[co-author: Christy Rush]

In R (oao Gallaher and others) v CMA [2018] UKSC 25, handed down last week, the Supreme Court has clarified that substantive unfairness is not an established ground of judicial review and that likewise there is no “distinct principle” of equal treatment.

Case background

In March 2003, the Office of Fair Trading (“OFT“) (a predecessor of the Competition and Markets Authority) launched an investigation into alleged price-fixing arrangements in the tobacco industry. In April 2010, it issued a decision with a finding of infringement against 13 companies (manufacturers and retailers). Six of these companies appealed to the Competition Appeal Tribunal. Six had previously entered into so-called “early resolution agreements” (“ERAs“), admitting their infringement in return for a 20% in penalty.   At that time, ERAs were not provided for in statute nor indeed described in any OFT document. TM Retail was one of the six parties who had entered into an ERA and was not party to the appeal.

In 2008, the OFT gave an assurance to TM Retail (who queried the point) that it would apply the same principles to TM Retail as those determined in the appeal being brought by the other six companies –  in effect, confirming that TM Retail would also get the benefit of the appeal.

In 2011, the Competition Appeal Tribunal upheld the appeals of all six appealing parties. The OFT subsequently released a statement announcing that, in light of the specific assurances given to TM Retail, it would be paying the amount of its penalty and a contribution to interest and legal costs.

The respondents (Gallaher and Somerfield) claimed that they should also have been given the benefit of the OFT’s assurances to TM Retail. They therefore brought judicial review proceedings against the OFT asking it to withdraw the decisions against them and refund their penalties, on the basis that the OFT had failed to uphold its duties of “fairness” and “equal treatment” by treating them differently from TM Retail.

The judgments

The judge at first instance held that although the OFT’s powers were “subject to public law requirements of fairness and equal treatment” and that it was “essential that in negotiations in relation to ERAs one party is not given an advantage denied to another“, the specific assurance had been given in error and that “as a general rule a mistake should not be replicated where public funds are concerned.” The Court of Appeal, however, concluded that “the OFT must comply with the principle of equal treatment in all steps leading up to the imposition of a penalty” and that the failure to offer the assurance to the other parties was “stark and manifest“. The Court of Appeal therefore declared that the OFT had acted unlawfully by not making the assurance to the other parties in 2008, and not paying those parties’ penalties in 2012.

The Supreme Court departed from both approaches. It held that “[w]hatever the position in European Union law or under other constitutions or jurisdictions, the domestic law of this country does not recognise equal treatment as a distinct principle of administrative law.” Whilst it is a “generally desirable objective” or a “democratic principle“, it is “not an absolute rule” nor a “justiciable rule of law“.

Similarly, it held that “[f]airness, like equal treatment, can readily be seen as a fundamental principle of democratic society; but not necessarily one directly translatable into a justiciable rule of law.” (Procedural fairness, by contrast, has always been recognised as grounds for complaint – for example, if a bidder in a public procurement process has received a procedural advantage over another bidder.)

Instead, the Court held that these principles are instead considerations to be taken into account when considering ordinary principles of judicial review, such as irrationality and legitimate expectation.

Applying this conclusion to the present case, the Supreme Court held that it was reasonable for the OFT to honour the specific assurances given to TM Retail and not to the other ERA signatories, who had taken a risk that other parties would appeal and be successful.

The OFT had therefore not acted irrationally and its appeal was allowed.

Commentary

The judgment reflects the desire by the courts to provide for certainty and flexibility for public authorities by limiting the scope of judicial review, and, in the words of Lord Sumption in the judgment, to avoid undermining “the coherence of the law by generating a mass of disparate special rules distinct from those applying to public law generally or those which apply to neighbouring principles.”

This case also addresses the interesting question of whether mistakes by public bodies addressed at one person have to be replicated to cover all other persons in a similar situation. The assurance given to TM Retail was the result of a mistake. The OFT had the choice then  either to renege on the assurance; honour it in relation to TM Retail only; or extend the assurance to any other party in a similar situation.  The OFT’s approach of honouring it only in relation to TM Retail did amount to unequal treatment, but was objectively justified.  The Court found that the OFT had made “a rational choice between unpalatable alternatives“, taking into account two important facts:

• TM Retail would have been better off if the assurance were not honoured (as its appeal would be bound to succeed – and then there would have been a finding that TM Retail’s conduct was not unlawful).
• The two respondents had not received or relied upon any similar assurance and the assurance given to TM Retail had in no way been given at their expense.

In practice, this will mean that applicants seeking judicial review of the decision of a public body may have to demonstrate more than a difference in treatment, even if this treatment appears unfair, because, as this case demonstrates,  substantive unfairness or lack of equal treatment are not, alone, sufficient grounds for a judicial review. Further, even where it is appropriate to consider fairness and equal treatment (e.g. in the context of legitimate expectations or irrationality), differential treatment may often be justified. The decision also clarifies that public bodies should not, as a general rule, replicate mistakes involving the use of public funds.

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