AS TO THE ADMISSIBILITY OF
Application No. 17101/90
by Mohamed Al FAYED, Ali FAYED
and Salah FAYED
and the House of Fraser Holdings plc
against the United Kingdom
The European Commission of Human Rights sitting in private on
15 May 1992, the following members being present:
MM. C.A. NØRGAARD, President
S. TRECHSEL
F. ERMACORA
E. BUSUTTIL
G. JÖRUNDSSON
J.-C. SOYER
H.G. SCHERMERS
H. DANELIUS
Mrs. G. H. THUNE
Sir Basil HALL
MM. C.L. ROZAKIS
Mrs. J. LIDDY
MM. L. LOUCAIDES
J.-C. GEUS
M.P. PELLONPÄÄ
B. MARXER
Mr. H.C. KRÜGER, Secretary to the Commission
Having regard to Article 25 of the Convention for the Protection
of Human Rights and Fundamental Freedoms;
Having regard to the application introduced on 30 August 1990 by
Mohamed Al FAYED, Ali FAYED and Salah FAYED and the House of Fraser
Holdings plc against the United Kingdom and registered on 30 August
1990 under file No. 17101/90;
Having regard to:
- reports provided for in Rule 47 of the Rules of Procedure of the
Commission;
- the Government's written observations of 10 June 1991 to which
the applicants replied on 15 November 1991;
- the parties' oral submissions at the hearing on 15 May 1992;
Having deliberated;
Decides as follows:
THE FACTS
The first three applicants are Egyptian citizens, born in 1933,
1943 and 1939 respectively. They are brothers and businessmen. The
fourth applicant is a limited public company which is owned by the
brothers. The applicants are represented before the Commission by
Messrs. Herbert Smith, Solicitors, London.
The facts of the present case, as submitted by the parties, may
be summarised as follows:
A. The particular circumstances of the case
The application arises out of an investigation into the affairs
of the fourth applicant by Inspectors appointed by the Secretary of
State for Trade and Industry, pursuant to section 432 (2) of the
Companies Act 1985, and the publication of the Inspectors' report in
its entirety by the respondent Government.
In March 1985, the first three applicants acquired ownership of
House of Fraser plc (HOF). HOF was then and is now one of the largest
groups of department stores in Europe and includes one particularly
well-known London store, Harrods. The brothers acquired ownership of
HOF through the fourth applicant, the House of Fraser Holdings plc
(HOFH), which at all material times was owned by the brothers. It had
previously been known as the Al Fayed Investment Trust (UK) Limited and
assumed its present name in December 1985.
Prior to the HOF takeover, in or about early November 1984, on
professional advice, the brothers appointed Broad Street Associates to
act as their public relations advisers and, with their assistance, the
brothers and their advisers led the press to receive and present a
positive picture of their origins, wealth, business interests and
resources. Upon the basis of this picture, which they had a part in
painting, they enjoyed, for a time, an esteem or reputation which was
highly valuable to them. Between 2 and 10 November 1984 the first
applicant gave separate interviews to The Observer, The Sunday
Telegraph and The Daily Mail. The applicants' public relations
consultants played a part in making the arrangements. A further
interview, involving the brothers, arranged by the consultants, took
place on 10 March 1985. In these interviews the brothers described a
wealthy, distinguished and established family background. They gave
a similar picture to Mr. MacArthur of their merchant bankers Kleinwort
Benson. Mr. MacArthur accepted it and, acting on their behalf,
conveyed that picture by a press release in November 1984 and in a
television interview in early March 1985. There were other press
interviews about the family background for which the applicants were
responsible. They thus took active steps to promote their own
reputations in the public domain. The acceptance of the brothers by
the City of London and by Government was later considered to be crucial
to an understanding of the events surrounding their takeover of HOF.
The takeover was vigorously but unsuccessfully opposed by Lonrho
plc (Lonrho) and, in particular, its Chief Executive, Mr. Rowland, a
former business associate, turned rival, of the applicants. In 1984
Lonrho had sold its near 30 % share in HOF to the applicants, but when
their directors were obliged to resign from HOF's Board and the
applicants bid to take over HOF completely, relations between Lonrho
and the applicants deteriorated. Lonrho proceeded to launch an
acrimonious campaign against the applicants. In opposing the
applicants' bid for HOF, Lonrho had made submissions to Ministers
concerning unfair competition and the undesirability of HOF falling
into foreign hands. It was alleged that the applicants were
fraudulently claiming that the funds for the acquisition were theirs
personally. Lonrho alleged that the brothers were lying about their
money and themselves and that they should not be permitted to acquire
HOF without a thorough inquiry. However, the applicants' bid was
cleared and accepted, but Lonrho single-mindedly campaigned on through
the media and other publications, and in particular through its
newspaper, The Observer. The applicants instituted three libel actions
against The Observer in 1985 and 1986 for articles written about them.
In March 1987 Lonrho commenced legal proceedings against the applicants
and their bankers alleging wrongful interference with business,
conspiracy and negligence in connection with HOFH's acquisition of HOF.
These proceedings are to date apparently still pending. Lonrho was
refused leave to apply for judicial review of the Secretary of State's
refusal to refer the applicants' acquisition of HOF to the Monopolies
and Mergers Commission (MMC).
After two years of powerful and unrelenting pressure by Lonrho
upon the United Kingdom Government, on 9 April 1987, the Secretary of
State for Trade and Industry appointed two Inspectors to investigate
the affairs of HOFH and, in particular, the circumstances surrounding
the acquisition of shares in HOF in 1984 and 1985. The appointment of
the Inspectors was made by the Secretary of State under section 432 (2)
of the Companies Act 1985 (the 1985 Act).
The Inspectors stated that their investigation was an unusual one
and that in order to establish what had occurred during the takeover
they had been obliged to make findings on contested issues of fact.
The principal questions which they addressed when investigating
the affairs of HOFH were as follows:
"(i) Were the Fayeds who they said they were, and if not
who were they?
(ii) Did they acquire HOF with their own unencumbered
funds?
