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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Camelot Group Plc, R (on the application of) v National Lottery Commission [2000] EWHC Admin 391 (21 September 2000)
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Cite as: [2001] EMLR 3, [2000] EWHC Admin 391

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The Queen v. The National Lottery Commission Ex parte Camelot Group plc [2000] EWHC Admin 391 (21st September, 2000)

Case no: CO/3085/2000
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
CROWN OFFICE
ROYAL COURTS OF JUSTICE
STRAND, LONDON, WC2A 2LL
Thursday, 21 September, 2000

BEFORE:
THE HONOURABLE MR JUSTICE RICHARDS
-------------------

The Queen
- and -
The National Lottery Commission

Respondent
Ex parte
Camelot Group plc

Applicant
____________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
____________________


Mr D. PANNICK QC and MR T. DE LA MARE (instructed by Baker McKenzie & Co) appeared on behalf of the Applicant
MR J. CROW and MR M HOSKINS (instructed by the Treasury Solicitor) appeared on behalf of the Respondent
MR N PLEMMING QC and MISS A FOSTER (instructed by Clifford Chance LLP) appeared on behalf of GTECH

____________________
Judgment
As Approved by the Court
Crown Copyright ©

MR JUSTICE RICHARDS:
1. The National Lottery is currently operated under a seven year licence by Camelot Group Plc ("Camelot"). The licence expires on 30 September 2001. Responsibility for the award of a new licence with effect from 1 October 2001 lies with the National Lottery Commission ("the Commission"). In 1999 the Commission established a competitive procedure for the award of the new licence and bids were subsequently received from Camelot and The People's Lottery ("TPL"). After a lengthy process of evaluation, involving an extension to the original timetable, the Commission announced on 23 August 2000 that it had decided (1) that neither of the bidders' plans met the statutory criteria for granting a licence, and the competitive procedure for the new licence was at an end, and (2) to proceed on the basis of a new procedure under which it would negotiate exclusively with TPL for one month.
2. By these proceedings Camelot challenges the legality of the Commission's decision to operate the new procedure of exclusive negotiation with TPL. On 29 August Elias J granted Camelot permission to apply but refused interim relief. The case has now come before me to decide the substantive application. Camelot is represented by Mr David Pannick QC and the Commission by Mr Jonathan Crow.
3. GTECH, the supplier of gaming software and terminals to Camelot, has been served with the application and has appeared, represented by Mr Nigel Pleming QC. Mr Crow, whilst not actively opposing GTECH being heard, raised a number of questions for the assistance of the court concerning GTECH's standing. He submitted that GTECH is not a person directly affected by the decision within CPR Schedule 1 RSC Order 53 r.5(3) and cannot be heard under r.9(1) because that applies only to persons desiring to be heard in opposition to an application; and, if the court has an inherent discretion to hear a person in support of an application, it is doubtful whether GTECH can add to what Camelot has to say and thereby assist the court. I have not found it necessary to decide whether GTECH is a person directly affected. In my view the court has a discretion to hear a person even where that person does not come within r.5(3) or r.9(1). Any doubt about that will be removed in any event by the new rules due to come into force on 2 October: CPR rule 54.17, as contained in the schedule to the Civil Procedure (Amendment No.4) Rules 2000, SI 2000 No.2092, confers an express power to allow any person to make representations at the hearing. I have exercised what I perceive to be my existing discretion in favour of GTECH. In doing so I have had particular regard to the impact of the Commission's decision on GTECH, even if such impact is indirect, and to the limited additional time required for consideration of Mr Pleming's commendably brief written and oral submissions. Should it ever become important, it remains open to GTECH to contend that it is entitled to appear anyway as a person directly affected.
4. TPL was also served with the application but has not appeared.
Statutory framework
5. The governing statute is the National Lottery Etc. Act 1993, as amended by the National Lottery Act 1998. Section 1 of the 1993 Act creates the National Lottery and requires it to be promoted by a body licensed under section 5. Section 3A, which was introduced by the 1998 Act, establishes the Commission, to which are transferred the functions previously conferred or imposed on the Director General of the National Lottery.
