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Malayan Law Journal Articles/2005/Volume 2/JUDICIAL !VI!" #$ $I%A%CIAL !&ULA'#(
)#DI!*
[2005] 2 MLJ xxvii
Malayan Law Journal Articles
2005
JUDICIAL REIE! "# #I$A$CIAL RE%ULA&"R' ("DIE)
Dato' Cyrus Das
1
LLB (Hons), Ph D of Messrs Shook Lin & Bok, Advoates & So!iitors, "ua!a Lu#$ur, Past
President Bar Couni! of Ma!aya and Past President Co##on%ea!th La%yers' Assoiation
Intro*uction
egulatory +o,ies -a.e to,ay +ecome an in,is/ensa+le 0eature o0 t-e 0inancial lan,sca/e o0
many countries1 In most countries wit- a ,e.elo/e, mar2et system3 t-ere is a ,anger o0 a sur0eit
o0 regulatory +o,ies an, t-e ,anger o0 o.er4regulation1 )ut t-e com/elling argument 0or
regulation is t-at con0i,ence in t-e 0inancial mar2et an, /rotection o0 in.estors cannot +e
ac-ie.e, wit-out regulation an, t-e regulators1
'-ere are many ty/es o0 regulatory +o,ies1 $or e5am/le in !nglan, t-ere are a large num+er o0
sel04regulatory +o,ies3 non4statutory in c-aracter3 wiel,ing consi,era+le /ower un,er t-e
regulatory sc-eme esta+lis-e, +y t-e $inancial *er.ices Act 16781
)ut in most ot-er countries t-e regulatory +o,ies en9oy statutory un,er/inning li2e t-e *ecurities
Commission o0 Malaysia3 t-e Australian *ecurities Commission an, t-e In,ian Com/any Law
)oar, or its Mono/olies an, estricti.e 'ra,e Practices Commission1
'-ere is general acce/tance t-at alt-oug- t-e mo,els may .ary 0inancial regulatory +o,ies
e.eryw-ere wiel, consi,era+le /ower in t-e mar2et1 '-eir licensing an, a//ro.al 0unctions on t-e
one si,e an, t-eir in.estigati.e an, in:uisitorial 0unction on t-e ot-er3 mar2s out t-eir im/ortance1
"it- t-is /ower arises t-e &uist ustodiet :uestion3 w-o is to regulate t-e regulator; Can an
aggrie.e, /erson -ol, t-e regulators accounta+le 0or t-eir actions or ,ecisions in a court o0 law;
Are Re+ulatory (o*ies A,ena-le to Ju*icial Control.
As a conce/tual :uestion3 all statutory +o,ies or /u+lic +o,ies or +o,ies /er0orming /u+lic ,uties
are su+9ect to 9u,icial control t-roug- t-e /rocess o0 9u,icial re.iew or +y t-e ,eclaratory /rocess
o0 t-e courts1
)ut t-e e5/erience o0 !nglan, -as s-own t-at amena+ility to 9u,icial re.iew was not an assume,
t-ing w-ere t-e regulatory +o,y lac2e, statutory
' ML( ))vii at ))viii
+ac2ing1 '-e test in !nglan, -as always +een t-e source o0 t-e /ower3 w-et-er it is statutory or
/rerogati.e or w-et-er it was e5ercise, +y a +o,y o0 /ersons c-arge, wit- a /u+lic ,uty <see
*u//erstone = &ow,ie3 (udiia! *evie% <166>3 )utterwort-s? / @15A +he Su$re#e Court Pratie3
1675 Part 1 / >563 /ara 5@/1 4 1B/10?1 Many o0 t-e 0inancial regulatory +o,ies are non4statutory
an, sel04regulatory li2e t-e Panel on 'a2e4#.ers an, Mergers1 '-e :uestion w-et-er t-e Panel
was su+9ect to 9u,icial re.iew 0irst arose in t-e Datafin case <* v Pane! on +ake,overs & Mer-ers
e)$arte Datafin $! C167>D 1 All ! 58B?1 Lor, Donal,son sai, o0 t-e Panel </ 588?E
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F<it? is a truly remar2a+le +o,y1 Perc-e, on t-e 20t- 0loor o0 t-e *toc2 !5c-ange +uil,ing in t-e City o0
Lon,on3 +ot- literally an, meta/-orically it o.ersees an, regulates a .ery im/ortant /art o0 t-e Unite,
Ging,om 0inancial mar2et1 (et it /er0orms t-is 0unction wit-out .isi+le means o0 legal su//ort1F
In ,eci,ing t-e :uestion3 t-e Court o0 A//eal was more concerne, wit- t-e PanelHs 0unctions in
t-e /u+lic ,omain an, t-e im/ortant conse:uences o0 its ,ecisions rat-er t-an its lac2 o0 a
statutory +ase1 It unanimously -el, t-at t-e Panel <notwit-stan,ing its non4statutory c-aracter?