(iii) Did they deliberately mislead, whether directly
or indirectly, those who represented them to the
authorities and the public?
(iv) If so, did they seek to frustrate those who tried
to establish the true facts, and if so how?
(v) What steps did the Board of HOF and its advisers
and the Fayeds' financial and legal advisers take
before they gave the comfort that they appeared
to give to those who relied on their words or
actions?
(vi) Were the authorities - the officials of the OFT
(Office of Fair Trading) and the DTI (Department
of Trade and Industry) and, eventually, Ministers -
or the public misled about the Fayeds? If so,
how and why?"
(The Inspectors' report, para. 1.11).
The Inspectors also stated that, throughout their investigation,
they were not concerned solely with simple questions relating to the
direct control of the purchase money which was used to buy HOF. They
were concerned about the statements which the applicants made, or which
they allowed others to make on their behalf, which had the effect of
influencing people to act favourably towards them.
During the course of the investigation, the Inspectors identified
matters upon which they wished to receive evidence. If any uncertainty
or issue arose in relation to the provision of such evidence, these
were discussed in the course of meetings or through correspondence
between the Inspectors' staff and the applicants' solicitors.
Thereafter, information was provided to the Inspectors by way of
memoranda, together with copy documentation. In addition, the
Inspectors received oral evidence by interviewing witnesses. They
interviewed Mohamed and Ali Fayed on 14 October 1987 and again on
8 and 9 March 1988. All proceedings were conducted in private. There
was no opportunity for the applicants to confront or to cross-examine
witnesses, it being well-established as a matter of English law that
the Inspectors were not obliged to afford such an opportunity to
anyone.
It was agreed between the Inspectors and the applicants that,
having assimilated the factual information supplied, the Inspectors
would notify the applicants of the provisional conclusions they had
reached and the material upon which they had relied in reaching such
conclusions. The Inspectors would then consider such submissions as
the applicants might make in respect of these conclusions.
Respect for personal privacy was a matter of particular concern
to the brothers. It was not in dispute that they had occupied a
position as trusted and confidential advisers to Heads of State. This
fact made respect for the privacy of their affairs especially
important. They claimed that loss of confidence in their ability to
maintain privacy would put in jeopardy their relationships, as
businessmen and confidential advisers, with Heads of State and other
important and influential individuals.
The Inspectors' approach to matters of privacy and
confidentiality is summed up at paragraphs 26.44 - 26.45 of their
subsequent report as follows:
"We were aware of the Fayeds' concerns about privacy.
However, if private people incorporate a company, in
which they become directors, and which makes public
representations about their affairs, Inspectors who
are appointed to investigate the truth of those
representations must balance their concern to preserve
the directors' privacy as far as practicable (in
Chapter 12 for instance we have deliberately refrained
from making detailed findings in respect of many of
the Fayeds' private companies whose accounts we have
seen) against their duty to do the job which they
were appointed to perform.
If the Fayeds had chosen to say nothing this might
have created evidential difficulties for us. But
because they wished us to make findings in their
favour they brought witnesses to see us ...
and gave us evidence about their private affairs
which it was then our duty to test."
At the start of the investigation the brothers expressly accepted
that the Inspectors were entitled to enquire into the accuracy of
statements which had been made by them or on their behalf. These were
the statements at the heart of the enquiry. Only at the very end of
the enquiry did they alter that stance and challenge the Inspectors'
entitlement to enquire into certain aspects of their private life. The
Inspectors rejected the challenge and gave their reasons for so doing.
The Inspectors were entitled to seek confidential information from
third parties, but before doing so they gave the brothers an
opportunity to satisfy them as to the accuracy of the statements "in
whatever manner was least obtrusive to their privacy" (report paras.
16.2.5 and 16.6.2). The law did not permit them to compel the brothers
to produce personal bank statements (which would have gone far to
confirm or refute the accuracy of the statements) nor, save to a very
limited extent, did the brothers consent to such production. The
Inspectors considered that the brothers were in breach of their duty
to give all the assistance which they were reasonably required to give.
The Government stated that the Inspectors were entitled to certify to
a court that the brothers were refusing to answer questions, produce
documents or to give such assistance as they required (section 436 of
the 1985 Act). The court could then have taken steps to sanction the
brothers if, after hearing evidence, it was satisfied that they were
in breach of their duty. The Inspectors, however, were of the opinion
that they could complete their task without the need to resort to such
a serious measure and chose to pursue the matter without making such
a certificate.
In October 1987 and thereafter Lonrho publicly criticised the
conduct of the investigation by the Inspectors and sought an additional
two month period in which to assemble and submit evidence to them.
Through its lawyers Lonrho submitted that the rules of natural justice
required the Inspectors to allow Lonrho access to the information the
Inspectors had received from the applicants because Lonrho's commercial
reputation would suffer if the Inspectors dismissed the complaints
which it had made so publicly. The Inspectors dismissed Lonrho's
application for access to the applicants' evidence, but permitted
Lonrho to have a longer period in which to adduce evidence to them,
relating primarily to the personal background of the brothers and their
family. The applicants' solicitors protested to the Inspectors
vigorously about this decision. The Inspectors accepted that Lonrho
and its directors had pursued their ends in a remarkably single-minded
manner.
The Inspectors' provisional conclusions were made available to
the applicants on 12 April 1988 and, after much correspondence, it was
agreed that the applicants could make final submissions to the
Inspectors by 15 July 1988. On 23 July 1988, the Inspectors delivered
their Report to the Secretary of State. The Inspectors concluded that
the applicants had dishonestly misrepresented their origins, their
wealth, their business interests and their resources to the Secretary
of State, the OFT, the Press, the HOF Board and HOF shareholders and
their own advisers; that during the course of their investigations, the
Inspectors had received evidence from the applicants, under solemn
affirmation and in written memoranda, which was false and which the
applicants knew to be false; in addition, that the applicants had
produced a set of documents they knew to be false; that this evidence
related mainly, but not exclusively, to their background, their past
business activities and the way in which they came to be in control of
enormous funds in the Autumn of 1984 and the Spring of 1985. The
Inspectors were satisfied that the main thrust of Lonrho's attack on
the applicants was well founded on a sound basis of substantiated fact
(report para. 1.20). However, the Inspectors did not reject the
entirety of the applicants' evidence and praised part of their work.