6. Section 4 lays down overriding duties of the Secretary of State and the Commission. Substituting references to the Commission for references to the Director General, its material provisions read:
"(1) The Secretary of State and (subject to any directions that may be given by the Secretary of State under section 11) the Commission shall each exercise their functions under this Part in the manner they consider the most likely to secure -
(a) that the National Lottery is run, and every lottery that forms part of it is promoted, with all due propriety, and
(b) that the interests of every participant in a lottery that forms part of the National Lottery are protected.
(2) Subject to subsection (1), the Secretary of State and the Commission shall each in exercising those functions do their best to secure that the net proceeds of the National Lottery are as great as possible."
The net proceeds are paid into the National Lottery Distribution Fund ("NLDF"), from which distributions are made to good causes.
7. Sections 5 to 10 provide for the licensing system. Again substituting references to the Commission for references to the Director General, the material provisions of section 5 read:
"(1) The Commission may by licence authorise a body corporate to run the National Lottery.
(2) Only one body may be licensed under this section at any one time.
(3) The Commission shall not grant a licence under this section unless an application in writing, containing such information as it has specified as necessary for enabling it to determine whether to grant it, has been made to it by such date as it has specified.
(4) The Commission shall not grant such a licence unless it is satisfied that the applicant is a fit and proper body to run the National Lottery.
(5) In determining whether to grant such a licence, the Commission may consider -
(a) whether any person who appears to it to be likely to manage the business or any part of the business of running the National Lottery under the licence is a fit and proper person to do so, and
(b) whether any person who appears to it to be likely to be a person for whose benefit that business would be carried on is a fit and proper person to benefit from it."
8. Section 10(1) requires the Commission to revoke a licence granted under section 5 if it is satisfied that the licensee no longer is, or never was, a fit and proper body to run the National Lottery. There is also a discretion under section 10(3)(a) to revoke a section 5 licence on specified grounds which include a breach of a licence condition or a finding that any person involved in managing the lottery, or some part of it, is not fit and proper.
9. More detailed provisions concerning the Commission, its powers and procedures are laid down in Schedule 2A. They include, in paragraph 9, the duty to provide reasons for certain decisions:
"9(1) It shall be the duty of the Commission to give any person affected a written statement of their reasons for any decisions which they may make in the exercise of their functions under sections 5 to 10 or Schedule 3.
(2) It shall be the duty of the Commission to arrange for the publication, in such manner as they think fit, of a written statement of their reasons -
(a) for any decision which they may make to grant, or not to grant, to any particular applicant a licence under section 5;
(b) for any decision which they may make to revoke a licence granted under section 5; and
(c) for any other decision which they may make in the exercise of their functions under sections 5 to 10A or Schedule 3 and which they consider likely to be of interest to the public."
Factual history
10. On 29 July 1999 the Commission announced the process, timetable and basis for granting the next licence to run the National Lottery. Although an open competition is not required by the Act, the Commission chose to hold one, for reasons later expressed by it as follows:
"We have been keen to encourage a competition for the next licence. We were not bound to hold a competition but we think it is sensible to hold one because that helps achieve the best return for the good causes, and opens the lottery to new ideas" (Commission's notice on the background to the licensing process).
"The Commission considered, having consulted widely, that it was most likely to meet these overriding duties [under section 4 of the 1993 Act] in selecting the licensee for the next licence period by undertaking an open competition" (paragraph 7 of the statement of reasons for the decision of 23 August 2000).
11. Following further consultation, the Commission published its formal Invitation to Apply ("the ITA") on 30 November 1999. The ITA was a comprehensive document running to over 170 pages. In relation to the application process, it stated in paragraph 3.1:
"The NLC will undertake a detailed evaluation of each application. An applicant may be required to provide additional information in writing to clarify particular aspects of its application. The NLC may seek improvements in some or all of the commitments that an applicant has offered. If it does so, it will ensure that it does not distort competition by allowing one applicant to make changes in a way that, if open to another bidder, could have led to the eventual selection being different.
The NLC aims to announce a preferred applicant by the end of June 2000 and earlier if possible ...."
