DM Digital Television Ltd, R (On the Application Of) v The Office of Communications (Ofcom)

The Claimant’s case is that “the investigators of Ofcom (the authors of the preliminary view findings)” sat with the Committee before the Claimant arrived at the oral hearing and were present throughout the hearing; and that when the hearing was concluded and the Claimant was asked to leave, the investigative officers of Ofcom stayed with the three members of the panel. This is alleged to be procedural impropriety amounting to a breach of natural justice and its Article 6 rights because “the rules of natural justice require that the hearing and the [panel’s] decision ought to be independent”: see the Statement of Facts and Grounds at [30-33] and [36].

As succinctly and persuasively developed by Mr Williams, the Claimant submits that “the heart of this issue is the fact that the Ofcom employees who acted as investigators into the breaches, but who were not part of the committee, remained with the committee and made contributions during deliberations” and that this would cause a fair-minded and impartial observer to conclude that there was a real possibility of bias (in the sense that there was a real possibility that the panel’s decision may be influenced by the presence or contribution of the Ofcom employees).

A second strand of the Claimant’s argument, which was the point that persuaded HHJ Pelling QC to give leave to proceed on this issue, was that it would be procedurally unfair if there had been further discussions after the Claimant had left which the Claimant did not have the opportunity to consider and relpy to.

Ofcom joins issue on the facts and in addition submits that, even if the procedure adopted could otherwise have been described as unfair, it cannot be so described on the facts of this case because the Claimant knew what procedure was being adopted and raised no complaint until after the adverse decision had been made.

Challenges to the imposition of sanctions on the grounds that persons other than the decision makers were present during the decision making process are not uncommon. Although the result of such challenges will always fact-dependant, the Court of Appeal in Flaherty v National Greyhound Racing Club Ltd [2005] EWCA Civ 1117 gave guidance on the principles to be adopted. In that case, the NGRC fined and reprimanded Mr Flaherty for breaches of its rules of greyhound racing. At the conclusion of the hearing before the tribunal, all who were not stewards withdrew, with the exception of Mr Melville, the chief executive of the NGRC. Mr Melville remained present during the stewards’ deliberations.

At [61] the Court of Appeal summarised the part being played by Mr Melville as follows:

“Mr Melville played no part, other than to confirm that the respondent had no previous finding against him. As a matter of routine Mr Melville attended disciplinary inquiries and, in the course of a hearing would be asked whether he wished to put any question to any of the witnesses. Also as a matter of routine, he was allowed to remain in the inquiry room when it was cleared at the end of the hearing. This was so that the stewards could obtain clarification from him of the relevant rules and how they were applied. In cases where a breach of the rules was found, he was available to inform the stewards of any previous convictions. On occasions, Mr Melville would draw the stewards' attention to penalties awarded in previous inquiries for similar breaches. Otherwise, Mr Melville would not be "asked for or permitted to give any opinion or view as to whether the affected person is in breach of that rule as that is a matter exclusively for the stewards." … Mr Melville had not sought to ask any questions at the inquiry and that during the deliberations no explanation of the rules was required and his only intervention was to inform the stewards that the respondent had no previous record of breaking the rules. In short, … Mr Melville made no contribution to the deliberations. The stewards had made their decision on the basis of the evidence and submissions at the inquiry”

To the same effect, at [71]:

“It is important to bear in mind the position of Mr Melville. He is the chief executive of NGRC; he is not a prosecutor. He was concerned with administration. He did not instigate the proceedings; that was done by the senior steward, Mr Nicholson, and it was the senior steward who conducted the inquisition. This was an inquiry into whether or not the rules had been broken”

In this factual context, the Court of Appeal addressed the principles to be applied where an “outsider” becomes involved in the decision-making process of a tribunal at [73-75]:

“73.

The first category is where an 'outsider' has dealings with the tribunal members in private. Suppose the 'outsider' contributes to the matters under consideration by the tribunal and makes points that the 'accused' has no opportunity to answer. If the contributions are relevant to the tribunal's decision or regarded by the members as relevant, then the 'accused' will not have had a fair opportunity to meet the points against him and there will have been a breach of that aspect of natural justice. Mr Charlton makes the point that the status, or identity, of the 'outsider' in this category of case is irrelevant. It could, for example, be the prosecutor, the shorthand writer or anyone who sits in private with the tribunal members. Whether or not there has been a breach of the right of the 'accused' to a fair opportunity to meet points against him is a question of fact. Either there has been a breach or there has not been a breach.