Thus the report included, for example, findings that "... the departure
of the Lonrho directors and their replacement by the Fayeds brought
harmony to a board where previously discord had existed" (report para.
6.6.9); and that "the Fayeds' considerable ability to identify assets
with a potential for capital appreciation has undoubtedly been an
important element in their business success" (report para. 12.6.10).
In relation to the valuation of the brothers' banking interests the
Inspectors rejected the evidence of an Observer journalist and accepted
the figure which they advanced. In the final chapter of the report the
Inspectors make complimentary findings of fact and express favourable
opinions about HOFH. In the concluding paragraph the Inspectors made
it clear that their concerns "have been principally centred on the
specific matters we were appointed to investigate, and not on anything
which has occurred since March 1985". They regarded the management of
HOF since its acquisition as, subject to certain reservations,
"law-abiding, proper and regular".
The Secretary of State passed the report to the Director of
Public Prosecutions (the DPP) and the Director of the Serious Fraud
Office (the SFO). On 29 September 1988, the Department of Trade and
Industry (DTI) issued a press release stating that publication of the
report would be delayed until the SFO had completed its investigations.
After consideration of the report and the accompanying evidence, the
Director of the SFO and the DPP jointly referred the matter to the
Metropolitan Police on 24 November 1988 and asked for necessary
inquiries to be carried out. In the summer of 1988, the Secretary of
State also sent copies of the report to the Bank of England, the
Takeover Panel, the Inland Revenue, the OFT and the MMC.
In early November 1988, Lonrho sought judicial review of the
Director General of Fair Trading's failure to advise the Secretary of
State with regard to a possible referral to the MMC. This application
was withdrawn when the Director General subsequently tendered his
advice to the Secretary of State. On 9 November 1988, the Secretary
of State announced that, consistent with the advice of the Director
General of Fair Trading, he had decided against the referral of HOFH's
acquisition of HOF to the MMC, even though the report did disclose new
material facts. Also in November 1988, Lonrho made an unsuccessful
application for judicial review of the Secretary of State's decisions
(i) not to publish the report immediately and (ii) not to refer the
acquisition to the MMC in the light of the report. On 30 March 1989,
the day of Lonrho's Annual General Meeting, The Observer newspaper
published a 16 page special midweek edition devoted solely to extracts
from and comments on a leaked copy of the report. On the same day,
Lonrho posted between 2,000 and 3,000 copies of the special edition to
persons named on a mailing list to whom Lonrho had been regularly
sending propaganda literature hostile to the applicants. The High
Court immediately granted injunctions, on the applications of the
Secretary of State and HOFH, restraining any further disclosure of the
report or its contents. On 10 April 1989, before Lonrho's appeal in
its unsuccessful judicial review application was before the House of
Lords, Lord Keith of Kinkel raised the question whether the publication
of the special edition and its posting to, inter alia, four members of
the House of Lords who were due to hear Lonrho's appeal, was a contempt
of court by Lonrho, Mr. Rowland or the editor of The Observer.
Subsequently, the House of Lords held (<1989> 3 WLR 535) that the
publication of the special edition did not in the circumstances create
any risk that the course of justice in the appellate proceedings
challenging the lawfulness of the Secretary of State's decision to
defer the publication of the report would be impeded or prejudiced, and
they dismissed the contempt proceedings.
During the course of an interview broadcast on BBC Radio 4's news
programme, Today, on 4 April 1989, the Secretary of State stated, prior
to its publication, that the Inspectors' report "clearly disclosed
wrongdoing". This gave rise to substantial press reports.
On 1 March 1990, the Director of the SFO and the DPP announced
that their inquiries into the matter were complete and that they would
not be taking further action. They had carefully considered the report
and the accompanying evidence. In a joint statement issued on that
date they said:
"The directors are now satisfied that all lines of enquiry
have been pursued and that the evidence available is
insufficient to afford a realistic prospect of conviction
for any criminal offence relating to any matter of
substance raised in the report."
The Attorney General expressed himself satisfied that the
conclusion reached by the two directors was the correct one on the
basis of the admissible and available evidence. On 12 March 1990, he
stated to the House of Commons, in reply to a question (Hansard, House
of Commons, 12 March 1990, column 14):
"Whereas it was open to the inspectors to take account
of hearsay evidence if they thought that it was reliable
- and of course it was open to them to reach the
conclusion that they did - it would not have been open
to a jury in a criminal case to convict upon evidence
of the same character. The inspectors are entitled to take
account of evidence covering a wider scope than that
available in criminal proceedings in an English court ...