Paragraph 3.2 set out a more detailed timetable, with the final date for applications on 29 February 2000, announcement of the preferred applicant by the end of June 2000 and confirmation of the preferred applicant by the end of August 2000. A period of thirteen months from the end of August 2000 to the beginning of October 2001 was written into the timetable for the purpose of giving any new licensee (if Camelot did not win) time to install, test and set up the necessary systems to ensure a smooth hand-over
12. By paragraph 3.3 the Commission reserved the right to make changes at any time to the ITA and to the timetable. Paragraph 3.10 imposed substantial restrictions on the making of modifications or amendments to an application after the final date for applications and prior to the announcement of the preferred applicant. More general disclaimers were contained in section 5. I should make particular mention of one:
"5.3 Possibility of cancelling the ITA and/or rejecting all applications
The NLC reserves the right to change or cancel this ITA or the draft licences accompanying it at any time, and to reject all applications if none meets the necessary requirements adequately. The NLC may subsequently re-issue an ITA."
13. On 29 February 2000 detailed applications were submitted by Camelot and TPL. A subsequent request by a third potential applicant to present a bid out of time was rejected by the Commission.
14. Having completed its initial consideration of both bids, the Commission wished to seek various specific improvements to certain of the commitments offered by both bidders before reaching a decision on a preferred applicant. For that purpose, on 23 June it announced a provisional decision to extend the timetable to allow both applicants to improve their proposals. Details of the intended revisions to the evaluation process and timetable, together with the matters which the Commission wished to see addressed by offered improvements, were communicated to both applicants to enable them to make representations. In the case of Camelot, a list of the main areas for improvement was sent on 23 June and a more detailed schedule was sent on 26 June. The Commission's final decision on the revisions was announced on 30 June after consideration of the representations received. They involved amendments to paragraph 3.10 (modifications or amendments to applications) and to paragraph 3.2 (timetable). Under the amended timetable the last date for submission of improvements was 10 a.m. on 17 July and the target for announcement of a preferred applicant was the first week in August. The target for finalising the terms of the new licence was deferred to the end of September, still leaving the twelve months which the Commission believed to be necessary in order to ensure a smooth hand-over to any new licensee if Camelot did not win.
15. Both applicants submitted improvements by the deadline on 17 July.
16. Running in parallel with, and to some extent overlapping with, those developments in the open competition for the new licence was an issue concerning GTECH. In May 2000 it came to the attention of the Commission that certain senior officers of GTECH, without the knowledge of the Board of GTECH, had identified an error in the software used in the National Lottery terminals and had corrected the fault secretly, in breach of established software change control procedures and without disclosing it to Camelot or to the Commission's predecessor, the Director General. The fault had been in place since the beginning of the Lottery and had been successfully rectified in July 1998. In certain limited circumstances it caused duplicate transactions to be recorded on the gaming systems, with only a single ticket being produced. This resulted in an overcharge to retailers and, if the ticket were a prize-winner, errors in the distribution of the prize fund between the prize-winners of the draw. One consequence of the decision to correct the fault secretly was that no action could be taken to check the impact upon prize-winners and retailers and to make arrangements for restitution where appropriate. Hence the integrity of the Lottery was compromised.
17. The software incident was raised with Camelot and discussed at a number of meetings. The Commission's concerns were such that it wrote to GTECH on 26 June, and to Camelot on 27 June, informing them that the Commission was of the provisional view that the relevant GTECH companies were not fit and proper persons to manage the business or any part of the business of running the National Lottery or to be persons for whose benefit the business of running the National Lottery is carried on. The Commission made clear to Camelot that the question whether GTECH was a fit and proper person was relevant both to the question of revocation of the existing licence and to the application for a new licence, and that any additional representations on fitness and propriety should be made by the deadline of 17 July. The point was touched upon somewhat elliptically in the letter of 23 June, where "Camelot's capacity to manage key suppliers, especially in the field of technology" was one of the matters identified for improvement. The point was expanded on in the letter of 26 June. The Commission's attitude was put beyond doubt in its letter to Camelot dated 30 June:
"... If the Commission were to determine that GTECH is not a fit and proper person for the purposes of the present licence, then this could not but require it to go on to consider GTECH's fitness and propriety in the context of section 5(5). The Commission would not, however, wish to conclude any determination for the purposes of section 5(5) without considering any representations from either GTECH or yourselves on the issue which were separate and distinct from those made in relation to its consideration of fitness and propriety issues in the context of the present licence.
