stated:

They (the Inspectors) are masters of their own procedure. However, they must act fairly and reasonably. If they fail to do so, they are accountable to the courts in an action for judicial review.

Mr Collings sought to distinguish this case from the cases envisaged by Lawton LJ on the basis that in this case the Department of Trade and Industry has already decided not to initiate any proceedings against Mr Clegg. He also submitted that if the Court were to refuse to give a remedy for unfairness, there would be a denial of access to the courts.

42. I do not accept Mr Colling's submission on the effect of the judgments in Maxwell. In my judgment the Court of Appeal did intend to lay down that a declaration of unfairness or the like would be made only in the most exceptional circumstances. The suggestion that the refusal of the Court to give a remedy for unfairness amounts to a denial of access to the courts is not consistent with the discretionary nature of remedies in cases of judicial review.

43. It is not easy to reconcile what was said in Maxwell about the exceptional nature of the remedy with the unqualified statement as to the availability of judicial review in the judgment in Fayed. The reconciliation must be, I think, that the European Court in Fayed was concerned principally with the grounds of judicial review, and did not address the issue, common to all judicial review remedies, as to the circumstances in which the Court, in the exercise of its discretion, would grant relief.

44. The reasons for the exceptional nature of relief in cases such as the present are not difficult to see. A declaration made by the court in general terms that inspectors had acted unfairly would be perceived as undermining their entire report, and their conclusions would be seen as deprived of any value, even if the unfairness in question might be minor or affect only part of the report. A declaration that an individual had been treated unfairly would undermine all of the findings and conclusions of the Inspectors adverse to that individual. On the other hand, a particularised declaration, aimed at specific findings or criticisms, would involve the Court in trying the facts in question and constituting itself a court of appeal against the findings of the Inspectors. Parliament has not provided for any such appeal procedure. A declaration of the kind sought in this case is not only a discretionary remedy: it is to be given only in exceptional circumstances.

45. In this connection it is relevant that the damage of which Mr Clegg complains is to his reputation. He seeks "some small redress and vindication". A man's reputation should depend on his conduct. Vindication would take the Court into the area of trying facts, into which the Court cannot venture. Moreover, as Lawton J pointed out in the passage cited at paragraph [40] above, a person may suffer damage to his reputation without suffering legally recoverable damage.

46. In Re Pergamon Press, the Court of Appeal laid down the requirements of fairness or natural justice in relation to enquiries under the Companies Act. Lord Denning MR said, at [1971] Ch 399H: