Mr Justice Stuart-Smith:
Introduction
- The Claimant challenges two decisions of the Defendant ["Ofcom"] made on 5 July 2013. One was a financial sanction of £20,000 imposed because of breaches of the Broadcasting Code on 25 November 2011 and 4 December 2011 when the Claimant broadcast programmes about a conference known as the POAF Conference. The other was a financial sanction of £85,000 because of breaches of the Code when the Claimant broadcast a programme which has been referred to as the RLA Programme on 9 October 2011.
- These proceedings were issued on 27 August 2013. On 31 October 2013 HHJ Pelling QC gave permission to bring the proceedings limited to two issues:
i) The fairness of the Defendant's decision making process; and
ii) The rationality of the Defendant's decisions as to the level of the penalties in the light of the Claimant's financial position.
The Regulatory Background
- Ofcom exercises statutory functions pursuant to the Broadcasting Act 1990, the Broadcasting Act 1996 and the Communications Act 2003 ("the 2003 Act"). Its principal duties are set out in section 3 of the 2003 Act which provides:
"3 General duties of Ofcom
(1) It shall be the principal duty of Ofcom, in carrying out their functions—
(a) to further the interests of citizens in relation to communications matters; and
(b) to further the interests of consumers in relevant markets, where appropriate by promoting competition.
(2)The things which, by virtue of subsection (1), Ofcom are required to secure in the carrying out of their functions include, in particular, each of the following—
…
(e) the application, in the case of all television and radio services, of standards that provide adequate protection to members of the public from the inclusion of offensive and harmful material in such services;
…
(3) In performing their duties under subsection (1), Ofcom must have regard, in all cases, to— "
(a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed; and
(b) any other principles appearing to Ofcom to represent the best regulatory practice.
(4) Ofcom must also have regard, in performing those duties, to such of the following as appear to them to be relevant in the circumstances—
…
(g) the need to secure that the application in the case of television and radio services of standards falling within subsection (2)(e) and (f) is in the manner that best guarantees an appropriate level of freedom of expression;
…
(j) the desirability of preventing crime and disorder;"
- Under Section 211 of the 2003 Act, Ofcom has the function of regulating television licensable content services that are provided by persons under the jurisdiction of the United Kingdom. As part of its regulatory function Ofcom is required to set, review and revise such standards for the content of programmes to be included in television and radio services as appears to them best calculated to secure the standards objectives. Those objectives include that material likely to encourage or incite the commission of crime or to lead to disorder is not included in television and radio services; and that news included in television and radio services is presented with due impartiality. In addition Ofcom is required to establish and maintain a committee known as the Content Board, which has been established as a committee of the main Ofcom Board with delegated advisory responsibility for a wide range of content issues predominately dealing with broadcasting.
- Any person who provides a regulated television service in the United Kingdom must be authorised to do so under a licence granted by Ofcom. Every licence for television broadcasters will require the licensee to ensure that the provisions of any code made under the 2003 Act are complied with. A breach of the Broadcasting Code by a licensee will therefore be a breach of a condition of its licence.
- Section 237 of the 2003 Act makes provisions about penalties for contravention of licence conditions as follows:
"(1) If Ofcom are satisfied that the holder of a licence to provide a television licensable contents service
(a) has contravened a condition of the licence, …
They may serve on him a notice requiring him to pay them, within a specified period, a specified penalty.
(2) The amount of the penalty under this section must not exceed the maximum penalty given by subsection (3).
(3) The maximum penalty is whichever is the greater of –
(a) two hundred and fifty thousand pounds;
(b) five per cent of the qualifying revenue for the licence holder's last complete accounting period falling within the period for which his licence has been in force ("the relevant period").
- Ofcom are not to serve a notice on a person under s.237 (1) of the 2003 Act unless they have given him a reasonable opportunity of making representations to them about the matters appearing to them to provide grounds for the service of the notice: see s. 237 (6). The powers available to Ofcom also include, if satisfied it is necessary in the public interest to do so, revoking the person's licence: see sections 238-239 of the 2003 Act.