.... [After a reference to the 17 July deadline:] In the event that before this deadline expires you or GTECH wish (whether in advance or of after the notification of the Commission's decisions on fitness and propriety in the context of the present licence) to make additional representations on issues of fitness and propriety for the purposes of the next section 5 licence evaluation, then I would be grateful if these could be made in writing addressed personally to me to be received no later than the stated deadline."
18. In order to address the whole issue, various undertakings and clarifications were given by Camelot in letters of 11 July, 17 July and 20 July and by GTECH in letters of 7 July and 20 July. Again it was clear that what was being put forward related not only to the question of fitness and propriety in the context of the existing licence, but also to the new licence. For example, in its letter of 17 July Camelot stated:
"In this letter we set out the commitments to these improvements received from GTECH to date and the supplementary controls that Camelot has so far devised, that we wish to be considered as improvements to Camelot's Application."
19. In the light of the material received from Camelot and GTECH, the Commission decided not to proceed to a decision for the time being on the question whether GTECH was a fit and proper person. In a letter of 28 July to GTECH it stated:
"... In the light of [your submissions], and of the representations which had been made by [Camelot], the Commission has decided not to proceed further with a determination that GTECH Corporation (including its subsidiary company GTECH UK Limited) is not a fit and proper person to manage part of the business of running the National Lottery.
....
... It is on the basis that the undertakings will be complied with that the Commission presently intends to take no further steps towards a finding that the GTECH Corporation is not a fit and proper person to manage part of the business of running the National Lottery, given that the substance of the Commission's concerns will be met if those undertakings are discharged.
The Commission acknowledges that some of the undertakings will take time to implement .... It will nevertheless be concerned closely to monitor compliance with those undertakings, and it reserves the right to review the matter generally on a periodic basis. It is with this in mind that the Commission would wish to meet GTECH's Board in three months' time to receive a progress report on the undertakings given."
The Commission made much the same points in a letter of the same date to Camelot. The undertakings relied on by the Commission related in part to the period of any new licence rather than the existing licence. An annex to the Commission's letter of 28 July to GTECH set out "additional and appropriate control mechanisms as identified by the Commission", which included the achievement of certain targets by January or August 2002, i.e. well after expiry of the existing licence.
20. As appears from their evidence in these proceedings, Camelot and GTECH thought that the letter of 28 July removed any problem of fitness and propriety in relation to the application for a new licence. The third witness statement of Mr Andrew Osborne, Camelot's Group Legal Adviser, states:
"Accordingly, when Camelot received the Commission's letter of 28 July 2000 it understood from the fact that the Commission had decided to withdraw its threat of revocation that the G-Tech issue ceased to be an issue for the New Licence bid ...."
Similarly the witness statement of GTECH's chairman, Mr Bruce Turner, explains that the Commission's letter of 28 July was taken at face value and was understood to mean that the Commission had decided not to proceed with a determination that GTECH was not fit and proper and that, so long as GTECH implemented the measures it had proposed, it would have addressed the substance of the Commission's concerns. Thus the contention advanced, which I shall have to consider later, is that Camelot and GTECH were misled into thinking that the problem had been resolved, and at the very least the Commission failed to alert them to the existence of a continuing problem.
21. Another contention to which I shall have to return is that the Commission acted unfairly by giving TPL assistance after the 17 July deadline, in marked contrast with its approach towards Camelot. The evidential basis of the contention is a transcript of a meeting between the Commission and TPL on 23 August, the day of announcement of the decisions referred to below. The Commission's Chair, Dame Helena Shovelton, is recorded as saying to the TPL representatives:
"However, we were disappointed in the final outcome that you were not able to give us an unconditional proposal on the prize protection scheme. As you know, we had problems with what you put forward in your initial bid and explained to you what it was that we wanted both in our letter to you, Simon, of 26th June in our meeting and then the further letter of 26th July. In order to try and underline the seriousness of this issue, it is one of the three things that I spoke to Sir Richard [Branson] about when I telephoned him in Neckar."