was amena+le to 9u,icial re.iew1 '-e CourtHs reasons are a,e:uately state, in t-e -ea,4notes </
58B? an, t-ey are re/ro,uce, +elowE
FIn ,etermining w-et-er t-e ,ecisions o0 a /articular +o,y were su+9ect to 9u,icial re.iew3 t-e court was
not con0ine, to consi,ering t-e source o0 t-at +o,yHs /ower an, ,uties +ut coul, also loo2 to t-eir nature1
Accor,ingly3 i0 t-e ,uty im/ose, on a +o,y3 w-et-er e5/ressly or +y im/lication3 was a /u+lic ,uty an,
t-e +o,y was e5ercising /u+lic law 0unctions t-e court -a, 9uris,iction to entertain an a//lication 0or
9u,icial re.iew o0 t-at +o,yHs ,ecisions1 Ia.ing regar, to t-e wi,e4ranging nature an, im/ortance o0 t-e
matters co.ere, +y t-e City Co,e on 'a2e4o.ers an, Mergers an, to t-e /u+lic conse:uences o0 non4
com/liance wit- t-e co,e3 t-e Panel on 'a2e4o.ers an, Mergers was /er0orming a /u+lic ,uty w-en
/rescri+ing an, a,ministering t-e co,e an, its rules an, was su+9ect to /u+lic law reme,ies1 Accor,ingly3
an a//lication 0or 9u,icial re.iew o0 its ,ecisions woul, lie in an a//ro/riate case1F
'-e Datafin ,ecision set t-e tren, towar,s t-e amena+ility o0 suc- regulatory +o,ies to 9u,icial
re.iew1 '-us in t-e LA.+*/ case <* v Life Assurane & .nit +rust *e-u!atory /r-anisation Ltd
(LA.+*/) e)$arte *oss C166@D 1 All ! 5B5?3 w-ere t-ere was a c-allenge +y 9u,icial re.iew o0 a
,irecti.e issue, +y LA.+*/ <a non4statutory +o,y? to certain insurance com/anies un,er a
mec-anism /ro.i,e, 0or un,er t-e $inance *er.ices Act 16783 it was conce,e, t-at t-e ,ecision
was susce/ti+le to 9u,icial re.iew <see / 55Bg?1 Li2ewise in * v 0nvestors Co#$ensation She#e,
e) $arte 1eye!! C166BD 1 All ! 8013 concerne, wit- w-et-er t-e IC* )oar, was a//lying t-e
correct e.aluating /rinci/les to ,etermine com/ensation to in.estors w-o -a, 0allen .ictim to
negligent a,.ice 0rom 0inancial +ro2ers3 it was conce,e, t-at t-e )oar,Hs ,etermination was
su+9ect to 9u,icial re.iew as raising issues o0 /u+lic law <see / 805e?1
' ML( ))vii at ))i)
Lor, Donal,son -a, o+ser.e, in t-e Datafin case t-at t-e PanelHs non4statutory c-aracter was a
-istorical anomaly /eculiar to t-e CityHs tra,itions o0 sel04regulation +ut t-at t-e e5/erience o0
com/ara+le mar2ets worl,wi,e was ,i00erent <see / 5>B9?1 <Iowe.er un,er t-e new $inancial
*er.ices an, Mar2ets Act 20003 w-ic- re/eale, t-e $inancial *er.ices Act 16783 one sees a
mo.e towar,s /ro.i,ing statutory +asis to sc-emes an, regulatory +o,ies?1
'-at o+ser.ation is +orne out +y t-e e5/erience o0 Commonwealt- countries li2e Malaysia3 In,ia
an, Australia3 to cite a 0ew1 '-e Malaysian Panel on 'a2e4o.ers an, Mergers en9oys a statutory
0oun,ation un,er t-e 'a2e #.er Co,e </re.iously un,er t-e Com/anies Act 1685 an, now un,er
t-e *ecurities Commission Act 166B?1 In t-e Peta!in- +in Bhd case <Peta!in- +in Bhd v Lee "ian
Chan C166BD 1 MLJ 85>?3 a ,ecision +y t-e Panel to issue a /u+lic re/riman, came +e0ore t-e
t-en *u/reme Court on a matter o0 9uris,iction1 elying on t-e Datafin ,ecision3 !,gar Jose/- Jr
*CJ a//lie, t-e a fortiori argument to say </ 8>1?E
FI0 t-at +e t-e /osition o0 t-e !nglis- /anel w-ic- is a non4statutory3 sel04regulatory +o,y wit-out .isi+le
means o0 legal su//ort3 t-en t-e /osition in t-is country3 must +e a 0ortiori3 since t-e Co,e3 unli2e t-e
Lon,on Co,e3 is /romulgate, +y Parliament an, not t-ere0ore3 as t-e 9u,ge t-oug-t3 a mere gentlemanHs
agreement1F
'-e Malaysian /osition is o0 course ma,e muc- sim/ler +y t-e amen,e, #r,er 5@ o0 t-e ules o0
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t-e Iig- Court 16701 )y ule 2<B? t-e ,ecision o0 Fany /u+lic aut-orityF is amena+le to 9u,icial
re.iew1 '-ere0ore any regulatory +o,y 0unctioning un,er a statutory sc-eme woul, +e su+9ect to
9u,icial re.iew1
In In,ia3 im/ortant 0inancial regulatory +o,ies li2e t-e Mono/olies Commission an, t-e Com/any
Law )oar, are esta+lis-e, +y statute1 '-e Mono/olies an, estricti.e 'ra,e Practices Act 1686
create, +y *ection 5 t-e Mono/olies = estricti.e 'ra,e Practices Commission <calle, Ft-e
Mono/olies CommissionF? to o.ersee t-e en0orcement o0 anti4mono/oly an, restricti.e tra,e
/ractices un,er t-e Act1 '-e early cases a0ter t-e intro,uction o0 t-e Act recognise, t-e
a.aila+ility o0 9u,icial re.iew o0 t-e CommissionHs 0unctions1 In 2iv!on Syntheti 3i4res v Sa)ena
516789 :8 Co; Cas; :16 and 0+C Ltd v Mono$o!ies Co##ission C16>8D B8 Co Cas 8163 t-e
c-allenges were as to t-e .ali,ity o0 t-e notices issue, +y t-e Commission instituting
in.estigations1 '-e Commission ,i, not ta2e t-e /osition in eit-er case t-at its actions were not
su+9ect to 9u,icial scrutiny1
Moreo.er3 t-e writ /etition 9uris,iction -as +een use, 0re:uently in In,ia to su+9ect regulatory
+o,ies to 9u,icial scrutiny1 $or e5am/le3 un,er /owers con0erre, +y t-e Com/anies Act3 t-e
Central &o.ernment -a, ,elegate, its /owers to t-e Com/any Law )oar, to ,etermine w-en to
inter0ere in t-e a00airs o0 a cor/oration on t-e groun,s t-at its +usiness was +eing con,ucte, in a
manner to ,e0rau, its cre,itors1 In +ot- Bariu# Che#ia!s Ltd v Co#$any La% Board AI 168>
*C 265 an, *ohtas 0ndustries Ltd v S D A-ar%a! AI 1686 *C >10 success0ul writ /etitions were
maintaine, to assail t-e inter.entions
' ML( ))vii at )))
as +eing #a!afide or not +ase, on rele.ant circumstances1 '-e Courts -el, t-at w-et-er t-e
re:uire, circumstances e5ist in any gi.en case is o/en to 9u,icial re.iew Ft-oug- t-e o/inion
0orme, +y t-e &o.ernment is not amena+le to re.iewF <see Ieg,e J in t-e *ohtas case?1
In Australia3 t-e Australian *ecurities Commission is esta+lis-e, un,er t-e Australian *ecurities
Commission Act 16761 In So##ervi!!e v Austra!ian Seurities Co##ission C166@D 11 AC* 565 it
was a00irme, t-at t-e ,ecisions o0 t-e Commission were su+9ect to 9u,icial re.iew1 '-e a//licants
were see2ing 9u,icial re.iew o0 ,ecisions ma,e +y t-e Commission in relation to t-e +ringing an,
con,uct o0 /rocee,ings against t-em3 an, soug-t also to im/lea, t-e commissioners w-o sat an,
ma,e t-e ,ecision1 '-e attem/t to Hli0t t-e cor/orate .eilH was re+u00e, wit- t-e $e,eral Court
saying t-at t-e commissioners acte, as ,elegates an, Ht-e ,ecision o0 t-e ,elegate is to -a.e t-e
same e00ect as i0 it were a ,ecision o0 t-e CommissionH </ 800?1
)u-stantive Review
In t-e CC*U case <Couni! of Civi! Servie .nions v Minister of Civi! Servie C167BD @ All ! 6@5
IL? Lor, Di/loc2 -a, neatly3 an, now wi,ely acce/te, as -a.ing aut-oritati.ely3 i,enti0ie, t-e
touc-stones o0 9u,icial re.iew1 #n Ft-e ,ecisionF t-at is amena+le to 9u,icial re.iew3 -e sai, </
6B6?E
F'-e su+9ect matter o0 e.ery 9u,icial re.iew is a ,ecision ma,e +y some /erson <or +o,y o0 /ersons?
