The stage is set for the Euro-drama of our time. We know that giving effect to the UK's vote for Brexit could require as many as four sets of distinct but closely linked negotiations, or...01 August 2016
Private bodies and public law: When is a private body amenable to judicial review?
In 2012, Barclays Bank gave an undertaking to the Financial Conduct Authority (the "FCA") that it would set up a voluntary redress scheme (the "Scheme") to compensate customers who had wrongly been sold IRHPs. Barclays appointed KPMG as a "skilled person" under section 166 of the Financial Services and Markets Act 2000, whose role was to oversee the implementation and application of the Scheme. KPMG was responsible for approving Barclays' offers of compensation and ensuring that they were appropriate, fair and reasonable. The overall process was overseen by the FCA, who had approved KPMG's appointment. The claimant, Holmcroft Properties Ltd, sought a judicial review of KPMG's decision to approve a compensation offer made to it by Barclays, which it submitted was inadequate as it did not include compensation for consequential loss. The questions for the Court to consider were:
- whether, in the circumstances, KPMG was amenable to judicial review; and
- if so, whether, in approving Barclay's offer, KPMG had acted in breach of the public law principles to which it was subject.
Is it a public function?
Dismissing the Claimant's claim, the Court ruled that "KPMG's duties do not have sufficient public law flavour to render it amenable to judicial review", although it is clear that the Court did not reach this conclusion easily. Confirming that the fact that a body's powers are conferred by contract does not necessarily result in public law principles automatically being inapplicable, the Court considered whether KPMG was exercising public functions in its role as the independent reviewer.
The Court accepted the Claimant's arguments that KPMG was clearly "'woven into' the regulatory framework" and that its function was critical in achieving objectivity and acceptability. It would be artificial to treat KPMG's relationship with Barclays as a mere private arrangement: the FCA was required to approve of KPMG's appointment and the FCA, as part of its regulatory functions, had required KPMG to be given a veto power over Barclays' offers of redress. In addition, the Court held that there was a clear public connection between its function and the regulatory duties carried out by the FCA. However, the Court ruled that these arguments alone were insufficient to establish amenability.
One of the key factors in the Court's decision was the fact that the redress scheme was a voluntary process. Although the FCA had the right to use more draconian statutory powers, it had given Barclays the freedom to remedy its own errors and to offer redress where necessary. As a result:
- KPMG's role in reviewing Barclays' offer, although vital, could not have been imposed on Barclays by the FCA; and
- the FCA had no regulatory obligation to carry out KPMG's role, in the absence of an independent reviewer.
In addition, the Court also relied upon the following factors in ruling that KPMG was not amenable to judicial review:
- KPMG's powers were conferred by contract and KPMG had no relationship with customers.
- KPMG was not appointed by the FCA.
- The courts are generally reluctant to find a private body amenable to judicial review where it is carrying out functions at the request of a public body, which, if performed by that public body, would be subject to public law principles.
- The claimant had an alternative source of redress, as under the arrangements, the FCA was able to intervene in a case, where a claimant alleged that they were being treated unfairly by Barclays and KPMG. If it failed to review the complaint appropriately, the FCA would potentially be subject to judicial review.
The Court considered that if, however, KPMG were amenable to judicial review, the nature of KPMG's functions was limited by the terms of its engagement with Barclays. Public law "could not impose duties which undermined the basis of the private contractual arrangements". As a result, if KPMG were amenable to judicial review, its public law duties would have to be framed consistently with its terms of engagement.
In any event, the Court held that there was no unfairness in the procedure adopted by Barclays and therefore there could be no material breach by KPMG of a public law duty. There was clear evidence that KPMG did review the case properly, as required pursuant to the undertaking.
The question of amenability to judicial review is not one that is always easily answered. The decision in this case will provide comfort to private bodies carrying out contractual roles that are linked to public functions. The Court's clarification that, even if KPMG had been found to be amenable to judicial review, its public law duties must be interpreted in light of its contractual agreement, will further limit the applicability of public law principles to private bodies.
The new May Government has now been fully established and has begun getting to work. Judging by last week's notable developments, foreign affairs is top of the agenda.Brexit diplomacy:... 25 July 2016