Camelot puts weight on the reference to a letter of 26 July and the telephone call to Sir Richard Branson; also on the general tone of the remarks. The underlying documentary material has not been disclosed (and Camelot's request for it has, understandably, not been pursued before the court). But in her second witness statement in these proceedings Dame Helena states that after the deadline of 17 July the Commission went no further than to seek permissible clarification from or on behalf of each bidder. No improvements were sought or received from either bidder under the ITA procedure after that date.
22. On 23 August the Commission announced its decision on the applications received under the ITA procedure. The decision in principle was in fact taken on 15 August, but the decision was perfected on 23 August by the adoption of formal reasons as required by the 1993 Act. The Commission decided that neither application met the statutory criteria for the grant of a licence. It did so for very different reasons in the case of the two applicants.
23. In the case of Camelot the reasons related to the fitness and propriety test. In its published statement of reasons the Commission referred under this heading to the GTECH software incident, the various measures taken and proposed by GTECH and Camelot in response to the Commission's investigation, and the decision to review in November 2000 the adequacy of the measures. The statement continued (paragraph 17):
"The Commission has as yet unresolved concerns about the future long term propriety of the arrangements made within GTECH and between GTECH and Camelot to ensure that the National Lottery regulator's fit and proper person jurisdiction in the context of licence revocation is not invoked again. These concerns have led it to conclude that it cannot presently be certain that the outstanding measures offered will be implemented in full and will have the necessary impact on GTECH's culture and conduct so as to ensure propriety over the life of seven year licence. It will not be in a position to judge further within what timescale propriety can be demonstrated in respect of the previous licence until, at the earliest, the conclusion of its November review. The Commission has therefore concluded that it cannot, at this stage, be satisfied that a grant of a seven year section 5 licence to Camelot would be consistent with the discharge of its overriding duty under section 4(1)(a) of the 1993 Act".
In a later passage it was stated that until the Commission could be satisfied that the propriety measures had been implemented and were effective, it could not be satisfied that the protection of the interests of every participant in the National Lottery was most likely to be secured by the grant of a seven year licence to Camelot. The bid therefore also failed under section 4(1)(b)of the Act.
24. In the case of TPL there were two issues which rendered the application incapable of acceptance: prize fund security arrangements and additional financial underpinning. The former meant that the Commission was not satisfied in accordance with section 4(1)(b) that adequate arrangements had been made for the protection of the interests of every participant in the National Lottery. In relation to the latter, the Commission had significant concerns about the financial viability of TPL in lower revenue scenarios, as a result of which it was not satisfied that its duties under section 4(1)(a) or (b) would be adequately discharged by letting the licence to TPL. Improvements had been offered in respect of both matters, but were not sufficiently clear and unconditional to satisfy the Commission.
25. The statement of reasons concluded:
"40. The Commission has been faced with a very difficult decision and has had to decide, with considerable reluctance, that:
* neither of the applications it had received enabled it to conclude that it would, in accepting the application, be complying with its overriding statutory duties; and
* it was unable to deal further in this process with either of the applicants without taking steps that would treat one or the other of them unfairly.
41. The Commission therefore concluded that the only option available to it was to decide not to grant a section 5 licence to either of the applicants as a result of this process. The process laid down within the Invitation to Apply issued in November 1999 is therefore at an end and the Commission is considering, as a matter of urgency, how best it can meet its statutory responsibilities and grant a licence to operate the National Lottery with effect from 1 October 2001."
26. In a press release issued on the same day, 23 August, Dame Helena was quoted as saying:
"Both bids had many merits. We met the bidders and gave them every chance to make improvements to their applications. But they also had important failings. We are disappointed about that, but we would fail in our statutory duty if we granted a seven-year licence based on either bid in its present form. This decision is made to protect the National Lottery and its players in the way Parliament intended when it created the National Lottery.
Our statutory duties are both clear and overriding. The Commissioners had no alternative other than to reach this conclusion. This competition for the next licence is now at an end.
The National Lottery, however, goes on. The existing licence lasts until October 2001.