w-om I will call t-e F,ecision4ma2erF or else a re0usal +y -im to ma2e a ,ecision1
'o :uali0y as a su+9ect 0or 9u,icial re.iew t-e ,ecision must -a.e conse:uences w-ic- a00ect some
/erson <or +o,y o0 /ersons? ot-er t-an t-e ,ecision4ma2er3 alt-oug- it may a00ect -im too1 It must a00ect
suc- ot-er /erson eit-er <a? +y altering rig-ts or o+ligations o0 t-at /erson w-ic- are en0orcea+le +y or
against -im in /ri.ate law or <+? +y ,e/ri.ing -im o0 some +ene0it or a,.antage1111F
#n t-e groun,s o0 c-allenge3 -e sai, </ 651?E
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FJu,icial re.iew -as I t-in2 ,e.elo/e, to a stage to,ay w-en3 wit-out reiterating any analysis o0 t-e ste/s
+y w-ic- t-e ,e.elo/ment -as come a+out one can con.eniently classi0y un,er t-ree -ea,s t-e groun,s
on w-ic- a,ministrati.e action is su+9ect to control +y 9u,icial re.iew1 '-e 0irst groun, I woul, call
FillegalityF3 t-e secon, FirrationalityF an, t-e t-ir, F/roce,ural im/ro/rietyF1111 )y FillegalityF as a groun, 0or
9u,icial re.iew I mean t-at t-e ,ecision4ma2er must un,erstan, correctly t-e law t-at regulates -is
,ecision4ma2ing /ower an, must gi.e e00ect to it1111 )y FirrationalityF I mean w-at can +y now +e
succinctly re0erre, to as F"e,nes+ury unreasona+lenessF <see Associate, Pro.incial Picture Iouses Lt,
. "e,nes+ury Cor/ C16B>D 2 All ! 8703 C16B7D 1 G) 22@?1 It a//lies to a ,ecision w-ic- is so
outrageous in its ,e0iance o0 logic or o0 acce/te, moral stan,ar,s t-at no sensi+le /erson w-o -a,
a//lie, -is min, to t-e :uestion to +e ,eci,e, coul, -a.e arri.e, at it111 I -a.e ,escri+e, t-e t-ir, -ea,
as F/roce,ural im/ro/rietyF rat-er t-an 0ailure to o+ser.e +asic rules o0 natural 9ustice or 0ailure to act
wit- /roce,ural 0airness towar,s t-e /erson w-o will +e a00ecte, +y t-e ,ecision1111F
' ML( ))vii at )))i
It may +e state, con0i,ently t-at 0inancial regulatory +o,ies are su+9ect to t-e Di/loc2 rules o0
9u,icial re.iew 0or t-e ,ecisions t-ey ma2e1
In t-e In,e/en,ent $inancial A,.isers Association case <* v Seurities and 0nvest#ents Board,
e)$arte 0nde$endent 3inania! Advisers Assoiation C1665D 2 )CLC >8? t-e c-allenge was to a
statement issue, +y t-e *ecurities an, In.estment )oar, <*I)? to in,e/en,ent 0inancial a,.isers
<I$AHs? in t-e mar2et on t-e groun,3 inter alia3 t-at it was ultra .ires1 '-e *I) 0unctione, un,er t-e
$inancial *er.ices Act 1678 <UG?1 It is not esta+lis-e, +y t-e Act +ut is regar,e, as t-e o.erall
0inancial ser.ices in,ustry watc-,og1 '-e statement3 ,escri+e, as a gui,ance3 was issue, to
I$AHs to re.iew t-eir a,.ice on t-e con.ersion o0 /ension sc-emes 0rom one ty/e to anot-er1 '-e
argument on ultra .ires was re9ecte, +y *taug-ton LJ w-o sai, t-at it was common groun, t-at
t-e *I) -a, no /ower to en0orce t-e statement ,irectly against t-e I$AHs <see /789? alt-oug- t-e
statement may -a.e gi.en t-e im/ression +ut t-at coul, not -a.e ,ecei.e, t-e traine, eye o0 t-e
I$AHs <see / 7>9?1
A /arallel may +e ta2en 0rom t-e well42nown case o0 Laker Air%ays Ltd v De$t of +rade C16>>D 2
All ! 172 w-ere again t-e c-allenge was as to a gui,ance statement issue, +y t-e *ecretary o0
*tate 0or 'ra,e to t-e Ci.il A.iation Aut-ority <CAA? t-e regulatory +o,y in c-arge o0 lan,ing rig-ts
at ci.ilian air/orts1 '-e e00ect o0 t-e Hgui,anceH was to ,e4licence t-e lan,ing rig-ts o0 La2erHs s2y4
trains an, create a mono/oly 0or )ritis- Airways1 In -is inimita+le way Lor, Denning outline, w-y
t-e gui,ance statement creating a mono/oly lac2e, legal sanction an, was ultra .ires <// 1614
62?E
F'-is new /olicy gui,ance -a, a ,irect im/act on La2er Airways Lt,1 '-ey were not allowe, to o/erate
t-e *2ytrain ser.ice +ecause it was 0eare, t-at it woul, ,i.ert /assengers 0rom )ritis- Airways1 *o t-e
aut-ority was to re.o2e t-e licence it -a, grante, 0or *2ytrainA1111 '-e Minister coul, not3 -owe.er3 ,o it
entirely on -is own1 Ie -a, to get t-e a//ro.al o0 +ot- Iouses o0 Parliament +e0ore -e coul, call on t-e
Ci.il A.iation Aut-ority to 0ollow -is new /olicy gui,ance1 Ie got t-eir a//ro.al1111 )ut3 mar2 you3 t-is
a//ro.al3 e.en +y +ot- Iouses3 was not t-e e:ui.alent o0 an Act o0 Parliament1 It coul, not o.erri,e t-e
law o0 t-e lan,1111 It was in t-is res/ect ultra .ires an, t-e 9u,ge was rig-t so to ,eclare1F