- The provisions of the Broadcasting Code that are relevant for the present proceedings are:
i) Rule 3.1: "Material likely to encourage or incite the commission of crime or to lead to disorder must not be included in television or radio services";
ii) Rule 5.4: "Programmes in the services…must exclude all expressions of the views and opinions of the person providing the service on matters of political and industrial controversy and matters relating to current public policy (unless that person is speaking in a legislative forum or in a court of law). Views and opinions relating to the provision of programme services are also excluded from this requirement"; and
iii) Rule 5.5: "Due impartiality on matters of political or industrial controversy and matters relating to current public policy must be preserved on the part of any person providing a service…this may be achieved within a programme or over a series of programmes taken as a whole."
The Factual Background
- The Claimant operates a free to air satellite television channel called DM Digital. It is aimed at an Asian audience in the UK and also broadcasts to the Middle East and parts of Asia. The Claimant is subject to the regulatory framework to which I have referred and to the Broadcasting Code. It has three directors, of whom Dr Liaqat Malik is the main one. It is associated with another company or entity in Pakistan, from which it gets its pre-programmed material. In addition, DM Digital broadcasts live programmes which, at the relevant time, were subject to a five second delay so that unacceptable material could be stopped before being broadcast.
The RLA Programme
- The RLA Programme was broadcast on 9 October 2011. It lasted approximately an hour. A presenter introduced an Islamic Pir (a religious scholar) who delivered a live televised lecture. On the basis of a translated transcript of the lecture, Ofcom concluded that the scholar had made remarks in the course of the lecture that were likely to encourage or incite the commission of crime or to lead to disorder. Ofcom concluded that they were likely to have this effect because, on a reasonable interpretation of the scholar's remarks, he was personally advocating that all Muslims had a duty to attack or kill apostates or those perceived to have insulted the Prophet. A number of the scholar's remarks amounted to direct calls to action, including what was reasonably interpreted by Ofcom as a generic call to all Muslims encouraging or inciting them to criminal action or disorder, by unambiguously stating that they had a duty to kill anyone who criticises or insults the Prophet Mohammed and apostates, and by praising Pakistan's blasphemy law and the killing of the Punjab governor, Salmaan Taseer, by Malik Mumtaz Qadri. Such actions were presented as being justified, and even required, as a duty binding on all Muslims according to the tenets of Islamic law and theology. The remarks were made frequently and unambiguously throughout the duration of the lecture.
- The Claimant rightly accepts and accepted before Ofcom that this broadcast amounted to a breach of Rule 3.1 and that it was serious. On the evidence of Ofcom's Director of Content Standards, Licensing and Enforcement, Mr Close, the breach of Rule 3.1 was unprecedented: "The programme contained unambiguous statements that all Muslims have a duty to kill anyone who criticises or insults the Prophet Mohammed and apostates. These comments were delivered live in a religious programme to a predominantly Muslim audience, not just in the UK but in the Middle East and parts of Asia, by a religious person who holds a position of authority and respect within the Muslim community. The comments were uncontested in the programme and had a very real potential to be acted upon. This was demonstrated by the various killings and attacks that have taken place in recent years against individuals or entities perceived as insulting the Prophet Mohammed; … ." That evidence is not disputed.
The POAF Conference programme
- The first POAF Conference Programme was broadcast on 25 November 2011. It focussed on an appearance by the Pakistani politician Dr Zulifiqar Mirza, from the Pakistan People's Party. Other speakers included Dr Malik, the director of the Claimant. The programme included a range of statements that were highly critical of the Muttahida Qaumi Movement ("MQM"), which was then the governing party in the Pakistani province of Sind. It did not include any expressions of views that could reasonably be said to reflect the viewpoint of the MQM, especially in relation to allegations that it had sanctioned violence and killings in Karachi.
- The second POAF Conference programme was broadcast on 4 December 2011. It focussed on the reported killing of up to 24 Pakistani soldiers caused by NATO airstrikes on 26 November 2011. Once again, the speakers included Dr Malik. The programme included statements that were highly critical of NATO and the Government of the United States and their policies towards Afghanistan and Pakistan, but did not include any views that could reasonably be said to reflect the views of those organisations on the issues.
- Dr Malik was a "company officer" of the Claimant and a person having "editorial responsibility for the service" within the meaning of the guidance provided by Ofcom and so was a "person providing the service" within the meaning of Rule 5.4. The Claimant rightly accepts and accepted before Ofcom that these broadcasts amounted to breaches of Rules 5.4 and 5.5 and that the breaches were serious.