The question now, of course, is what happens in the light of this decision. The Commission has been advised that it can proceed on the basis of a new process. This would be with one bidder only and would take place over a short period. This we propose to do as quickly as possible. We propose to negotiate with The People's Lottery and hope that we can reach a satisfactory solution within the deadline we have set of one month from today. In the event that this negotiation fails to reach our required threshold, based on our legislative responsibility, we intend to ask the Government to take such steps that will keep the lottery running."
27. It was by means of the last paragraph of that press release that the Commission announced the decision to adopt the new procedure, the matter left open in the last paragraph of the statement of reasons for the decision not to accept either application under the ITA procedure. No reasons were given at the time for the decision to adopt the new procedure. None have since been published. Reasons are, however, given in the witness statements of Dame Helena in the present proceedings (though the issues raised in argument extend to whether the court is entitled to take them into account, and what weight it should give them).
28. In her witness statements Dame Helena explains what lay behind the decision. She says that there appeared to be three options: to have another competition, to explore other provider possibilities (in particular, the possibility of a State controlled corporate body being established to take over the running of the National Lottery), or to negotiate individually with TPL. The decision was taken against the background that if there was to be a new licence there would have to be a lead-in period of at least twelve months. A new competition could not be completed within the time available and would therefore require the grant of a short interim licence to Camelot to cover the period before a long-term new licence could be put in place. For that and related reasons the Commission decided that the first option was unacceptable. The second, i.e. to explore other provider possibilities, was considered to be an option of last resort. The Commission favoured the third option, i.e. individual negotiation with TPL.
29. Before reaching its decision to pursue the third option, the Commission considered a number of matters:
(a) It satisfied itself that it had legal capacity to proceed otherwise than by open competition.
(b) It took the view that it would be a reasonable exercise of discretion to proceed in that way. Dama Helena says in her first witness statement:
"Within this we had to consider whether we felt that negotiation with TPL offered a better solution for the running of the National Lottery in accordance with the requirements of the Act from 1/10/2001 than the organising of a further competition. On this aspect we had regard to the fact, stated in our Statement of Reasons for refusing both bids ..., that the TPL application was more generous i.e. made a higher contribution to the NDLF for each £1 of sales at equivalent sales levels than the bid submitted by [Camelot]. This had led us to conclude that the TPL application under the ITA procedure might well have generated a better return for good causes had we been able to accept it. We therefore had regard to the fact that the earlier competition produced only two bids and the one on which we would be negotiating was the one which had won the competition on this limited, but nonetheless potentially decisive (given the terms of Section 4(2) of the Act) issue."
(c) The Commission also considered the prospect of negotiation with TPL producing a satisfactory outcome. On both points which had caused TPL's bid to fail, the Commission was confident that in an unfettered negotiation TPL's commitments would be finalised in a manner satisfactory to the Commission. On balance it concluded that the negotiation, if successful, was preferable to the uncertainties implicit in organising a new competition.
(d) The Commission also considered whether, in choosing to negotiate with TPL, it might be ignoring another party who could offer a more beneficial licence arrangement. It was not thought that any alternative bidder was likely to be forthcoming within the required time-scale. As to Camelot:
"We had already ruled out [Camelot] as a candidate for a 7-year licence in the short to medium term because of our as yet unresolved concerns about 'all due propriety' and we still had outstanding the question of resolving what financial penalties to impose on [Camelot] in respect of apparent breaches of the current licence arising from the handling of the software incident by G.Tech. Furthermore we recognised that even if [Camelot] did satisfy us on propriety it was still the less generous at equivalent sales levels on the issue of returns to the NDLF, so that a concluded negotiation with TPL was to be preferred having regard to our duty under section 4(2) of the Act."
(e) Finally the Commission satisfied itself that it would be possible procedurally for the application by TPL under the ITA procedure to be transmuted into one which satisfied the requirements of section 5(3) of the Act.
