R (United Co Rusal plc) v London Metal Exchange

Key principles: Where a body undertakes consultation it must act fairly by providing sufficient reasons and information to allow consultees to give an intelligent response (Coughlan principles). However a consulting body has a wide discretion to choose the options on which it will consult and is not generally obliged to consult on or disclose every discarded alternative. The duty of fairness is intensely fact-sensitive.

Decision grounds: The Court of Appeal held the judge was wrong to find the LME's consultation unlawful. The court concluded that consultees did not need disclosure of the previously rejected "rent ban" option to respond intelligently to the proposed LILO rule; market materials and background knowledge meant the competition risks were sufficiently apparent; investigations begun during the consultation into the rent cap as an adjunct to LILO were permissible; and the claim of vitiation by bias failed because the LME's stock levy was widely known and any objection had been waived. The court also rejected any requirement to disclose privileged legal advice as part of a lawful consultation.

The LME proposed a new rule (the "LILO" rule) to reduce long queues at approved warehouses by linking permitted load-in to recent load-out where queues exceeded 100 days. The LME issued a consultation notice in July 2013 describing the LILO proposal but did not set out in the notice a previously-considered option to cap or ban warehouse rent (the "rent ban"). Rusal sought judicial review arguing the consultation was unfair because (i) it failed to explain why the rent ban had been rejected, (ii) the LME should have undertaken a fresh competition law review before consulting and deciding to adopt LILO, and (iii) the decision was vitiated by bias because the LME received a stock levy related to warehouse rents.

The Administrative Court (Phillips J) quashed the consultation principally because it held consultees needed to know the reasons the rent ban had been rejected and because the LME began investigating that option during the consultation. The Court of Appeal allowed the LME's appeal.

The Court analysed the common law duty of fairness in consultation (Coughlan and related authorities), emphasising that consultation must provide sufficient reasons for consultees to give an intelligent response but that public bodies have a wide discretion not to consult on all discarded options. The court addressed four primary findings of Phillips J:

• On Madden: the court distinguished Madden and held the judge had misapplied it; the LME had not misrepresented its reasons for LILO.
• On disclosure of competition concerns: the court held that, in the commercial and specialist market context, consultees and the market were sufficiently aware of competition risks from prior reports and materials, so the absence of detailed competition advice in the consultation notice did not render the consultation unfair.
• On investigations during consultation: reviewing the rent ban as a possible adjunct to LILO during consultation was permissible and did not require postponement or disclosure in the consultation notice.
• On bias: the stock levy was well known in the market, and Rusal had waived any timely objection; the consultation was not vitiated by bias and there was no obligation to disclose privileged legal advice.

The court stressed the case-sensitive nature of consultation fairness, cautioned against expanding the duty of fairness in a way that would oblige consulting bodies to consult on every discarded option, and noted the particular commercial context where ill-founded challenges risk market disruption.

Appeal allowed. The Court of Appeal concluded that the judge had extended the duty of fairness beyond proper limits: consultees did not need the omitted "rent ban" information to respond to the LILO consultation, the LME was entitled to investigate alternatives during consultation (as an adjunct) without postponing or disclosing privileged advice, and the bias complaint failed because the LME's stock levy was known and any objection was waived. Accordingly the consultation was not unlawful.

Appeal to the Court of Appeal (Civil Division) from the Queen's Bench Division (Administrative Court) (Phillips J) [2014] EWHC 890 (Admin); decision of the Court of Appeal reported at [2014] EWCA Civ 1271 (this judgment).