... Inquiries were pursued in every part of the world
indicated by the inspectors' report, but the in their joint statement issued on 1 March, that there was insufficient evidence available for use in an English court in English criminal proceedings on any matter of substance raised in the inspectors' report to warrant the bringing of criminal proceedings." Also on 1 March 1990, the Secretary of State announced his intention to publish the report on 7 March 1990. It is general policy to publish reports on public companies. (The fourth applicant, HOFH, is a public company.) In this particular case the Government considered that there were specific grounds of general public interest justifying publication: There had been a complex and lengthy investigation, and the public were entitled to learn the result of that investigation unless there were compelling reasons why they should not. There were important lessons to be learnt by those involved in takeovers from studying the report. These were categorised under six headings as: (1) the demarcation of responsibility between the merchant bank and the solicitor, (2) knowledge of one's client, (3) appropriate procedures for advisers in relation to taking on clients, taking up references, accepting and verifying material from other advisers, and accepting instructions from clients, (4) relationships with the media, (5) relationships with the regulatory authorities, and (6) loopholes in the City Code on Takeovers and Mergers. The report contained a recommendation that certain features of part XIV of the 1985 Act (which deals with the investigation of companies and their affairs) deserved to be reconsidered in the light of difficulties encountered by the inspectors (report para. 1.25). (Changes were later incorporated in the Companies Act 1989.) It was appropriate to acknowledge that the Secretary of State, the OFT, the DTI, certain journalists and sections of the press, the Board of HOF, the regulatory authorities, and the applicants' professional advisers had been misled by the applicants. Lonrho considered that its interests and reputation had been seriously and adversely affected by the preparedness of the Secretary of State to allow the HOFH bid to go forward in March 1985 without a reference to the MMC. Lonrho would have had a legitimate grievance if the explanation for this was suppressed without compelling reasons. There was a need to dispel continuing speculation as to the events which had given rise to the investigation. Rumours and speculation were rife. Publication of the report would provide employees and creditors with information concerning the way in which HOF and Harrods had been run and might be expected to be run in future. (The Inspectors were largely prepared to accept the sincerity of the brothers' assurances for the future.) The brothers had been prepared before the Inspectors to attempt to discredit Lonrho, Mr. Rowland, The Observer, its editor and others. It was deemed to be in the public interest to publicise both the fact that these attempts had been made and the conclusion of the Inspectors that they were ill-founded. On 2 March 1990, the applicants were provided with pre-publication copies of the report in confidence, in order to enable them to consider their position. Throughout the period from 26 July 1988 to 7 March 1990 the possibility of applying for judicial review to prevent publication was kept under review by the applicants and their advisers, but the unanimous view at all stages was that such proceedings were almost inevitably bound to fail and, accordingly, they were not commenced. On 7 March 1990, the Secretary of State for Trade and Industry stated to the House of Commons (Hansard, House of Commons, 7 March 1990, column 873): "I should explain to the House that in this matter I have three main responsibilities as Secretary of State: first, to decide whether to publish the report. This I have now done as soon as possible after I was informed by the prosecution authorities that they had withdrawn their objection to publication. Second, I had to consider whether to apply to the court to disqualify any director under section 8 of the Company Directors Disqualification Act 1986. I have concluded that it would not be in the public interest to do so. Anyone who reads the report can decide for themselves what they think of the conduct of those involved. Third, I also have responsibility for decisions on whether to refer mergers to the Monopolies and Mergers Commission. That responsibility was fully discharged by my predecessor. He had six months from July 1988 in which to consider the findings of the inspectors' report and to decide whether to refer the matter. He concluded in November 1988 that a reference to the MMC would not be appropriate ... No other matters require action from me. I have passed the report to all those authorities concerned with enforcement and regulation so that they may consider whether to take action under their various powers." The Secretary of State considered that the publication of the report and the ensuing publicity would enable people who might have dealings with the applicants in their capacity as directors to judge whether their interests were likely to be at risk from the type of conduct described in the report. The Secretary of State also publicly expressed his own view that the Inspectors' findings were correct. He stated (Select Committee Report, Annex 6, page 183, paras. 938, 939, 940A): "... the allegations in the report have not been substantiated in a court of law. We can all take our view about them and I think that the balance of probability is extremely strongly that they are accurate, but there is no proof of this. ... I am not required to say that every fact and opinion in the report is true. These were outside inspectors who were appointed to look into these matters, and they published their report. I have no means of checking it word for word. I myself and I think most people are inclined to believe that the events revealed are correct, but we have no proof - that is all I am saying. ... a succession of lies to the inspectors themselves, who were then investigating the lies they had already told. Is that right? On 28 March 1990, in the course of a debate in the House of Lords, the Minister of State for Trade and Industry stated (Hansard, House of Lords, 28 March 1990, columns 946-7): "Although the inspectors concluded that the Fayeds lied to the competition authorities at the time of the merger - I have no reason to believe that they were wrong, but it is for individuals to make up their own minds once they have read the report - the inspectors did not criticise the Fayeds for the way they were running the House of Fraser which they already owned and which cannot be taken away from them. In these circumstances, of the report, which would allow people to judge for themselves whether they wished to do business with the Fayeds, would be a severe blow to their reputation, as indeed I think it has proved." The report and its findings were widely reported on television, radio and in the national press. The first three applicants claimed that it very seriously damaged their personal and commercial reputations as the Minister had predicted. They also felt compelled to abandon their libel actions against The Observer newspaper and paid the latter's £500,000 legal costs. One month after the publication of the report the Bank of England served notice of restrictions on Harrods Bank Ltd in relation to the brothers' positions within that company. A Parliamentary Select Committee considered that the Secretary of State had not taken sufficient action against the applicants. Lonrho persisted with its attacks. In May 1990 it applied for judicial review of the Secretary of State's refusal to apply to the High Court for an order disqualifying the first three applicants as directors. These proceedings are apparently still pending. B. The relevant domestic law and practice The scope of a section 432 (2) investigation The investigation of HOFH was conducted under section 432 (2) of the Companies Act 1985 in relation to the circumstances