Judicial Review, Compliance and Corporate Disputes
Since the 2008 “Great Recession” (there are those who believe it has not yet ended1, the UK has seen Corporate litigants flock to the courts in a range of disputes. There have been consumer-related disputes with financial institutions. There have been disputes between directors and shareholders in a number of high-profile cases2 . There have been disputes between different corporations (breach of contract, intellectual property and so on) and there have been disputes between businesses and regulators.
Intertwined across this plethora of legal cases, the threat of fraud, money laundering and regulatory non-
compliance menaces the commercial decisions made by boards and senior management. It is well-known in the legal profession that the rules governing dispute resolution have undergone considerable change following the reforms of Lord Justice Rupert Jackson and the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”).
In short, the legal landscape of 2016 is radically different from that of 2012/13. The review of Court fees4, although strenuously challenged by the legal professions5, saw a huge increase in Court fees – with more to follow in April 2016. In his Final Report6, Lord Justice Jackson said:
“In some areas of civil litigation costs are disproportionate and impede access to justice. I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice.” Few in the legal profession saw the reforms as “promoting access to justice”.
One of the most contentious areas of reform relates to Judicial Review. Judicial Review is an important part of any regulated business’ “access to justice”. Although not fully included in LASPO, Judicial Review was the focus of Part 4 of Criminal Justice and Courts Act 2015. In December 2014, whilst just a Bill, it was reported that:
“Eleven police and crime commissioners, including former solicitor general Vera Baird, have written to The
Times describing the plans a "potentially deep injustice".” 7
Chapter 30 of Lord Justice Jackson’s Report focused on Judicial Review and proposed one-way cost shifting based on the proposed rule: “Costs ordered against the claimant in any claim for personal injuries, clinical negligence or judicial review shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including: (a) the financial resources of all the parties to the proceedings, and (b) their conduct in connection with the dispute to which the proceedings relate.”
Subsequently, Part 4 of the Criminal Justice and Courts Act 2015 (“CJCA”) finally made fundamental changes to the operation of Judicial Review, including:
A court must not permit a judicial review if it appears highly likely; that the decision or action by the public body would not have been substantially different if the conduct complained of had not occurred (s.84).
The court must be given information about the financial resources above a certain level - that are available to the party wishing to bring the judicial review (s.85). The court must take this into account and consider making a cost order against any party identified in that information as providing financial support for the proceedings (s.86).
Third-party interveners in judicial reviews may have to pay other parties; costs if certain conditions are met. These conditions include 'unreasonable behaviour; by the intervener and if the intervener's actions have not been of significant assistance to the court; (s.87).
Cost-capping orders will only be available after permission for a judicial review is granted, rather than before (ss.88-90).
Schedule 16 makes amendments to the procedures for planning challenges under certain legislation, including the Town and Country Planning Act 1990.
In the face of this radically different, less-accessible, more expensive approach to justice, combined with a far more ferocious regulatory structure for finance, money-laundering, consumer rights and the legal system, corporate dispute resolution has had to adapt, perhaps becoming more akin to risk-management than dispute resolution8.
Imagine, a regulator makes a decision that affects your business, perhaps limiting or revoking an authorisation or licence. You don’t agree that that decision is right. You want to challenge it whilst protecting your commercial interests. Unlike before the CJCA, you are now exposed to a requirement for the Court not to permit your case to progress and a requirement to disclose financial resources – both of which could prevent you getting the access to justice you and your business are looking for. Maybe you are a developer looking to challenge a planning decision or a financial advisor whose FCA authorisation has been revoked for reasons which you disagree with. Whatever the grounds, you and your business are now less likely, overall, to consider Judicial Review due to increased cost, increased obstacles and increased uncertainty.
The new landscape for regulation and compliance appears to come with a tougher stance from regulators (reeling from the embarrassment of the past) and more obstacles to challenge these decisions following LASPO and CJCA. It is only a matter of time before we see the impact of these changes (as we saw when the number of cases brought before the Employment Tribunal tumbled following the introduction of the new fee structure9, or the sharp rise in litigants in person following the Jackson Reforms and LASPO 10 ).
On a practical day to day level, many regulated businesses will want to find certainty. Unfortunately, it appears the only certainty available is a consistent uncertainty as the new landscape takes shape. Regulators may well find that they are defending fewer decisions, but ultimately, the commercial interests of the regulated business must be balanced with compliance and commercial needs. This approach will help to mitigate the unwanted regulatory decisions and also theoretically put corporations outside of the “highly likely that the decision or action by the public body would not have been substantially different if the conduct complained of had not occurred” bracket. A lot remains to be seen, and inevitably there will be winners and losers – the question you will be asking yourself is which is your business going to be!
1 See Andrew Fieldhouse Huffington Post 2014
2 “Tesco faces £100m damages claim over accounting black hole” By Alan Tovey, Industry Editor The Telegraph Jan 26 2016
3 See, for example, “Hundreds of businesses want a judicial review into the FCA's decision to scrap its report into banking culture” Lianna Brinded, Business
Insider UK, Dec. 31, 2015
4 Court Fees: Proposals for reform April 2014
5 See, for example, “Society mounts challenge to new court fees” By John Hyde 31 January 2015
6 Review of Civil Litigation Costs: Final Report December 2009 (Published by TSO (The Stationery Office))
7 Judicial Review reform: An attack on our legal rights?, Clive Coleman Legal correspondent, BBC News
8 See “Future of legal risk management: lessons from the insurance industry” By Jeremy Irving,, In-House Lawyer Tuesday, 09 November 2010
9 See “Tribunal claims plummet after introduction of fees” Personnel Today, By Madeleine Graham on 13 Mar 2014
10 See “Key litigant in person charity sees incredible 900% rise in clients helped” By Katie King Legal Cheek OCT 16 2015