The Implementation of the Regulatory Process: General
- Although Ofcom may act on its own initiative, the implementation of the regulatory process is normally triggered by the receipt of a complaint from persons or bodies who consider that a broadcaster has failed to comply with the standards established by the Broadcasting Code. The investigation of complaints is governed by Ofcom's published "Procedures for Investigating Breaches of Content Standards for Television and Radio." If Ofcom decides to proceed to investigate a complaint it invites representations from the licensee and then reviews the materials before forming a preliminary view on whether there has been a breach of the code. Its preliminary view will contain a summary of the complaint, a summary of the material parts of the broadcast to which the complaint relates, the particular provisions of the Code which Ofcom considers are relevant and applicable to the complaint, and Ofcom's preliminary assessment of whether any breaches of those provisions have occurred and the reasons for that assessment.
- When Ofcom has prepared its preliminary view, it provides it to the licensee and any directly affected third parties and invites further representations in writing. After any representations have been received, Ofcom makes and publishes its final decision on breach. If Ofcom decides that there has been a breach it then considers whether the breach justifies consideration of a statutory sanction against the broadcaster. If it proceeds to consider the imposition of a sanction, its "Procedures for the Consideration of Statutory Sanctions in Breaches of Broadcast Licences" will apply: they are published on Ofcom's website.
- If Ofcom considers that a sanction may be appropriate, it will write to the broadcaster providing information including details of the breach, comments on any issue raised by the broadcaster that is material to the case, details of any relevant cases on which Ofcom has already adjudicated, details of the broadcaster's recent compliance history, details of Ofcom's preliminary view on the type and level of any sanction considered to be appropriate and proportionate, a summary of the material on which it has relied in reaching its preliminary view, and the documentation that Ofcom has taken into account in forming its preliminary view. It will then again invite the licensee to make either written or oral representations (or both) depending on what Ofcom considers necessary in order to ensure that it can fairly and properly determine whether to impose a sanction and, if so, the appropriate and proportionate level of any sanction. In practice, Ofcom always invites the licensee to make oral representations where the possibility of imposing a statutory sanction is under consideration.
- The procedure for making oral representations is at the discretion of Ofcom. It will write to the broadcaster in advance of the date for hearing the representations to set out what the procedure will be. The approach to sanctions will be informed by Ofcom's "Penalty Guidelines", which are also published on its website. Decisions on sanction (both preliminary and final) are made by two senior members of the Ofcom Executive who have been given appropriate delegated authority by the main Ofcom Board, together with a Non-Executive member of Ofcom's Content Board who chairs the panel. The decision makers will be identified to the licensee in advance. After hearing any representations, the panel makes its decision. Ofcom's decision is final.
- The decision makers obviously cannot be expected to undertake all of the work necessary between receipt of a complaint and the issuing of the final decision. They are assisted by "executive officers" employed by Ofcom. Mr Close describes their involvement as follows:
"As at the breach stage, Executive officers (usually but not always those who were involved in the investigation of the breach, depending on resources) assist the Panel at the sanction stage. This includes the drafting of the preliminary view, but with the figure for any financial penalty being left blank for the Panel itself to insert. After the preliminary view has been finalised by the Panel and provided to the licensee, Executive officers (again, usually but not always the same individuals) then assist in preparing the Panel for the meeting that is held with the licensee to discuss the proposed sanction(s). This assistance may involve, for example, the provision of suggested questions that the Panel may wish to ask at the meeting and of information concerning previous sanctions decisions in other cases. The Executive officers will usually meet with the Panel before the meeting with the licensee to finalise arrangements for the meeting, and then following the conclusion of the meeting they will usually remain present during the Panel's deliberations in case further assistance is required. However, it is the members of the Panel alone who take the decision on sanction."
The Implementation of the Regulatory Process in the Present Case
- There is no complaint about the implementation of the process until after Ofcom had provided its preliminary view that the appropriate sanction in the RLA case was a financial penalty of £85,000 and in the POAF case was a financial penalty of £20,000. On 17 June 2013 the Claimant attended the hearing on sanction at which it was represented by Counsel, the purpose of the hearing being for the Claimant to make oral representations (having already submitted written representations and supporting materials) and to provide further information in answer to questions from the Ofcom panel.