surrounding the acquisition of shares in HOF in 1984 and 1985. Section 432 (2) empowers the Secretary of State to appoint Inspectors to investigate the affairs of a company and to report on them in such manner as he directs if it appears to him that there are circumstances suggesting wrongdoing, within the categories of wrongdoing defined in sub-sections 432 (2) (a) to (d). Section 432 (2) defines those categories of wrongdoing as follows: "(a) that the company's affairs are being or have been conducted with intent to defraud its creditors or the creditors of any other person, or otherwise for a fraudulent or unlawful purpose, or in a manner which is unfairly prejudicial to some part of its members, or (b) that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial, or that the company was formed for any fraudulent or unlawful purpose, or (c) that persons concerned with the company's formation or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards it or towards its members, or (d) that the company's members have not been given all the information with respect to its affairs which they might reasonably expect." The Secretary of State does not generally disclose to the company concerned the reasons for the appointment of Inspectors to investigate its affairs. The Secretary of State is under no statutory obligation to do so (Norwest Holst Limited v. Secretary of State <1978> 3 WLR 73 (CA)). In this case, when requested by the House of Lords to do so in the course of Lonrho's judicial review applications, the Government's counsel stated that the Secretary of State had acted under section 432 (2) (a) in appointing the Inspectors. The basis for a section 432 (2) investigation Before appointing Inspectors, it must appear to the Secretary of State that there are circumstances suggesting one or more of the types of wrongdoing described in section 432 (2) (a) to (d). The Secretary of State is not required to limit the powers of investigation of the Inspectors to the matters set forth in section 432 (2), and Inspectors are not obliged, before they report, to consider whether every matter on which they report can properly be described as falling within section 432 (2), and to exclude it if it cannot (the Inspectors' report in this case, para. 26.18). The Inspectors' powers to obtain information Section 434 confers wide powers upon the Inspectors to obtain information, if necessary by compulsion, from officers and agents of the company whose affairs are being investigated. An answer given by a person to a question put to him in exercise of powers conferred by section 434 may be used in evidence against him (section 434 (5)). By virtue of section 436, obstruction of the Inspectors is treated as a contempt of court, and is therefore punishable by imprisonment or fine. The Inspectors' duty to act fairly The Inspectors have a duty to act fairly and to give anyone whom they propose to condemn or criticise in their report a fair opportunity to answer what is alleged against them (In re Pergamon Press Ltd <1971> 1 Ch. 388 (CA)). However, the Inspectors are not a court of law; they are masters of their own procedure and are under no duty to act judicially (ibid., pp. 399-400 per Lord Denning M.R.; pp. 406-07 per Buckley L.J.). Except for the duty to act fairly, Inspectors are not subject to any set rules or procedures and are free to act at their own discretion. There is no right for a person who is at risk of being condemned by the Inspectors to cross-examine witnesses (ibid., p. 400B per Lord Denning M.R.). It is not necessary for the Inspectors to put their tentative conclusions to the witnesses in order to give them a chance to refute them. It is sufficient in law for the Inspectors to put to the witnesses what has been said against them by other persons or in documents to enable them to deal with those criticisms in the course of the investigation (Maxwell v. Department of Trade and Industry <1974> 1 Q.B. 523 (CA)). Publication of the report of the investigation The Secretary of State is empowered by section 437 (3) (c) to decide whether or not to print and publish the Inspectors' report. Although he has a very wide discretion in deciding whether or not to publish the whole report, he is precluded by section 437 (3) (c) from deciding to publish only parts or a synopsis of it. Publication may, however, be deferred if there is a possibility that criminal proceedings may be taken, in order to avoid the possibility of prejudice to such proceedings. Policy concerning the publication of Inspectors' reports generally The question of whether an Inspector's report should be published is considered in each case on its merits. The DTI's general policy is to publish reports on public companies wherever possible, as being matters of public interest. The fourth applicant, HOFH, is a public company. Companies are in a privileged legal position resulting in particular from the limited liability which their members enjoy. Therefore, in circumstances where the Secretary of State has decided that the affairs of a large public company should be investigated under the provisions of section 432 of the 1985 Act because he is satisfied that the conditions of that section have been met and that the circumstances are of sufficient concern to warrant the substantial cost of an inspection, it is important that the Inspectors' report explaining the underlying facts and the conclusions that they draw from them should be made public unless there are overriding reasons to the contrary. Privilege from defamation proceedings In re Pergamon Press Ltd (<1971> Ch. 388 (CA)), at page 400G, Lord Denning M.R. stated that Inspectors "should make their report with courage and frankness, keeping nothing back. The public interest demands it. They need have no fear because their report, so far as I can judge, is protected by an absolute privilege: see Home v. Bentinck (1820) 2 Brod. & Bing. 130, 162, per Lord Ellenborough, and Chatterton v. Secretary of State for India in Council <1895> 2 Q.B. 189, 191, per Lord Esher M.R." Even if, contrary to Lord Denning's observation, the Inspectors' report is subject to a qualified rather than an absolute privilege, neither the Inspectors nor the Secretary of State could be successfully sued for defamation in publishing the report, except upon proof of express malice (i.e., the desire to injure as the dominant motive for the defamatory publication: see Horrocks v. Lowe <1975> A.C. 135 (HL), at page 149 per Lord Diplock). Judicial review The grounds on which administrative action (such as the Secretary of State's decision to publish the report) is subject to judicial control are the three traditional grounds of judicial review described by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service (<1985> AC 375 (HL)), at pages 410-11. These are illegality, irrationality, and procedural impropriety. "Illegality" means that the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. "Irrationality" applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be arrived at could have arrived at it. "Procedural impropriety" covers failure to act with procedural fairness towards the person who will be affected by the decision. The Secretary of State had a duty to exercise his discretion whether to publish the Inspectors' report by reference to relevant and not irrelevant considerations, and in a manner which was not unreasonable in the sense of the Wednesbury principles (Associated Provincial Picture Houses Ltd v. Wednesbury Corporation (1948) 1 KB 223 (CA)). "Irrationality" or "Wednesbury unreasonableness" is a narrowly restricted ground of judicial review of an administrative decision. "Where the existence or non-existence of a fact is left to the judgment and discretion of a public body and that fact involves a broad spectrum ranging from the obvious to the debatable to the just conceivable, it is the duty of the court to leave the decision of fact to the public body to whom Parliament has entrusted the decision-making power save in a case where it is obvious that the public body, consciously or unconsciously, are acting perversely" (per Lord Brightman, in