74.

The second category is one that can arise because of the identity or status of the 'outsider'. Although the 'outsider' remains silent, his identity or status may operate to influence the tribunal. An example would be where the 'outsider' has the power to decide whether the tribunal members hold office. Sedley J in R v Chelsea and Westminster Health Care NHS Trust ex parte L (30 October 1997, unreported) described it as the "brooding presence" class of case. The nature of the objection in this class of case is grounded on bias; actual bias if it is found that the silent presence influences the deliberations, or apparent bias if a fair minded and independent observer would conclude there was a real possibility of such influence occurring.

75.

The third category is where the 'outsider' is present with the tribunal in private, but there is no evidence to demonstrate either that he made some form of impermissible contribution which falls foul of the right of the 'accused' to be heard (category 1); or that he is a "brooding presence" (category 2). In this third category, submits Mr Charlton, the concern will be the risk of unfairness to the 'accused' that may occur. The nature of the risk will largely depend on the status or identity of the outsider. A tea lady is one thing, someone closely involved with the facts in issue is another. This class of case is concerned with the risk of improper influence on the decision making process and the correct test is Lord Hope's test for apparent bias in Porter v Magill … . It is into this category that the present case falls and the judge should have applied the apparent bias test.”

Lord Hope’s test for apparent bias in Porter v Magill [2002] 2 AC 357 is at [103] where he said:

“The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”

Bias in this context means a predisposition or prejudice against one party’s case or evidence on an issue for reasons unconnected with the merits of the issue: see Flaherty at [28].

Without derogating from the complete statements set out above, I highlight the following points that emerge:

The importance of considering all of the facts when considering whether apparent bias is established is shown by the manner in which the Court of Appeal in Flaherty applied the principles it had just explained to the facts of that case. At [77] the Court said:

“The judge should therefore have given full weight to the uncontradicted evidence of the stewards as to what happened during the deliberations. Had he done so he would have concluded that Mr Melville took no part in them. The situation might have been different had Mr Melville been the prosecutor; but he was not. If anyone, it was the senior steward, but in truth he was conducting an inquisitorial process rather than a prosecution. The respondent's argument is that applying the apparent bias test of what the fair minded and informed observer would have concluded, the answer is that there was a sufficient risk of bias (i.e. more than de minimis) to justify setting aside the decision of the stewards. Mr Penny points out that this was the argument that he advanced in the concluding paragraph of his written submissions to the judge. I cannot accept the respondent's submission, which in my judgment fails on the facts. There simply is no basis for a finding of apparent bias in the light of the stewards' evidence as to what in fact occurred. The informed observer, apprised of all the relevant circumstances, would have concluded that there was no real possibility of bias occurring through Mr Melville's presence.” [Emphasis added]

It is therefore plain that, where either actual or apparent bias is alleged, the Court should have regard to admissible evidence about what actually happened in the course of the tribunal’s deliberations. Where it is available, it would be wrong in principle to reach a conclusion that there has been apparent bias without having regard to such evidence: its effect may be, as in Flaherty to remove the basis that there might otherwise have been for a fair-minded observer to conclude that there was a real possibility that the tribunal was biased.

The parties referred to Virdi v Law Society [2010] 1 WLR 2840. There the objection was that the clerk to the Solicitors’ Disciplinary Tribunal had retired with the tribunal when it considered its verdict. The description of the clerk’s functions at [17] shows that he had an essentially administrative role which, as in the case of the Executive officers in the present case, included drafting formal documents for the tribunal to adopt as it saw fit and drawing the tribunal’s attention to similar past cases.

At [38] the Court said:

“The ultimate question is whether the proceedings in question were and were seen to be fair. If on examination of all the relevant facts, there was no unfairness or any appearance of unfairness, there is no good reason for the imaginary observer to be used to reach a different conclusion.”

And at [42] the Court adopted another formulation of the same principle, endorsed by the House of Lords in Porter v Magill and very similar to Lord Hope’s, the first sentence of which is inconsistent with any limitation on the circumstances that should be taken into account:

“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased.”