- The panel was chaired by the non-executive Board member, Ms Joyce Taylor. The other members of the panel were Mr Close and Mr Peter Davies, who is Ofcom's Director of Content Policy. At the start of the hearing, Ms Taylor introduced the panel and said that the panel members had delegated authority from the Ofcom Board and would take all decisions. She introduced others from Ofcom in the following terms:
"The other colleagues from Ofcom who are here today are Caroline O'Dwyer, Standards Executive; Mark Collini, the Legal Adviser; and Trevor Barnes, Head of Harm, Offence and Fairness Standards. Adam [Baxter] is observing and plays no part in this. We've also been joined by Guy Hursthouse, who is an external recorder, who will prepare a transcript."
- Counsel, Dr Malik and two others from the Claimant then introduced themselves. After a brief introduction, Counsel for the Claimant made oral representations interspersed with contributions from the Claimant's three representatives to explain the Claimant's position more fully. Those representations included the following passage:
"Counsel
In relation to sanctions, which this panel have the power to impose upon a TV channel for any breaches of the Code, what impact would a fine, in this instance, on the first count of £85,000, and on the second count of £20,000 – what impact would that have on the television channel as a whole?
Dr Liaqat Malik
We won't be able to pay this. The channel would close down.
Counsel
So the channel would close.
Dr Liaqat Malik
The bank's not willing to lend any money. We've been having this problem the last two years. Virtually it will close down.
Counsel
So that would – and what impact – following on from that, what impact would that have on the community a) in the north of England, where you broadcast from, but also in the more wider sense?
Dr Liaqat Malik
The community won't have a voice. I've borrowed £2 million from the bank to run this TV channel, in my personal name. I'd have to pay it back as well as soon as possible. I'd be made bankrupt as well."
- The panel then asked questions. With two brief exceptions, the answers were provided by Dr Malik. The questioning covered the relationship between the Claimant and the DM Digital entity in Pakistan (which Dr Malik also owned); the size, structure and finances of the Claimant; what had gone wrong so as to cause the admitted breaches of the Code; what steps had been taken in response to the breaches and to guard against their happening again; and the fact that on a previous occasion the Claimant had been in breach of Rule 5.5 of the Code and had told Ofcom that it was then making changes and improving its awareness of impartiality requirements. After concluding remarks, Ms Taylor said to the Claimant's party:
"We'll now consider the case and your representations and then reach a decision, and Ofcom will let you know our decision as soon as possible. … So, I'd now like to ask you to leave, as well as the external recorder."
- In advance of the hearing, Ofcom's executive officers had provided the panel with details of recent sanctions in other cases, and with a list of suggested questions to be asked of the Claimant. There was a pre-meet which gave the panel the opportunity to ask the executive officers to explain any factual details of the case or any queries the panel might have about the paper work. After the hearing they stayed with the panel to assist with factual questions relating to the case or relevant precedents. An Ofcom lawyer remained to ensure that due process was followed and to answer any legal questions.
- Mr Close's evidence is that no new evidence was introduced to the panel, nor any new points raised, after the Claimants' team had left the room. That is borne out by the hand-written notes of the discussions made by Ms O'Dwyer, the external recorder having left. A comparison of Ms O'Dwyer's note of the open hearing with the transcript made by the external recorder indicates that Ms O'Dwyer's note, while not verbatim, is reliable. Her note discloses that the great majority of the talking was by members of the panel. The Ofcom lawyer gave some advice, which has been redacted; and Mr Barnes spoke on six occasions. Two entries in the notes represent the high-water mark for the Claimant. They record things being said by Mr Barnes. In the first[1], the note reads "Previous sanctions nothing done -> more breaches Now [breach of rule] 3.1 Not small community station DM Digital way more serious." The second[2] reads "-> if going bust where is the evidence?"
Ofcom's Decision: the RLA Programme
- The panel decided to impose a financial penalty of £85,000. The decision recorded in considerable detail the representations that had been made by and on behalf of the Claimant. Specifically it referred to the Claimant's assertion that the imposition of a substantial financial penalty would cause the closure of the channel. It described the breach of rule 3.1 as "particularly serious" and gave cogent reasons for reaching that view. After detailed consideration of the relevant factors, it concluded that revocation of the licence was not justified. In addressing the appropriateness of imposing a financial penalty, it considered the relevant features of the case, including the fact that the Claimant had a considerable history of contraventions between 2008 and 2012, which were itemised. It addressed in detail the Claimant's financial position and included the following passage:
"Ofcom carefully assessed all the evidence provided by the Licensee about its size and current financial situation, including the Licensee's accounts, the Licensee's Representations and the Licensee's responses at the hearing to Ofcom's question about sources of funding which had not been apparent before the hearing. Having weighed all these factors with the utmost care, Ofcom considered that a penalty of £85,000 would be proportionate taking into account all the relevant circumstances as set out and discussed in this Decision."