R v. Hillingdon L.B.C., ex parte Puhlhofer <1986> A.C. 484 (HL), at page 528). No duty on the Secretary of State to give reasons for his decision to publish There is no general duty on a public body to give reasons as a matter of administrative fairness (R v. Civil Service Appeal Board, ex parte Cunningham, Times Law Report, 13 June 1990). Thus, there was no duty on the Secretary of State to give reasons for his refusal to make a reference to the MMC of HOFH's bid for HOF (R v. Secretary of State for Trade and Industry, ex parte Lonrho, <1989> 1 WLR 525, per Lord Keith of Kinkel at page 539H). Similarly, there is no duty on the Secretary of State to give reasons for his decision to publish the report. The absence of any duty to give reasons for the decisions of public authorities limits the scope of judicial review. The powers of the Bank of England, and safeguards for persons affected by their exercise The regulatory duties and functions of the Bank of England and the controls placed upon them are contained in the Banking Act 1987. The powers of the Bank of England include the power to grant or refuse to institutions authorisation to carry on a deposit-taking business (section 9). The minimum criteria for authorisation of an institution include a requirement that every director, manager and executive shareholder and indirect controller of the institution is a fit and proper person to hold his position (schedule 3 para. 1(1)). In determining whether a person is fit and proper, regard must be had, inter alia, to his probity (ibid. para. 1(2)) and regard may be had to any evidence that he has, inter alia, engaged in any business practices appearing to the Bank to be deceitful, oppressive or otherwise improper (whether unlawful or not) or which otherwise reflect discredit on his method of conducting business (ibid. para. 1(3)(c)). The Bank may revoke (section 11) or restrict (section 12) the authorisation of an institution if, inter alia, the minimum criteria for authorisation are not met by the institution. A party aggrieved (including, in the case of a revocation or restriction, the individual concerned) by any decision of the Bank may appeal to a tribunal consisting of an experienced lawyer and two persons with experience in accountancy and banking respectively (section 28). The tribunal has power to confirm or reverse the decision complained of (section 29(2)) and has to determine whether the Bank's finding of lack of probity was not justified by the evidence on which it was based. There are further rights of appeal on a point of law to the High Court, and, with leave, to the Court of Appeal and the House of Lords (section 31). COMPLAINTS The applicants complain that the making and publication of the Inspectors' report has (a) determined their civil right to honour and reputation, in breach of Article 6 para. 1 of the Convention; (b) determined criminal charges against them, in breach of Article 6 para. 1 of the Convention; (c) violated the presumption of innocence, in breach of Article 6 para. 2 of the Convention; (d) arbitrarily and unnecessarily interfered with their honour and reputation, protected as part of their right to respect for private life, in breach of Article 8 of the Convention; (e) arbitrarily and unnecessarily interfered with the peaceful enjoyment of their possessions, in breach of Article 1 of Protocol No. 1 to the Convention. The applicants further complain that, in breach of Article 13 of the Convention, there are no effective remedies before the national authorities of the United Kingdom for any of the above Convention claims. PROCEEDINGS BEFORE THE COMMISSION The application was introduced on 30 August 1990 and registered on the same day. After a preliminary examination of the case by the Rapporteur, the Commission considered the admissibility of the application on 7 December 1990. It decided, pursuant to Rule 48 para. 2 (b) of the Rules of Procedure, to give notice of the application to the respondent Government and to invite the parties to submit their written observations on admissibility and merits. The Government's observations were submitted on 10 June 1991 after three extensions of the time limit fixed for this purpose. The applicants replied on 15 November 1991 after two extensions of the time limit. On 20 February 1992 the Commission decided to hold a hearing of the parties on the question whether Article 6 para. 1 (civil) of the Convention had been violated. The hearing was held on 15 May 1992. The applicants were represented by Mr. A. Lester QC, Counsel, Mr. P. Goulding, Counsel, Ms. L. Hutchinson, Solicitor, Messrs. Herbert Smith, and Mr. D. Marvin, Attorney, Washington DC. The Government were represented by their Agent, Mrs. A. Glover, Mr. M. Baker, QC, Counsel, Mr. J. Eadie, Counsel, Mrs. T. Dunstan, Mr. M. Osborne and Mr. J. Moore, all three of whom were from the Department of Trade and Industry. THE LAW 1. The applicants have complained about the making, contents and publication of the Inspectors' report on the affairs of the fourth applicant, a company. Before dealing with the specific claims, the Commission would first exclude the fourth applicant company from the purview of the application. The essence of the case concerns the criticisms made in the Inspectors' report about the first three applicants and the effects of the report upon their honour and reputation. Even though they own the fourth applicant company no evidence of any criticism of the company or any prejudice to its reputation has been put forward. In these circumstances the Commission concludes that the fourth applicant company cannot claim to be a victim of a violation of the Convention. It follows that, in respect of the fourth applicant company, the application is incompatible ratione personae with the provisions of the Convention and this aspect of the case must, therefore, be rejected under Article 27 para. 2 (Art. 27-2) of the Convention. Reference hereafter to the applicants is a reference to the first three applicants only. 2. Turning to the specific issues, the applicants have complained of a denial of effective access to the civil courts in that the Inspectors' report allegedly determined their civil right to honour and reputation, in breach of Article 6 para. 1 (Art. 6-1) of the Convention, which reads as follows: "In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice." The Commission finds that the complaint has two aspects: a) that the applicants cannot bring a civil claim against the Inspectors or the Secretary of State for Trade and Industry in order to clear their reputations, allegedly sullied in the report; b) that the applicants felt obliged to withdraw libel proceedings against The Observer newspaper because, after the publication of the report, which partly related to matters in issue in those proceedings, a fair hearing would allegedly have been impossible. The applicants have submitted that the publication of the report resulted in massive adverse publicity in the media, the wholesale destruction of their reputations and a general belief in their dishonesty and criminal guilt. They have claimed, inter alia, that they had no effective safeguards or domestic remedies against this because of the great breadth of the Secretary of State's and the Inspectors' discretionary powers, the restrictive scope of judicial review and the impossibility of suing the Inspectors or the Secretary of State in the civil courts for defamation because they would have had a defence of absolute or qualified privilege. The applicants have complained that the report hopelessly blighted the defamation proceedings against The Observer, which they withdrew as a result. Other such proceedings would have been futile. The Government have submitted, inter alia, that the applicants' complaints about the consequences for them of the publication of the report were exaggerated and unsubstantiated. The extensive publicity after the report's publication was ephemeral. Whilst it is true that an action in defamation against these public officials would probably have been successfully defended on the ground of privilege, this merely