There may be circumstances that would amount to a breach of natural justice but where the affected party has known of the circumstances and not objected to them when he could have done so. Where that happens, the question that may arise is whether the affected party has acquiesced in such a way that precludes him from asserting that there has been a breach of natural justice. The issue arose in Hill v Institute of Chartered Accountants [2014] 1 WLR 86 (CA). At [30-31] Longmore LJ (with whom Beatson and Underhill LJJ agreed) drew the distinction between (a) “true waiver” which is the correct description to be used in respect of something that was definitely a breach when it occurred but is later agreed not to matter and (b) an agreement in advance to something which, in the absence of that agreement, would constitute a breach of natural justice. At [31] he said:

“In relation to a true case of waiver in respect of the imputed bias of the tribunal in Millar v Dickson [2002] 1 WLR 1615, para 31 (the case about temporary recorders) Lord Bingham of Cornhill CJ said that an effective waiver had to be voluntary, informed and unequivocal. If agreement is to prevent what would otherwise be a breach of the rules of natural justice it cannot be anything less than a voluntary, informed and unequivocal agreement. The question is thus whether there was such an agreement on the facts of the present case. It may well be that the distinction between saying that there was no breach of the rules of natural justice by virtue of the parties' agreement and saying that there was a breach of the rules of natural justice but that it was waived is a mere matter of words. Nevertheless I prefer the earlier formulation if it is appropriate on the facts.” [Emphasis added]

At [44] Beatson LJ said:

“The second type of case is where, at a stage in the process before there has been any breach of express procedural requirements or the requirements of natural justice, the decision-maker and the others involved have discussed a proposed procedure and have freely and in full knowledge of the facts consented to that procedure which is then followed. In such a case in my view the correct analysis is (for the reason given by Longmore LJ at para 30) to not regard the situation as a breach of natural justice which has been waived.”

On the facts of Hill there had been a discussion and express agreement by Counsel to the procedure which was subsequently said to be a breach of the rules of natural justice. However, as in other areas of the law, I see no reason in principle why agreement or consent should not be inferred from conduct or even silence provided that the conduct or silence is voluntary, informed and unequivocal.

It is necessary and inevitable that the Board of Ofcom should be assisted by others in the discharge of its regulatory function; otherwise the sheer volume of work could not be managed. There is also nothing objectionable in the executive officers preparing draft documents identifying relevant materials or draft decisions provided that it is the duly authorised panel that makes the effective decision and that the panel does not merely rubber stamp what is placed before it. On the evidence, it is clear beyond argument that Ofcom has instituted and implemented procedures that are designed to enable the panel to discharge their functions properly and independently, albeit with the necessary assistance of others. The Claimant has not identified anything that occurred before or during the meeting on 17 June 2013 that casts doubt on the independence or integrity of the panel’s conduct and decision-making. In particular, there is nothing objectionable in the executive officers preparing schedules of previous decisions, details of the Claimant’s past record, or providing draft questions for panel members. On the evidence the decision what questions to ask was taken independently by the panel.

The nub of the Claimant’s complaint is Mr Barnes’ presence and involvement in the deliberations after the hearing. However, the evidence on this is all one way. Mr Close’s evidence is that, as a general practice, executive officers “remain present during the Panel’s deliberations in case further assistance is required”; and that on this occasion “no new evidence was introduced to the panel, nor any new points raised, after the Claimants’ team had left the room.” His evidence is supported by Ms O’Dwyer’s notes. The failure of the Claimant to tighten up its compliance procedures despite sanctions being imposed after previous breaches was one of the subjects which was specifically mentioned by the panel in its preliminary view on sanction (Footnote: ⁴) and had been the subject of questions during the hearing (Footnote: ⁵); the Claimant’s finances had been the subject of detailed questioning during the hearing. The observations of Mr Barnes, as recorded by Ms O’Dwyer, do not suggest that anything new was being introduced or anything which the Claimant had not had every opportunity to address: on the contrary, it had the opportunity and took it, both orally and in writing.

