Two wrongs don’t make a legal right

Equal treatment is a fundamental principle of justice. This is well understood in the abstract, but what it might mean in practice and how it might be enforced is less clear, as is demonstrated by an important recent UK decision[1] that will be monitored closely by Australian lawyers.

The case

As a result of cartel investigations, UK regulators brought proceedings against 13 tobacco manufacturers and retailers. Several of them, including the claimants, entered into early resolution agreements (ERAs) to receive substantial reductions in anticipated penalties in exchange for admitting liability and co-operating with the regulator. A party to an ERA could appeal against the final decision despite the admissions in the ERA, but then was liable to have its penalty increased. TMR, a retailer that had entered into an ERA, sought and obtained an assurance, that, if it did not appeal, it would be given the benefit of any successful appeal by any of the other parties. No other party received or was told of TMR’s assurance. The regulator’s own policies for ERAs committed to “equal treatment principles”.

Neither the claimant nor TMR appealed the regulator’s final decision, choosing to pay the reduced penalties under the ERA. The other ERA parties appealed and were successful in the Tribunal. TMR then reached a settlement with the regulator for the penalty to be repaid, essentially giving it the benefit of the earlier assurance.

It was broadly accepted in all courts that the TMR assurance (being contrary to finality and legal certainty principles) should never have been given and that, were the regulator to resile from it, it would be exposed to claims by TMR.

The issues

The essential question was whether the regulator, having honoured a (flawed) agreement with TMR to repay the penalty, also was obliged by principles of fairness and equal treatment to repay the penalty to the claimant.

At first instance, the judge held that the claimants had been unfairly treated but unequal treatment had been objectively justified on the basis that a mistake should not be replicated where public funds were concerned.

The Court of Appeal disagreed.[2] Negotiations would be impossible if a party which had been promised equal treatment could not obtain a benefit accorded to another party unless they asked for it. The complainant could complain of unequal treatment despite not seeking the same assurance as TMR; if the claimants had been made aware of the assurances to TMR, they would surely have sought similar assurances. The regulator did not have discretion to enter into different arrangements with TMR, so the fact that it did make those arrangements did not allow the regulator to then say the claimant was in a different position and therefore potentially subject to different treatment.

The decision

The Supreme Court took a different view. It held that equal treatment is not a distinct principle of administrative law; consistency is a generally desirable objective, but not an absolute rule.[3] The parties had a legitimate expectation of equal treatment, but that says nothing about the legal consequences of the expectation in terms of rights and remedies in public law.[4] Fairness, like equal treatment, can readily be seen as a fundamental principle of democratic society; but not necessarily one directly translatable into a justiciable rule of law.[5] Even accepting that there was a breach of a legitimate expectation of equal treatment in the failure to replicate the assurances given to TMR, that would not in itself provide a basis for financial remedy nor the reversal of financial penalties.[6] All those who entered ERAs were aware of the possibility that other parties would appeal and might be successful. That was a risk the claimants took but TMR did not, which of itself was sufficient reason for unequal treatment.[7]

Lord Sumption added that the benefit to TMR was in no sense given at their expense. Nor did it make any difference that the assurance was not disclosed to them. If it had been, they might well have asked for a similar assurance for themselves, but they would have had no right to one. As a matter of principle, the regulator’s mistake was that they gave the assurance to TMR, not that they failed to give it to the complainants.[8]

Lord Briggs noted that, where a public authority has the option to avoid replicating an earlier mistake but at some cost to equal treatment, the choice is one for the authority rather than the court.[9] In his view, the regulator made a rational choice between unpalatable alternatives.

The Australian approach

The courts have long held that equality before the law requires that people should be treated uniformly unless there is a valid reason to treat them differently. This begs the question of what counts as a valid reason and who decides on validity.[10] The fact that equality of treatment is a general principle of rational behaviour – the prototypical public law defence – does not entail that it should necessarily be a justiciable principle, that it should always be judges who have the last word on whether the principle has been observed, where rational choices are made.

How Australian courts would approach similar circumstances is an open question. Each of the Supreme Court’s view and the overruled unanimous Court of Appeal view to the contrary raises sound competing arguments. Australian courts are increasingly adopting a wider view of fairness, including considering fairness not only from the perspective of the wielder of the power but also from the perspective of the subject.[11] That the parties to the UK dispute were sophisticated commercial entities may also be relevant to the approach of local courts in future cases.

Key takeaway

Although the detail of equal treatment may be difficult to define in specific cases, the principle remains a cornerstone of proper government behaviour. Given the approach taken by the UK Supreme Court, public authorities should anticipate that parties dealing with them will increasingly seek specific equal treatment assurances in proposed settlement and similar arrangements.

[1] R (Gallaher Group Ltd and others) v Competition and Markets Authority [2018] UKSC 2
[2] [2016] EWCA Civ 719
[3] n1 [24]
[4] n1 [30]
[5] n1 [31]
[6] n1 [42]
[7] n1 [44]
[8] n1 [54]
[9] n1 [62]
[10] Matadeen v Pointu [1999] 1 AC 98, 109 (PC)
[11] Chief Justice Allsop, Values in Law: How they Influence and Shape Rules and the Application of Law (20 October 2016)

Authored by:
Lionel Hogg, Partner