reflects the limited content of the right to reputation under domestic law, rather than the right of access to court for determining the applicants' civil rights under Article 6 para. 1 (Art. 6-1) of the Convention. The Government have contended that the applicants could have brought defamation proceedings against others, particularly proceedings against Lonrho and The Observer, and those who worked for them, in respect of the allegedly serious improprieties committed by them during Lonrho's acrimonious campaign and, more particularly, in respect of the very matters central to the Inspectors' report. The Government have disputed a claim made by the applicants that any jury trial of these issues would have been biased and that they therefore had to withdrew the defamation proceedings against The Observer. They have contended that the report could not be used as evidence in those proceedings. The Government emphasised that the decision of the Secretary of State to publish the report was not a decision directed against the applicants; it was a decision taken in the general public interest, including that of freedom of expression and information, having regard to the overall content of the report. The Commission considers that this part of the application raises a serious question of fact and law which is of such complexity that its determination should depend on an examination of the merits. This aspect of the application cannot, therefore, be regarded as being manifestly ill-founded within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention, and no other ground for declaring it inadmissible has been established. 3. The applicants have next complained that the publication of the Inspectors' report violated the presumption of innocence. Article 6 para. 1 (Art. 6-1) of the Convention, cited above, guarantees a fair hearing in the determination of criminal charges. Article 6 para. 2 (Art. 6-2) provides that anyone "charged with a criminal offence shall be presumed innocent until proved guilty according to law". The applicants have contended that the Inspectors' report made statements about them which amounted to findings of criminal conduct. However, Article 6 para. 2 (Art. 6-2) of the Convention requires public officials to refrain from declaring or pronouncing that an individual is guilty of a criminal offence, where guilt has not been proved by a fair judicial process satisfying the requirements of Article 6 (Art. 6) (cf. eg. Eur. Court H.R., Adolf judgment of 26 March 1982, Series A No. 49; Deweer judgment of 27 February 1980, Series A No. 35; and No. 7986/77, Krause v. Switzerland, Dec. 3.10.78, D.R. 13 p. 73). The Government have submitted, inter alia, that the applicants were not persons who had been charged with a criminal offence within the meaning of Article 6 paras. 1 and 2 (Art. 6-1, 6-2) of the Convention. The Inspectors had not conducted a criminal investigation. They had been appointed to investigate and report on the fourth applicant's affairs, and, in particular the acquisition of shares in House of Fraser plc (HOF) in 1984 and 1985. Before the Inspectors' report was published it was clearly and publicly stated by the competent authorities that no criminal proceedings would be brought against the applicants. The Inspectors had not made any findings of criminal conduct by the applicants. They considered that the applicants had been dishonest over certain matters, but although dishonesty is reprehensible, it is not a criminal offence. The Commission considers that while the Inspectors' report was being studied by the Director of Public Prosecutions (DPP) and the Director of the Serious Fraud Office (SFO), the applicants could have considered themselves affected by a possible criminal prosecution and therefore, "charged", within the meaning of Article 6 para. 2 (Art. 6-2) of the Convention (cf. the Court's aforementioned Deweer judgment of 27 February 1990, p. 24, para. 46, and the Adolf judgment of 26 March 1982, p. 15, para. 30). However, once these officials had issued their public statements on 1 March 1990 that the applicants would not be prosecuted, there can, in the Commission's view, be no question of the applicants being deemed to have been "charged" any longer. The Inspectors' report was published a week after the DPP and SFO statements. The report made no findings that the applicants had committed any criminal offence, although it was critical of certain aspects of their business affairs. In these circumstances the Commission concludes that the applicants' rights under Article 6 paras. 1 and 2 (Art. 6-1, 6-2) of the Convention in respect of the earlier risk of criminal prosecution were not infringed. It follows that this aspect of the case is manifestly ill-founded, within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention. 4. The applicants have also complained that the making and publication of the Inspectors' report constituted an unjustified interference with their private lives, contrary to Article 8 (Art. 8) of the Convention, the relevant part of which provides as follows: "1. Everyone has the right to respect for his private ... life ... 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others." The applicants have submitted, inter alia, that English law provides no enforceable right to privacy and no safeguards or limitations on the scope of investigations and reports of the kind seen in this case. The report referred to unwarranted aspects of the applicants' private lives and labelled them as dishonest, which had adverse effects on their reputation. Even if some of the investigations into the applicants' personal background was legitimate, it was unacceptable and wholly disproportionate to inquire into details of the Fayeds' family and business history, followed by the wholesale publication of private information. Any public interest in the conclusions of the Inspectors or the general lessons to be learnt for future commercial practice could have been satisfied by partial publication of the report, but English law did not allow this. The report could only be published in its entirety or not at all. Nor was there any need to protect others' right such as those of Lonrho, by publishing the report in its entirety, as their rights were adequately secured by the ordinary courts. The Government have contended, inter alia, that the report did not interfere with the private lives of the applicants. They stated that the applicants had themselves put their reputation into the public domain before the Inspectors were appointed by the hiring of public relations professionals for this purpose and ensuring media coverage. The inquiries made by the Inspectors were necessary to establish whether the applicants were who they claimed to be - longstanding successful and wealthy businessmen. The Inspectors were aware of the need for privacy and proceeded in whatever manner was least obtrusive to the applicants' privacy (cf. the Inspectors' report paras. 