In t-e Peta!in- +in Bhd case3 su$ra3 t-e Malaysian *u/reme Court -a, -el, t-at t-e 'a2e4#.er
Panel -a, acte, outsi,e its 9uris,iction un,er t-e Co,e in e5/ressing an o/inion on t-e legal
conse:uences o0 a /u+lic censure w-ic- 0ell s-ort o0 a ,ecision1 '-e /ur/orte, H,ecisionH was
t-ere0ore null an, .oi,1 '-us u!tra vires is t-e 0irst an, /ro+a+ly most im/ortant control
mec-anism to ensure regulatory +o,ies 2ee/ wit-in t-eir limits1
'-e ot-er Di/loc2 groun, is HirrationalityH1 As state, it is a con.enient s-ort4-an, ,escri/tion +y
Lor, Di/loc2 o0 "e,nes+ury unreasona+leness1 '-e ,ecisions o0 0inancial regulatory +o,ies are
not e5em/t 0rom t-is test1 $or e5am/le3 in t-e In,e/en,ent $inancial A,.isers case3 su/ra3 t-e
ot-er groun, o0 c-allenge to t-e gui,ance statement issue, +y t-e *I)3 an, w-ic- succee,e,3
was HirrationalityH1 #ne o0 t-e conse:uences o0 t-e statement was
' ML( ))vii at )))ii
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t-at it 9eo/ar,ise, t-e insurance lia+ility co.er o0 t-e I$AHs1 *taug-ton LJ rule, t-at inasmuc- as
t-e statement 0aile, to state t-at t-e I$AHs are not re:uire, to ta2e any ste/ w-ic- will in.ali,ate
t-eir insurance co.er wit-out t-eir insurerHs consent3 t-e statement was w-olly irrational <see /
60e?1
'-e irrationality groun, was also consi,ere, in t-e 0nvestors' Co#$ensation She#e (0CS) case3
su/ra <more at t-e Court o0 A//eal stageE see C166BD 1 All ! 525 t-an at t-e Iouse o0 Lor,s?1
'-e Court o0 A//eal -a, -el, t-at it was not irrational 0or t-e IC* )oar, to a//ly com/ensation
/rinci/les t-at im/ose, certain limitations on entitlements so long as t-e aim to /ro.i,e 0air
com/ensation was met1 Mann LJ sai, </ 5@8?E
F'-e ,ecisi.e :uestion is w-et-er t-e ,ecision o0 t-e )oar, was irrational1 "e cannot see -ow it comes
wit-in measura+le ,istance o0 +eing irrational to ,e,uct +ene0it recei.e, 0rom w-at ot-erwise woul, +e
0air com/ensation1 "-et-er it s-oul, or s-oul, not +e3 is /lainly susce/ti+le o0 argument +ut t-e court is
not a//ellate on argument1F
#n t-e su+9ect o0 irrationality3 t-ere are two /rinci/les w-ic- woul, un,ou+te,ly a//ly3 as a matter
o0 /rinci/le3 to ,ecision4ma2ing +y 0inancial regulatory +o,ies1 It may +e use0ul to mention t-em
now1
'-e 0irst is t-at i0 t-e statutory /ro.ision lea.es it to t-e ,ecision4ma2er to ,etermine t-e rele.ant
0actors t-at s-oul, +e ta2en into account3 it is o/en to t-e courts to ,eci,e w-et-er t-e /articular
0actor is rele.ant1 Iowe.er weig-t to +e assigne, to it is entirely a matter 0or t-e regulatory +o,y
to attri+ute as it t-in2s 0it1 Lor, Geit- e5/resse, it as 0ollows in t-e '!*C# *tores case <+<SC/
Stores Ltd v Seretary of State C1665D I "L >56? at / >8BE
FIt is 0or t-e courts3 i0 t-e matter is +roug-t +e0ore t-em3 to ,eci,e w-at is a rele.ant consi,eration1 I0 t-e
,ecision ma2er wrongly ta2es t-e .iew t-at some consi,eration is not rele.ant3 an, t-ere0ore -as no
regar, to it3 -is ,ecision cannot stan, an, -e must +e re:uire, to t-in2 again1 )ut it is entirely 0or t-e
,ecision ma2er to attri+ute to t-e rele.ant consi,erations suc- weig-t as -e t-in2s 0it3 an, t-e courts will
not inter0ere unless -e -as acte, unreasona+ly in t-e "e,nes+ury sense1F
*econ,ly3 0inancial regulatory +o,ies must +e alert to t-e /u+lic an, sensiti.e nature o0 t-eir
,ecision4ma2ing1 '-eir ,ecision must +e merit4+ase, an, not in0luence, +y e5traneous
consi,erations1 '-us it s-oul, not +e su+9ect to /olitical ,ictates1 In t-e 0amous London +u4e
3are ase (Bro#!ey LBC v =reater London Couni! C1671D 1 All ! 126 IL? tu+e 0ares were
ar+itrarily re,uce, +y t-e Lon,on 'rans/ort !5ecuti.e <L'!? at t-e ,irecti.e o0 t-e &reater
Lon,on Council <&LC? an, recou/ment o0 t-e grant to t-e L'! to su//lement t-e s-ort0all was
soug-t +y t-e &LC re:uiring t-e +oroug- councils to issue su//lementary rates to 0inance t-e
grant1 All t-is -a//ene, +ecause o0 t-e election mani0esto o0 t-e ma9ority o0 t-e &LC Councilors
<o0 t-e La+our Party? t-at t-ey woul, re,uce tu+e 0ares i0 electe, to o00ice1 )ot- t-e Court o0
A//eal an, t-e Iouse o0 Lor,s were em/-atic in ,eclaring t-at t-e election mani0esto s-oul,
-a.e no +earing on t-e ,ecision4ma2ing +y t-e &LC1 Lor, Denning ,ealt wit- it 0ully in t-e Court