On the basis of the evidence that is before the Court, I reject any suggestion of actual bias. It is denied by Mr Close and his evidence is supported by the documentary evidence. I would draw additional support for my conclusion from the thoroughness of the final decision letters themselves, which evidence that the panel was at pains to address all relevant matters and did so. It is therefore to be inferred that the panel would have considered the Claimant’s failure to tighten its procedures after previous breaches and the evidence about its fairness in detail after the hearing, just as it had done before and during it. That being so, there is no real possibility that the recorded involvement of Mr Barnes, which referred to those points but introduced no new material, influenced the panel’s deliberations or decision.

Turning to apparent bias, once all the circumstances which have a bearing on the suggestion that the panel was biased are ascertained, I reject the suggestion that those circumstances would have led a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, that the tribunal was biased. The first circumstance to be noted is the positive evidence that the panel was not influenced or biased: see Flaherty at [77], which is set out above. Second, Mr Barnes’ role was to assist with factual matters that were already before the panel and not to introduce new ones. Third, he was not in any sense a prosecutor and had no interest in the outcome of the panel’s deliberations. Fourth, it was integral to the regulatory process that Ofcom allowed the broadcaster to deal with all relevant matters by representations before any decision was made. A fair-minded person would therefore not presume lightly that the panel (which was made up of very senior people who were fully aware of Ofcom’s principled approach to the regulatory process) would or even might permit the presence of the executive officers to abuse and subvert the fairness of those processes. At the very least, the fair-minded person would ascertain the facts, including any explanation that the panel would give about the role of the executive officers.

I accept the purely theoretical possibility that the executive officers could have acted so as to render the process unfair and the panel biased. However, for these reasons, there would have been no basis for a fair-minded person to conclude that there was a real possibility or danger that the executive officers would (or did) so act or that the panel was biased.

In these circumstances the question of acquiescence or waiver does not arise; but since it has been argued, and in case I were wrong on my primary conclusions on Ground 1, I deal with it. The Claimant and its counsel were told by Ms Taylor at the outset that Ms O’Dwyer, Mr Collini and Mr Barnes were present. They were also told that Mr Baxter “is observing and plays no part in this.” No such statement was made in respect of Ms O’Dwyer, Mr Collini or Mr Barnes. At the end, Ms Taylor made it plain that the Claimant’s party and the external recorder were to leave, but not the others. The Claimant therefore knew that executive officers who would or might have some role to play in the inquisitorial process were staying behind with the panel after the Claimant’s team had gone. In that knowledge, the Claimant raised no objection and left.

The Claimant’s decision to withdraw without objecting to the continued presence of the executive officers was voluntary. It was also informed, because the Claimant knew that the executive officers other than Mr Baxter were not excluded from playing a part in the process. If, therefore, the circumstances of their remaining with the panel and providing assistance would (contrary to my conclusion) have led an informed and fair-minded observer to conclude that there was a real risk of bias, the Claimant and its counsel knew of those circumstances. Finally, the act of leaving was unequivocal in signalling that the Claimant acquiesced in and agreed without any form of reservation or protest with what was happening.

The only qualification I would add is that, if it had been the case that the panel was subject to actual bias, the act of withdrawing could not be characterised as acquiescence in that. The reason for this conclusion is that the Claimant’s withdrawal can only be seen as an acquiescence in what the Claimant knew was going to happen, which did not include behaviour that would lead to a finding of actual bias.

I reach these conclusions without reference to the Claimant’s state of knowledge before the hearing. In his opening submissions to the Court, Mr Williams accepted that the Claimant would have known that it was customary for investigative employees to remain. He later corrected this on instructions and submitted that the Claimant had only once before attended a sanction hearing so that its knowledge was limited to what it may have learned then. In the absence of any admissible witness evidence on the point, a finding about what the Claimant knew or did not know before 17 June 2013 would not be soundly based.

For these reasons, I reject Ground 1 of the Claimant’s challenge.

