A judge in the Chancery Division has held (Bunney v Burns Anderson Plc and Anor  EWHC 1240) that awards made by the Financial Ombudsman Service ("FOS") may be challenged on public law grounds, even after the expiry of the time limit for bringing judicial review, in the context of "private law" enforcement proceedings. The judgment contains a review of the case law of the Court of Appeal and House of Lords relating to procedural exclusivity and is a reminder that the decisions of public authorities will not always be safe from challenge after the time limits in CPR Part 54 have elapsed.
Where a defendant to a claim wishes to challenge a public law decision as part of his defence, the court does not have any discretion to refuse to allow him to do so, unless either the raising of the defence is an abuse of process or it has no reasonable prospect of success;
It will have no reasonable prospect of success if, as a matter of construction of the statute under which the impugned act was done, the legislation forbids any challenge (or the particular type of challenge that the defendant wishes to make) to be made otherwise than by judicial review;
In construing statutory schemes which enable decisions to be made under them there is a strong presumption, based on the importance of the rule of law, against concluding that the only permissible means of challenge is by judicial review.
The FOS made awards to two individual complainants after they were given unsuitable advice relating to the transfer of benefits under pension schemes. The awards were accepted by the complainants and therefore became final and binding. The regulated firms did not seek to challenge the awards by way of judicial review. However, when the complainants brought proceedings to enforce their awards, the regulated firms sought to argue by way of defence that in making the awards the FOS had acted ultra vires in that it had exceeded the relevant powers set out in the Financial Services and Markets Act 2000 ("FSMA"). The court therefore had to consider whether the firms could use public law arguments to defend "private law" proceedings, despite the fact that the time limit for bringing judicial review proceedings had passed.
The exclusivity issue
It was common ground between the parties that the FOS is a public body subject to judicial review so that the court has the power to intervene if it exceeds its powers or fails to observe the rules of natural justice, for example. The issue was whether judicial review is the only permissible procedure for bringing a challenge to such an invalid determination. The complainants argued that once the Ombudsman's awards have become final and binding, the only way of challenging them is by way of judicial review proceedings brought in accordance with Part 54 CPR, within the applicable time limits (ie promptly and in any event within 3 months unless there is good reason to extend time). The firms argued that there are well recognised exceptions to the exclusivity of judicial review as the means of challenge to a decision of this type, including the "defendant exception" where a person challenges a decision in the course of his defence in civil proceedings.
In considering this issue, the judge reviewed in detail the case law relating to judicial review and procedural exclusivity, beginning with O'Reilly v Mackman  2 AC 237. In that case, four prisoners were subjected to penalties by the prison board of visitors, having been found to have committed disciplinary offences. The prisoners began proceedings by writ/originating summons for declarations that the penalties were null and void because the board had breached the rules of natural justice. The defendant members of the board successfully had the proceedings struck out on the basis that they were an abuse of process. In his judgment, Lord Diplock pointed out that Order 53 (the predecessor to CPR Part 54) contained various procedural safeguards (including the short time period for bringing a claim and the need to obtain permission). For a person to attempt to circumvent these requirements by seeking to challenge a public authority's decision by way of an ordinary action would, he said, be contrary to public policy and as such an abuse of process. However, he recognised that there may be exceptions to this rule, which should be developed on a case by case basis.
The judge went on to review the cases in which these exceptions have been established and concluded that as a matter of principle there was no reason why a defendant should not be able to challenge a public law decision by way of defence to a private cause of action against him. As the judge put it,
"The real question is whether the challenge to a public law decision brought by ordinary claim is an abuse of the process of the court. In considering that question the nature of the claim is relevant. If the claim is for a review or the exercise of a discretion then delay can be very relevant. If what is being claimed could affect the public generally the court will be more strict than if the proceedings only affect the immediate parties. What is important is whether the safeguards in Part 54 are being flouted in circumstances which are inconsistent with the proceedings being able to be conducted justly in accordance with the overriding objective."
The judge also emphasised that the particular statutory context would be a key factor in each case, as it was possible for Parliament to legislate in order to prevent challenges being brought to the decisions of public authorities otherwise than by judicial review. That said, however, the judge recognised that in construing statutory schemes with this in mind, there is a strong presumption against concluding that the means of challenge should be restricted in such a way.
Construing the statutory scheme
Having found that as a matter of principle public law arguments may be raised by defendants in "private law" proceedings, the judge went on to examine the particular statutory scheme in question. He considered whether the relevant provisions of the FSMA removed the firms' ability to challenge the validity of the Ombudsman's awards otherwise than by judicial review and concluded that they did not.
The important point to take from this case is that regulators and other public bodies cannot necessarily assume that their decisions are no longer susceptible to challenge on public law grounds once the time limit for bringing a judicial review has passed. Whether such a challenge will be permitted will depend in particular on the statutory framework but it should be noted that, at least in the opinion of this judge, "a citizen's right to defend himself against an unfounded claim is not to be taken away except by clear words".
The right to run a public law defence to a private law claim, e.g. where a public body claims that a citizen should pay the public body a sum of money (as distinct from raising public law points by way of claim) is well established in the law (see for example Wandsworth LBC v Winder  AC 461). However, the "defendant exception" to the requirement that public law points must be raised by way of judicial review was arguably applied rather differently in the present case, given that the proceedings in question could be characterised as enforcement proceedings. It remains to be seen whether the judge's decision will be appealed. One possible line of argument, however, may be that the "proceedings" in question here, being merely an enforcement mechanism, do not fall within the scope of the "defendant exception" recognised by the higher Courts and/or that it would be an abuse of power in the present circumstances to seek to raise the public law points by way of defence.
Please note that for the purposes of this public law bulletin we have not set out in detail the statutory context and the way in which the FOS was alleged to have exceeded its powers. For more detail please see our Financial Regulation briefing of 4 June 2007 .