o0 A//eal1 Ie sai, </ 1@5?E
' ML( ))vii at )))iii
F<'-e? ma9ority o0 t-e &LC ga.e altoget-er un,ue weig-t to t-e 0ollowing consi,eration1 '-ey -a, issue,
a mani0esto in w-ic- t-ey -a, /romise, to cut t-e 0ares on Lon,on 'rans/ort +y 25J1 '-ey regar,e,
t-emsel.es as committe, to t-e im/lementation o0 t-at /romise1 '-ey were ,etermine, to F-onourF t-at
commitment3 come w-at may1 '-ey a0terwar,s ,isco.ere, t-at it woul, in9ure t-e rate/ayers most
se.erely3 0ar more se.erely t-an t-ey -a, realise, w-en t-ey ma,e t-e /romise111 In gi.ing suc- weig-t
to t-e mani0esto3 I t-in2 t-e ma9ority o0 t-e &LC were un,er a com/lete misconce/tion1 A mani0esto
issue, +y a /olitical /arty3 in or,er to get .otes3 is not to +e ta2en as gos/el1 It is not to +e regar,e, as a
+on,3 signe,3 seale, an, ,eli.ere,1 In t-e result I -ol, t-e &LC ,i, not -ol, t-e +alance 0air1111 Millions o0
/assengers on t-e +uses an, tu+es come 0rom 0ar outsi,e t-e Lon,on area1 '-ey come e.ery ,ay1 '-ey
Page >
get t-e +ene0it o0 t-e 25J cut in 0ares wit-out /aying a /enny increase on t-eir rates at -ome1111
"-ereas t-ousan,s o0 rate/ayers in Lon,on w-o /ay t-e rates ne.er use t-e +uses or tu+es at all1111 My
conclusion is t-at t-e actions -ere o0 t-e &LC went +eyon, its statutory /owers an, are null an, .oi,1F
Li2e in t-e Laker Air%ays case3 su/ra3 ministerial ,irecti.es no matter -ow im/erati.e 0rom a
/ractical stan,/oint3 woul, -a.e to meet t-e test o0 u!tra vires i0 a regulatory +o,y acts on t-em1
An I,/ortant Li,itation
Ju,icial re.iew o0 merit4+ase, ,ecisions +y 0inancial regulatory +o,ies is su+9ect to an im/ortant
limitation1 It was .oice, +y Lor, )ing-am in t-e 0nternationa! Stok <)han-e case <* v
0nternationa! Stok <)han-e of the ." and 0re!and Ltd, e)$arte <!se Ltd C166@D K) 5@B1 It was a
case w-ere 9u,icial re.iew was soug-t o0 a ,ecision +y t-e :uotations /anel o0 t-e *toc2
!5c-ange canceling t-e o00icial listing o0 s-ares in a com/any1 In t-e course o0 ,ismissing t-e
c-allenge3 Lor, )ing-am ma,e t-is im/ortant o+ser.ation </ 552)?E
F<'-e? courts will not secon,4guess t-e in0orme, 9u,gment o0 res/onsi+le regulators stee/e, in
2nowle,ge o0 t-eir /articular mar2et1F
Moreo.er3 t-ere is a time -onoure, /rinci/le t-at in matters li2e /u+lic e5/en,iture3 /rice or rate
0i5ation or inci,ences o0 ta5 +ur,ens an, t-e li2e3 w-ic- Parliament -as con0i,e, to a s/ecialist
+o,y3 t-e courts will not or,inarily inter0ere in t-e ,ecisions t-ey ma2e1 Lor, *carman sai, in t-e
2ottin-ha#shire County Couni! ase (2ottin-ha#shire County Couni! v Seretary of State for
<nviron#ent 51678D AC 2B0 at 2B>E
F111111111I cannot acce/t t-at it is constitutionally a//ro/riate3 sa.e in .ery e5ce/tional circumstances3 0or
t-e courts to inter.ene on t-e groun, o0 Funreasona+lenessF to :uas- gui,ance 0rame, +y t-e *ecretary
o0 *tate an, +y necessary im/lication a//ro.e, +y t-e Iouse o0 Commons3 t-e gui,ance +eing
concerne, wit- t-e limits o0 /u+lic e5/en,iture +y local aut-orities an, t-e inci,ence o0 t-e ta5 +ur,en as
+etween ta5/ayers an, rate/ayers1F
0roce*ural Review
In t-e Di/loc2 categorisation in t-e CCS. case3 su/ra3 H/roce,ural irregularityH 0igures /rominently
as a +asis 0or 9u,icial re.iew1 Most 0inancial regulatory +o,ies wiel, enormous in0luence o.er t-e
0ate o0 /ersons an,
' ML( ))vii at )))iv
transactions in t-e 0inancial mar2et1 '-e ,ecisions t-ey ma2e -a.e great 0inancial conse:uences
on t-em1 Persons aggrie.e, are +oun, to in:uire w-et-er t-e regulatory +o,y -a, con,ucte,
itsel0 in accor,ance wit- esta+lis-e, /roce,ure an, ma,e a ,ecision 9ustly an, 0airly1 *uc- a
scrutiny is easy to ma2e1 Most regulatory +o,ies to,ay are esta+lis-e, +y statute1 It o0ten
-a//ens t-at t-e /roce,ure t-ey -a.e to 0ollow in ma2ing a /articular ,ecision woul, also +e
state,3 in t-e /rimary legislation3 i0 not at least in t-e su+or,inate legislation ma,e un,er t-e
statute1
'-e 0irst /rinci/le in t-is regar, is :uite sim/ly state, +y Lor, )ri,ge in L!oyd v MMahon C167>D 1
AC 825 IL t-at t-e ,ecision must +e arri.e, at 0airlyA t-at t-e re:uire, /roce,ure must +e
0ollowe,3 an, t-at a,,itional /roce,ural sa0eguar,s to ensure 0airness may well +e rea, into t-e
e5isting 0ramewor21 Ie sai, <at // >0240@?E