30. Pursuant to the decision to adopt the new procedure, the Commission commenced exclusive negotiations with TPL.
31. With great promptness Camelot brought the present proceedings for judicial review. One of the issues that has been raised in the proceedings is Camelot's belief that were it to be given the opportunity acceded to TPL of having one month to allay the Commission's concerns, it could do so. This is because Camelot has reached an agreement in principle with GTECH that, from the start of the new licence period, Camelot would operate the National Lottery independent of GTECH, in that Camelot would purchase all the relevant terminals and software from GTECH and would take over the employment of all relevant UK-based GTECH staff (software engineers, servicing engineers, etc.). These matters are covered in detail in the evidence filed by Camelot and GTECH.
32. For the Commission, Dame Helena describes the proposed arrangements as "completely new" and "radically different from the software commitments put forward on [Camelot's] behalf in the ITA Procedure bid", though Camelot and GTECH say that they are neither radical nor even particularly unusual. The Commission, on a without prejudice basis, has requested its retained IT consultants, HEDRA Limited, to perform an initial assessment of the proposed arrangements. The consultants' report estimates that it would take a total of 11 weeks to reach a decision on the proposals (1 week to prepare an invitation to submit improved proposals, 4 weeks for Camelot's preparation of improved proposals, 5 weeks for the Commission's evaluation of them and 1 week for the Commission's decision). The Commission regards the timing of the grant of the new licence as critical and this is one of the constraints within which it is working. It has therefore made clear that it will not be considering the new proposals further at this stage.
33. Whether Camelot is to get the chance to have its proposals considered is therefore dependent on the outcome of these proceedings.
Camelot's submissions
34. Mr Pannick accepts that the Commission was entitled to decide not to accept either application under the ITA procedure. Camelot's complaint is about what the Commission decided to do next, i.e. to negotiate exclusively with TPL. Mr Pannick submits that it was grossly unfair to abandon the ITA procedure and then to give only one of the bidders an opportunity to allay the Commission's concerns even though the Commission had decided that each bid had many merits as well as important failings. To be prepared to listen to one bidder but not the other is unprecedented. There are a number of strands to the case: procedural unfairness, abuse of power by acting with conspicuous unfairness (whether procedural or substantive), breach of a statutory duty to give reasons, and irrationality. I think it more convenient to examine the relevant authorities separately.
35. Although there is no challenge to the outcome of the ITA procedure, reliance is placed on the history of that procedure as being relevant to the fairness of what happened afterwards. Thus, in support of the case on unfairness, Mr Pannick points to the following matters: (1) both Camelot and TPL had been involved in an extensive open competition under the ITA procedure; (2) that procedure was adopted and followed by the Commission for the purpose of ensuring fairness to the bidders and ensuring the public interest by selecting the bid which best advances the public interest under the 1993 Act; (3) both bids were rejected as failing to satisfy both section 4(1)(a) and (b) of the 1993 Act; (4) both bidders believe that they can meet the Commission's concerns; (5) the Commission itself recognised that it could not deal further with either of the applicants under the ITA procedure without taking steps that would treat one or the other of them unfairly; and, it is submitted, if it would not have been fair to continue the ITA procedure, it must equally be unfair to depart from that procedure by taking steps to allow TPL, but not Camelot, the opportunity to meet the Commission's concerns within a month.
36. The Commission's evidence, it is said, shows that two matters are relied on as justifying the decision to adopt the new process: first, the Commission's belief that the deficiencies in TPL's bid, but not those in Camelot's bid, were probably capable of being addressed within a month; and secondly, the Commission's view that TPL's bid was preferable in terms of returns to the NLDF. Neither provides a proper justification for the decision.