Ofcom's Decision: the POAF Programme
- The panel decided to impose a financial penalty of £20,000. Once again it recorded in considerable detail the representations that had been made by and on behalf of the Claimant including the submission that "a severe financial penalty would have the effect of revocation." It drew attention to the Claimant's past record and the fact that, despite previous findings of breach and assurances that compliance would be improved, there remained "a manifest lack of knowledge and understanding of how to apply Rules 5.4 and 5.5" and "the extent and seriousness of the breaches was compounded by the Licensee's wholly insufficient compliance arrangements." It set out the relevant factors going to the imposition of a financial penalty, including a detailed assessment of the extent to which the level of penalty would be proportionate, taking into account the size and turnover of the Claimant. In a passage that is similar but not identical to what was said in the RLA decision, it said:
"Ofcom carefully assessed all the evidence provided by the Licensee about its size and current financial situation, including the Licensee's accounts, the Licensee's Representations and the Licensee's responses at the hearing to Ofcom's question about sources of funding which had not been apparent before the hearing. Having weighed all these factors with the utmost care, Ofcom considered that a penalty of £20,000 would be proportionate taking into account all the relevant circumstances, and in particular the need to achieve an appropriate level of deterrence and the serious nature of the Code breach in this case."
Ground 1: Procedural Fairness
The Issue
- 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.
The Applicable Principles
- 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:
i) The distinction is drawn between actual bias (which occurs where the deliberations of the tribunal are influenced, that being a question of fact) and apparent bias (which occurs if a fair minded and independent observer having considered the facts would conclude there was a real possibility of such influence occurring);
ii) There will be a finding of actual bias where an outsider makes points that the "accused" has no opportunity to answer and that are relevant or regarded as relevant by members of the tribunal. This is the first category, identified in [73]. The vice in such cases is that the tribunal will be taking into account relevant material without the "accused" having the opportunity to meet the points that are made against him;
iii) A finding of bias can happen where the identity or status of the outsider either does influence the tribunal or would lead a fair-minded person who knows the facts to conclude that there is a real possibility that the tribunal will be influenced. This is the second category, identified in [74];
iv) The circumstances identified in [75] do not appear to add to the first two categories. The statement that "this class of case is concerned with the risk[3] of improper influence on the decision making process and the correct test is Lord Hope's test for apparent bias in Porter v Magill …" identifies this class of case as an example of apparent bias which, to my mind, falls within the apparent bias objection under the second category, as explained in [74]. It follows that the reference to there being "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 [75] is, at that particular point of the judgment, treating the reference to "brooding presence" as a reference to actual bias;
v) I therefore respectfully question whether it is advantageous to elaborate upon the relatively straightforward distinction between actual and apparent bias that I have summarised at (i) above. What is important is that a finding of actual bias is a finding of fact and to be proved as such in each case; but a finding of apparent bias may arise where, despite the absence of proof of actual bias, the evidence is such as would lead a fair-minded person having considered the facts to conclude that there was a real possibility that the tribunal was improperly influenced.
- 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.
Application to the Facts of the Present Case
- 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[4] and had been the subject of questions during the hearing[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.
Ground 2: Proportionality/Irrationality
- 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:
i) It is alleged that Ofcom wrongly placed the burden upon the Claimant to prove that it would be put out of business by financial penalties amounting to £105,000;
ii) It is alleged that Ofcom ignored the evidence about the Claimant's financial standing and imposed penalties that were bound to (or, at its lowest, would probably) put the Claimant out of business. This is said to be irrational because Ofcom had concluded that revocation of the Claimant's licence was not appropriate even for the breach of Rule 3.1, and the financial penalties amounted to revocation of the Claimant's licence by the back door.
- 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.
Conclusion
- The challenges to Ofcom's decisions fail.