FMy Lor,s3 t-e so4calle, rules o0 natural 9ustice are not engra.e, on ta+lets o0 stone1111 In /articular3 it is
well4esta+lis-e, t-at w-en a statute -as con0erre, on any +o,y t-e /ower to ma2e ,ecisions a00ecting
in,i.i,uals3 t-e courts will not only re:uire t-e /roce,ure /rescri+e, +y t-e statute to +e 0ollowe,3 +ut will
rea,ily im/ly so muc- an, no more to +e intro,uce, +y way o0 a,,itional /roce,ural sa0eguar,s as will
Page 7
ensure t-e attainment o0 0airness1F
'-us w-ere a 0orwar,ing agent -a, -is licence re.o2e, wit-out +eing -ear,3 t-e Malaysian Court
-a, little ,i00iculty in -ol,ing t-at t-e 0or0eiture was +a, wit-out 0irst gi.ing -im an o//ortunity to
+e -ear,3 alt-oug- t-e statute itsel0 was silent on a rig-t to a -earingE see Ho "%an Sen- v "etua
Pen-arah "asta# C16>>D 2 MLJ 152 $C1
)ut t-e courts are less li2ely to inter0ere on groun,s o0 natural 9ustice w-ere t-e regulatory +o,y is
,isc-arging its in.estigati.e or in:uisitorial role1 In 2or%est Ho!st v De$art#ent of +rade C16>7D @
All ! 270 t-ere was a c-allenge to t-e ,ecision +y t-e De/artment o0 'ra,e to a//oint
ins/ectors o.er t-e a00airs o0 a com/any on t-e groun, o0 0ailure to a00or, a -earing +e0ore ,oing
so1 '-e argument 0aile,3 as it ,i, in t-e In,ian case o0 Ba!!a$ur 0ndustries v Mono$o!ies
Co##ission AI 1676 Del-i @261 '-e Del-i Iig- Court rule, t-at t-e Commission was un,er no
o+ligation to gi.e a -earing +e0ore issuing a notice to initiate an in:uiry into restricti.e tra,e
/ractices +y a cor/oration1
'-e Courts are also unli2ely to /ut 0etters on met-o,ology1 In t-e Australian case o0 Litt!e *iver
=o!dfie!ds v Mou!ds C1661D 8 AC* 2663 t-e $e,eral Court re9ecte, t-e argument o0 t-e
a//licants ser.e, wit- notices o0 in.estigation +y t-e Australian *ecurities Commission3 t-at t-e
,ecision o0 t-e Commission to carry out t-e in.estigations must +e in writing an, t-e Commission
was o+lige, to set out t-e groun,s u/on w-ic- a rele.ant contra.ention was sus/ecte,3 t-e am+it
o0 t-e in.estigation3 nominate a reasona+le time wit-in w-ic- t-e in.estigation must +e com/lete,
an, s-oul, a//oint an o00icer o0 t-e Commission to -a.e con,uct or res/onsi+ility o0 t-e
in.estigation1
%e.ert-eless t-ere is recognise, an o.erri,ing ,uty on t-e /art o0 t-e regulatory +o,y to act 0airly1
It o/erates +ot- at t-e time o0 t-e institution o0
' ML( ))vii at )))v
an in.estigation an, ,uring t-e course o0 t-e in.estigation1 In * v Seretary of State for +rade
<)$ Perestre!!o C1670D @ All ! 273 one o0 t-e com/laints was o.er t-e notice to /ro,uce
,ocuments issue, +y ins/ectors a//ointe, to in.estigate t-e a00airs o0 t-e com/any1 It was
conten,e, t-at t-e notice was unreasona+le1 '-e 9u,icial re.iew a//lication to :uas- t-e notice
succee,e,3 wit- "ool0 J1 <as -e t-en was? -ol,ing <see / 27?E
F'-e notice was unreasona+le an, e5cessi.e in t-e circumstances +ecause it was too wi,e in its sco/e
an, ,i, not ma2e clear t-at t-e ins/ectors were in 0act merely as2ing Perestrello to ,o no more t-an -e
coul, +e re:uire, to ,o un,er <t-e Act?1111 '-e notice was also unreasona+le an, e5cessi.e in sti/ulating
t-at -e s-oul, /ro,uce t-e ,ocuments at t-e ins/ectorsH o00ice as o//ose, to t-e com/anyHs o00ice3
+ecause t-at meant t-at111 -e an, t-e com/any woul, +e ,e/ri.e, o0 t-e use o0 t-e +oo2s w-ile t-ey
were +eing e5amine, at t-e ins/ectorsH o00ice1F
)ut it is unli2ely t-at t-e regulatory +o,y woul, +e re:uire, to esta+lis- in t-e notice t-e
connection +etween t-e ,ocument soug-t an, t-e in.estigation1 In Austra!ian Seurities
Co##ission v >a#o C1661D 8 AC* @753 t-e $e,eral Court o0 Australia rule, t-at it woul, +e an
im/ossi+le im/osition on t-e A*C i0 its in:uiries were to +e /re,icate, on an o+ligation in e.ery
case to ,etail t-e +asis o0 t-e asserte, connection +etween t-e ,ocuments soug-t an, t-e +o,ies
cor/orate t-e su+9ect o0 t-e in.estigation1
'-e /rinci/le o0 0airness is3 -owe.er3 0le5i+le an, woul, usually in.ol.e t-e regulatory +o,y
,eci,ing t-e :uestion on an o+9ecti.e +asis in t-e ,isc-arge o0 its statutory 0unction1 In t-e <!ders
case <* v Mono$o!ies & Mer-ers Co##ission <)$arte <!ders Ltd C167>D 1 All ! B51? 9u,icial
re.iew was soug-t to :uas- t-e ,ecision o0 t-e Mono/olies an, Mergers Commission to ,isclose
to t-e target com/any con0i,ential in0ormation recei.e, 0rom t-e +i,,er in t-e course o0