Mr Williams correctly accepted that the financial penalties of £20,000 and £85,000 would have been rational, reasonable and proportionate if it were not for the Claimant’s financial standing. The RLA penalty amounted to approximately 20% of the Claimant’s qualifying (gross) turnover; the POAF Programme penalty amounted to about 5%. The Claimants’ case and submissions have two main strands:

Given its acceptance that the financial penalties proposed in Ofcom’s preliminary view were appropriate in the absence of special features particular to the Claimant that rendered them inappropriate, it was for the Claimant to bring any such special features to the attention of Ofcom. This was for two main reasons. First, the special features were matters upon which the Claimant wanted to rely in order to obtain a reduction in what would otherwise be an appropriate sanction. Second, the special features were exclusively within the knowledge of the Claimant so that there was an inevitable evidential burden which only the Claimant could discharge. Placing the burden upon the Claimant did not render the proceedings adversarial rather than inquisitorial; and I see no reason in principle why the burden to adduce evidence should not rest on a person wanting to rely upon it in inquisitorial proceedings just as in those that are adversarial, particularly when that person is the only person with access to the evidence.

In any event, I am not satisfied that Ofcom did place the burden on the Claimant in any real sense. The Claimant produced some documents relating to its financial position and the panel then asked questions in an attempt to maximise its understanding. That was a process that was transparent and fair and was not determined by questions of burden of proof.

Turning to the second strand, the information that was available to Ofcom was partial. What is more, for reasons given in evidence by Mr Close, Ofcom had good reason to doubt whether the information about sources of income and costs was reliable. To give just one example, the Claimant’s unaudited accounts to 30 June 2012 showed that the business was substantially financed by directors’ loans in the sum of £1.4 million. Dr Malik told the committee that he personally had borrowed £2 million from the bank, which it would call in. No explanation was provided of how, if at all, the figure of £1.4 million related to the figure of £2 million and attempts by the panel to discover precisely how the Claimant was financed and what were its sources of income were unsuccessful.

Although Dr Malik had asserted that “virtually [the channel] will close down” if the proposed sanctions were imposed, the evidence as a whole did not demonstrate that to be the necessary result. The panel was entitled to conclude on the evidence that there were or may have been additional sources of funding available to the Claimant and that its costs were not accurately recorded in the documentation that had been presented to it. In addition, there was no documentary evidence to demonstrate the Claimant’s current indebtedness either to the directors or to the bank or, if appropriate, the current state of Dr Malik’s loan account with the bank or the bank’s current attitude to Dr Malik and the business. Also, as the panel noticed, this was not the first time that the Claimant had asserted that it was liable to be driven out of business, which had proved not to be the case in the past. For these reasons the panel was entitled to take the view that sanctions amounting to 25% of one year’s turnover would be a substantial penalty (as was intended) but not to conclude that it was one that would necessarily or even probably drive the Claimant out of business.

Each sanction decision addressed the question of proportionality taking into account the Claimant’s size and turnover; and each did so thoroughly and coherently. Ofcom recognised and said that the question of proportionality also had to reflect the central objective of imposing a penalty, namely deterrence and stated (at [81] of the RLA decision) that any penalty had to be substantial to reflect the “very serious” concerns which it set out fully in the decision and to “act as a powerful and clear deterrent to other broadcasters.” That involved a balancing exercise which Ofcom was much better placed to carry out than is the Court because Ofcom knows the market and is able to assess the likely deterrent impact on other broadcasters on the basis of knowledge and expertise that is not available to the Court.

For these reasons I am unpersuaded that the Claimant’s financial position rendered the imposed sanctions unreasonable, disproportionate or irrational. To the contrary, the rationale is clear and set out in detail in the decisions. I also reject the submission that there is any conflict between Ofcom’s decision that it would not be appropriate to revoke the Claimant’s licence and the size of the financial penalties that it imposed. There is, to my mind, a critical distinction between the two sanctions: revocation ends the broadcaster’s business immediately but the imposition of a financial penalty always leaves open the prospect that the money may be found and the business continued, whether the financial penalty has to be paid in one lump sum or (as here) Ofcom agrees to payment by instalments. Where a financial penalty is imposed, it is open to the broadcaster to go to existing or new potential sources of finance who may, if they consider that the business is fundamentally sound and worth maintaining, provide the investment that is needed to defray the penalty. That provides an incentive and possible way forward for the sound broadcaster, though not for all. It is not available at all if Ofcom revokes the licence.

For these reasons I reject Ground 2 of the Claimant’s challenge.

The challenges to Ofcom’s decisions fail.