16.2.5 and 16.6.2, pp. 5-6 above). Even if there had been an interference with the applicants' private lives, it was in accordance with the law and necessary for overwhelming reasons of public interest (pp. 9 and 13 above). Publication was delayed until questions of criminal prosecution had been decided, and sufficient notice was given to the applicants at all stages of the contents of the report to enable them to seek judicial review to prevent publication if they saw fit. Publication was also necessary to protect the economic well-being of the country as the report revealed weakness in the system of takeover bids. Publication thereby protected those operating that system in the future. It was also necessary to protect the rights and freedoms of others, such as those of Lonrho, its shareholders and associates, by confirming that their allegations about the applicants had been well-founded. Moreover the report was well-balanced and did not go further than was necessary for the Inspectors' legitimate purpose. It was not wholly negative about the applicants but gave them credit for their management of HOF (p. 7 above). Even if it had been lawful, it would have been impracticable and possibly misleading to have published only parts of the report, particularly as extracts had been leaked to and published by The Observer. In all the circumstances, the Government are of the opinion that the report itself and its publication did not amount to a disproportionate interference with the applicants' right to respect for privacy, and that the publication was well within the Government's margin of appreciation. The Commission finds that the publication of the Inspectors' report with certain of its findings constituted an interference with the applicants' right to respect for private life within the meaning of Article 8 para. 1 (Art. 8-1) of the Convention. However, that interference was in accordance with the law, the publication being authorised by section 437 (3) (c) of the Companies Act 1985. It pursued the legitimate aims, relied on by the Government, of protecting the economic well-being of the country and the rights and freedoms of others, within the meaning of Article 8 para. 2 (Art. 8-2) of the Convention. Investigations into large scale commercial activities of the present kind and the need to ensure honest dealings fall within the notion of protecting the economic well-being of the country. The interest of the general public in being informed about matters of major public concern can best be served by the publication of the results of Government inquiries. Further elements of general interest are cited above at pp. 9 and 13. The needs of democracy justify transparency in such matters. States enjoy a margin of appreciation in their decision whether to publish reports of the present kind, provided that the decision is not taken arbitrarily or with malice towards the particular individuals involved. The question is one of proportionality or balance between the public and the individual interests. The Commission finds that no elements of arbitrariness are disclosed in the present case. Although it might be fair to say that no investigation into the applicants' affairs would have been started if Lonrho had not launched its campaign against them, the actual investigation by the Inspectors and their report indicate no malice or unreasonableness. As a whole the report may be said to be balanced and thorough; it is not a one-sided condemnation of the applicants and gives them credit where credit is due for their business activities. The investigation of certain aspects of their private lives was necessary in view of their claims about their personal backgrounds, which they themselves had vaunted through the media, and as a result of which they had enjoyed a good business reputation for quite some time; hence their success in the HOF takeover bid. In the circumstances of the case, therefore, the Commission finds that the making and publication of the Inspectors' report was proportionate to the legitimate aims enunciated above and could be regarded as necessary within the meaning of Article 8 para. 2 (Art. 8-2) of the Convention. The Commission concludes that this part of the application is manifestly ill-founded, within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention. 5. The applicants have further complained that there has been an arbitrary and unnecessary interference with the peaceful enjoyment of their possessions, contrary to Article 1 of Protocol No. 1 (P1-1) to the onvention, which reads as follows: "Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties." The applicants have alleged that the publication of the report constituted a measure of control of the use of their property. It seriously damaged their reputation and financial standing and, thereby, harmed their economic interests in the business of HOF. Restrictions were put on their management of Harrods Bank. Although the publication of the report pursued the legitimate aim of informing the public about the acquisition of HOF, it imposed an individual and excessive burden on the applicants, which outweighed the general interest. The Government have contended that the applicants' claim was wholly unspecific as to the nature of the harm done to any of their economic interests. The restrictions placed on Harrods Bank were made by the Bank of England and were not caused by the publication of the report. If banking restrictions were in any way to fall within the ambit of Article 1 of Protocol No. 1 (P1-1), the Government have submitted that the measure fully complied with the requirements of that provision, given the Government's margin of appreciation in ensuring the general public interest and the proportionate nature of the restrictions. The Commission finds the applicants' claim to have suffered a breach of Article 1 of Protocol No. 1 (P1-1) unsubstantiated. No evidence of any significant economic prejudice has been submitted to it. Insofar as certain management restrictions were placed on Harrods Bank by the Bank of England one month after publication of the report, the Commission notes that the applicants had a right of appeal to an independent tribunal which does not appear to have been tried (pp. 14-15 above). In the circumstances the Commission finds that no appearance of a violation of Article 1 of Protocol No. 1 (P1-1) has been disclosed in the present case. It follows that this aspect of the application is also manifestly ill-founded, within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention. 6. Finally, the applicants have complained of an absence of effective domestic remedies for their above Convention claims, contrary to Article 13 (Art. 13) of the Convention. Article 13 (Art. 13) provides as follows: "Everyone whose rights and freedoms as set forth in this Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity." Examination of this complaint has two aspects. The first relates to the applicants' claim under Article 6 para. 1 (Art. 6-1) (civil) of the Convention, which the Commission retains for an examination on the merits, and the second relates to the rest of the applicants' complaints which the Commission rejects as being manifestly ill-founded. As regards the first aspect and the applicants' claim under Article 6 para. 1 (Art. 6-1) (civil), the Commission considers that the subsidiary complaint under Article 13 (Art. 13) of the Convention also raises a question of fact and law which requires a determination on the merits, no ground of inadmissibility having been established. However, as regards the second aspect, the Commission recalls that Article 13 (Art. 13) of the Convention does not require a remedy under domestic law in respect of every alleged violation of the Convention. It only applies if the applicant can be said to have an "arguable claim" of a violation of the Convention (Eur. Court H.R., Boyle and Rice judgment of 27 April 1988, Series A No. 131, p. 23, para. 52). The Commission has found above that the applicants' claims under Article 6 paras. 1 (criminal) and 2, Article 8 (Art. 6-1, 6-2, 8) of the Convention and Article 1 of Protocol No. 1 (P1-1) to the Convention are manifestly ill-founded within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention. In the light of the reasons upon which those findings are based, the Commission also considers that the facts of the present case fail to disclose an "arguable claim" of a violation of these provisions. Consequently the applicants cannot derive from Article 13 (Art. 13) of the Convention a right to a remedy for these Convention claims. To this extent it follows that the applicants' complaint under Article 13 (Art. 13) of the Convention is partially manifestly ill-founded, within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention. For these reasons, the Commission by a majority DECLARES THE APPLICATION ADMISSIBLE in respect of the complaint of the first three applicants under Article 6 para. 1 (Art. 6-1) (civil) of the Convention, both on its own and in relation to Article 13 (Art. 13) of the Convention, without prejudging the merits; DECLARES INADMISSIBLE the remainder of the application. Secretary to the Commission President of the Commission (H.C. KRÜGER) (C.A. NØRGAARD)
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