in.estigation into t-e /ro/ose, merger1 '-e a//lication 0aile,3 Mann J ruling on t-e /oint as
0ollows <// B81482?E
Page 6
F$airness is a 0le5i+le conce/t3 w-ose content is ,e/en,ent on t-e situation w-ic- is un,er
consi,eration1111 "-at is 0air in relation to a /articular /rocess an, to a /articular situation w-ic- is
su+9ect to t-at /rocess3 is 0or ,etermination +y t-e court111 t-e consi,erations o0 0airness arise in t-e
course o0 a statutory in.estigation as to w-at is or is not in t-e /u+lic interest1111 In my 9u,gment3 t-e
commission was correct in su+or,inating a /ercei.e, ,etriment to !l,ers <t-e +i,,er? to its 9u,gment o0
-ow +est to /er0orm its statutory 0unction1 I em/-asise t-at t-ere is no suggestion t-at t-e su+or,ination
was irrational or was ,one ot-erwise +ut in goo, 0ait-1F
In t-e Perestre!!o case3 su/ra3 "ool0 J1 <as -e t-en was? outline, t-e two re:uirements t-at must
+e met +y t-e regulator in ,eci,ing w-et-er to institute an in.estigation into t-e a00airs o0 a
com/any1 Ie sai, <at / @7?E
F$irst o0 all3 t-e /ersons e5ercising t-e /ower must not e5cee, or a+use t-e ,iscretion w-ic- is grante,
to t-em +y t-e sectionA an, not acting +ona 0i,e an, not acting -onestly are e5am/les o0 t-at1*econ,ly3
t-e /erson concerne, must not use t-e ,iscretion 0or some ulterior /ur/ose1 I0 t-e /erson concerne, is
so /re9u,ice, against someone t-at -e is using t-e section3 not 0or t-e /ur/oses 0or w-ic- t-e /ower was
gi.en3 +ut3 0or e5am/le3 to /unis- someone3 t-en t-at is using it 0or an ulterior /ur/ose w-ic- woul, +e
outsi,e t-e statute1 It a//ears to
' ML( ))vii at )))vi
me t-at it is a re:uirement o0 t-is /ower t-at it s-oul, +e e5ercise, 0airly in t-e sense t-at t-e statutory
,iscretion w-ic- it gi.es s-oul, not +e a+use,1F
As state, +e0ore t-e ,uty to act +ona 0i,e an, 0airly e5ten,s to t-e course o0 t-e in.estigation
itsel01 In *e Per-a#on Press Ltd C16>1D 1 C-1 @773 one o0 t-e Ma5well com/anies was su+9ect to
in.estigation +y t-e )oar, o0 'ra,e1 '-e solicitors 0or Mr1 Ma5well insiste, t-at t-e ins/ectors
s-oul, s-ow t-em t-e transcri/ts o0 witnesses w-o s/ea2 a,.ersely o0 t-em an, to cross4
e5amine t-em an, 0urt-er t-at t-ey s-oul, +e s-own any ,ocuments w-ic- may +e use, against
t-em1 Lor, Denning sai, t-at alt-oug- t-ey <t-e ins/ectors? are t-e masters o0 t-eir own
/roce,ure t-ere was only a ,uty on t-em to act 0airly1 Ie sai, <at // @664B00?E
F'-eir /rocee,ings are not 9u,icial /rocee,ingsE111 '-ey are not e.en :uasi49u,icial3 0or t-ey ,eci,e
not-ingA t-ey ,etermine not-ing1 '-ey only in.estigate an, re/ort1111 )ut t-is s-oul, not lea, us to
minimise t-e signi0icance o0 t-eir tas21 '-ey -a.e to ma2e a re/ort w-ic- may -a.e wi,e re/ercussions1
'-ey may3 i0 t-ey t-in2 0it3 ma2e 0in,ings o0 0act w-ic- are .ery ,amaging to t-ose w-om t-ey name1
'-ey may accuse someA t-ey may con,emn ot-ersA t-ey may ruin re/utations or careers1 '-eir re/ort
may lea, to 9u,icial /rocee,ings1 It may e5/ose /ersons to criminal /rosecutions or to ci.il actions1111
*eeing t-at t-eir wor2 an, t-eir re/ort may lea, to suc- conse:uences3 I am clearly o0 t-e o/inion t-at
t-e ins/ectors must act 0airly1111 '-e ins/ectors can o+tain in0ormation in any way t-ey t-in2 +est3 +ut
+e0ore t-ey con,emn or criticise a man3 t-ey must gi.e -im a 0air o//ortunity 0or correcting or
contra,icting w-at is sai, against -im1F
)ias is o0ten a com/laint es/ecially o0 t-e ins/ectors in.estigating a com/any1 )ut it is im/ortant
to -ear2en to w-at "ool0 J1 sai, in t-e Perestrello case3 su/ra3 t-at it is w-olly ina//ro/riate to
tal2 o0 t-e ins/ectors as +eing +iase,1 '-ey are acting in Fa /olicing roleF an, t-eir 0unction is to
see i0 t-eir sus/icions are 9usti0ie, +y w-at t-ey 0in,1 In t-ose circumstances "ool0 J1 sai, it was
ina//ro/riate to a//roac- t-e case as i0 t-e ins/ectors were /er0orming a 9u,icial or :uasi49u,icial
role o0 ma2ing a ,etermination <see / @7 +4c?1
Iowe.er +ias is a rele.ant 0actor w-ere t-e regulatory +o,y is ,isc-arging some a,9u,icatory or
:uasi4a,9u,icatory 0unction1 In 1inter v Austra!ian Seurities Co##ission C166BD 18 AC* 81
:uestions o0 +ias were raise, o.er suc- a role o0 t-e A*C in relation to w-et-er a ,irector s-oul,
+e /ro-i+ite, 0rom managing a cor/oration 0or a /erio, o0 time1 '-e $e,eral Court o0 Australia
rule, t-at t-e ,ecision4ma2er w-o ,eci,es t-at a notice to s-ow cause s-oul, +e gi.en to t-e
,irector cite, s-oul, not con,uct t-e -earing to ma2e t-e ,etermination +ecause a 0air min,e,
Page 10
mem+er o0 t-e /u+lic mig-t entertain a reasona+le a//re-ension o0 +ias1 '-e court sai, t-at t-e
/ower to /ro-i+it a /erson 0rom managing a cor/oration is a2in to a ,isci/linary /ower1 It must +e
e5ercise, in t-e lig-t o0 t-e serious e00ects on rig-ts an, li.eli-oo, o0 a /erson w-ose con,uct is
calle, into :uestion3 an, t-ere0ore must +e 0ree o0 +ias unless t-e em/owering statute e5clu,es
t-e /rinci/les o0 natural 9ustice1
A+ain An I,/ortant Li,itation
*e.eral cases -a.e sai, t-at t-e /u+lic interest is t-e o.erri,ing 0actor an, t-e /roce,ural
sa0eguar,s soug-t +y t-e aggrie.e, /arty may in certain
' ML( ))vii at )))vii
circumstances -a.e to gi.e way to t-e /u+lic interest1 '-us in two cases in.ol.ing t-e
Mono/olies an, Mergers Commission3 Lor, Donal,son s/o2e in eac- o0 t-e e5/ectations o0 t-e
0inancial /u+lic an, o0 t-e nee, 0or s/ee, o0 ,ecision an, 0inalityE see * v Mono$o!ies & Mer-ers
Co##ission e)$arte Ar-y!! =rou$ $! C1678D 2 All ! 25> at 288A see also t-e Data0in case3
su/ra3 at / 5>71
In t-e LA.+*/ case3 su/ra3 w-ic- was concerne, wit- a ,irecti.e issue, +y LA.+*/, a
regulatory +o,y3 to certain insurance com/anies /ro-i+iting t-em 0rom acce/ting +usiness 0rom
i,enti0ie, insurance re/resentati.e3 t-e :uestion was w-et-er t-e latter3 as a /arty a00ecte,3 was
entitle, to +e -ear, +e0ore t-e ,irecti.e was issue,1 In -ol,ing t-at 0airness woul, or,inarily
re:uire an o//ortunity to +e -ear, 0irst3 t-e court recognise, t-at LA.+*/ mig-t -a.e to act wit-
urgency in inter.ening in t-e +usiness o0 a mem+er in or,er to /rotect in.estors an, it woul, +e
incom/ati+le wit- t-at o+9ect to re:uire t-e organisation to -ear re/resentations 0rom /ersons
a00ecte, +e0ore it acte,1 Iowe.er3 t-e court ,i, say t-at it woul, +e com/ati+le wit- 0airness 0or a
regulatory +o,y to -ear re/resentations a0ter t-e e.ent an, it was e5/ecte, t-at t-e rules o0 t-e
+o,y woul, ma2e /ro.ision 0or it1
In A v B Bank (the Bank of <n-!and 0ntervenin-)3 su/ra3 t-e im/ortant /u+lic ,uty /er0orme, +y
t-e central +an2 as a regulatory +o,y was a material 0actor in t-e court -ol,ing t-ere coul, not +e
any 0etter on its in:uisitorial role1 Iirst J1 sai, </ >76?E
F'-e sco/e o0 t-is /u+lic ,uty is e5tremely wi,e1111 In 0ul0illing t-is ,uty t-e +an2 may o0ten +e 0ace, wit-
situations w-ere e5tremely urgent action is re:uire,3 an, w-ere ,elay coul, result in losses to3 /ossi+ly3
.ery su+stantial num+ers o0 customers o0 suc- institutions3 em+racing +ot- cor/orate an, /ri.ate
customers3 w-ose interests t-e 167> Act is ,esigne, to /rotect111F
In t-e Bank of <n-!and ase3 su/ra3 t-e 0act o0 an in9unction +etween /ri.ate /arties /re.enting
,isclosure o0 +an2ing ,ocuments was -el, not to e5cuse com/liance wit- t-e notice to /ro,uce
issue, +y t-e central +an21 Li2ewise in t-e case o0 Austra!ian Seurities Co##ission v A#$o!e)
Ltd C1665D 17 AC* >@53 t-e *u/reme Court o0 %ew *out- "ales -el, t-at t-e statutory notice
issue, +y t-e A*C un,er *ection @@ o.erro,e t-e e5/ress or im/lie, un,erta2ings to court
regar,ing con0i,entiality o0 ,ocuments1 Gir+y P <as -e t-en was? o+ser.e,3 inter alia3 at / >B>E
F'-e nee, 0or com/liance wit- s @@ o0 t-e A*C Law will 0re:uently +e urgent1111 '-e notice woul, +e <as
ol0e J recognise,? a signal <in at least some cases? t-at A*C in.estigation was un,erway1 It coul, lea,
to t-e ,estruction o0 ,ocuments w-ic- t-e more /erem/tory o+ligation to con0orm to t-e notice woul,
0rustrate3 or at least ma2e more ,i00icult1111 F
Conclusion
It is a//ro/riate t-at 0inancial regulatory +o,ies +e su+9ect to 9u,icial scrutiny 0or t-eir ,ecisions
an, actions1 egulatory +o,ies can only ins/ire con0i,ence in t-e mar2et i0 t-ey are not seen as
,es/otic an, ar+itrary +ut /ossesse, o0 integrity an, com/etence1 *uc- attri+utes are
unattaina+le i0 t-ey are allowe, to +ecome a law unto t-emsel.es1
Page 11
1 '-is /a/er was /resente, +y t-e aut-or at t-e 8t- Lawasia (usiness Law Con0erence3 %i22o Iotel3 Guala
Lum/ur3 > 4 7 #cto+er 200B1