37. In so far as the Commission proceeded in this way in the belief that the deficiencies in TPL's bid, but not those in Camelot's bid, were probably capable of being addressed within a month, Mr Pannick submits that (1) fairness requires that each of the bidders be given the same opportunity to allay the Commission's concerns, and procedural fairness should not be denied on the basis of a prediction as to whether the bidders may be able to satisfy the Commission within a stated period; (2) the Commission committed itself to this position without giving Camelot an opportunity to comment on the point, though Camelot had a legitimate expectation that it would be consulted (by reason of the history of consultation at every stage of the ITA procedure and the importance of the decision); and the court should be especially slow to rule that consultation would have made no difference; (3) if the deficiencies in Camelot's bid are not capable of being addressed within the timetable, the Commission is obliged to extend the timetable to give Camelot a fair opportunity to allay the Commission's concerns, if necessary by extending the bidding process to October and November and granting a short extension to Camelot's existing licence. In relation to (3), reliance is placed on the contacts between the Commission and TPL after the deadline of 17 July under the TPA procedure: it is said that fairness required that Camelot should have been given similar assistance and should have been told what it was that the Commission wanted; and that because Camelot was not given such assistance then, fairness requires that it should now be given additional time to allay the Commission's concerns. In any event the possibility that more time might be required could not justify the refusal to accord Camelot the same month as TPL in the first place. The unfairness is said to be compounded by the fact that, far from Camelot being told by the Commission what it needed to do for its bid to pass the threshold test, it was misled by the Commission's letter of 28 July into believing that concerns about the fitness and propriety of GTECH were not going to be a bar to its winning a new licence.
38. In so far as the Commission relies on TPL's bid being preferable in terms of returns to the NLDF, Mr Pannick's submissions may be summarised as follows: (1) this cannot sustain the decision if the first reason was bad, since the court cannot be confident that the Commission would have reached the same decision in the absence of the first reason; (2) this was not a reason given at the time; (3) the Commission's evidence in respect of it has shifted over time: the statement of reasons for the decision on the ITA procedure says only that TPL was more generous at equivalent sales level and this led the Commission to conclude that its application "might well" have generated a better return for good causes; Dame Helena's first witness statement uses the same language but adds the gloss that TPL "had won the competition on this limited, but nonetheless potentially decisive ... issue"; whilst her second witness statement states that "our view of the level of sales which was likely to be achieved by each bidder was that TPL's level would be likely at least to equal or to exceed that of [Camelot]"; (4) to refer only to the return at equivalent sales levels is manifestly wrong, since it is necessary to engage in a process of evaluation of a wide range of factors relevant to the efficiency, stability and skill of the operation in order to determine whether sales levels will be equivalent and how the section 4(2) objective of maximising returns to the NLDF is most likely to be secured; (5) the Commission has reached no conclusion that TPL's bid would offer higher returns; nor could it reach such a conclusion without a detailed assessment of the rival bids, which it has not carried out; (6) but even if the Commission has reached such a conclusion, it does not justify excluding Camelot from the further negotiation: it is possible that TPL may not allay the Commission's concerns, and it is obviously fair and sensible to give Camelot a chance to do so; (7) any revisions made to TPL's bid as a result of the negotiations may have an adverse effect on the evaluation of returns to the NLDF (e.g. TPL has to find another £50 million of funding, the cost of which will affect the figures). Indeed, by the new procedure the Commission has unfairly abdicated its function of determining which would be the better bid. In connection with this issue Mr Pannick reminds the court that, unlike TPL which is making untested promises, Camelot is tried and tested: it has operated a very successful National Lottery, raising over £8.8 billion for good causes to date.
39. Thus it is submitted that the Commission has adopted an unfair procedure which will unlawfully frustrate its duty to select the bid which will best advance the objects identified in section 4. Having received two bids, each of which has defects, the Commission has unfairly decided to give one bidder the opportunity to improve its bid, while denying the opportunity to Camelot, even though, if each were given the same opportunity, Camelot's improved bid might be found by the Commission to be the better bid under the section 4 criteria.
40. The matters summarised above cover most of the strands to Camelot's case. I should, however, make brief additional reference to the submissions with regard to reasons. What is said is that the decision to adopt the new procedure falls within paragraph 9(1) of schedule 2A to the 1993 Act and that the Commission was under a duty to give Camelot, as a "person affected", a written statement of its reasons for the decision. The absence of any such statement vitiates the decision and in any event is relevant to whether in the round there has been conspicuous unfairness. Further, the court should not rely on, or should treat with great caution, the reasons subsequently given in the Commission's witness statements, all the more so since the Commission has declined to provide copies of the contemporaneous minutes.
GTECH's submissions
41. For GTECH, Mr Pleming supports Camelot's case and adopts Mr Pannick's submissions. In his skeleton argument he draws attention to a number of matters as contributing to the unfairness of the decision, and he submits that however the challenge is articulated - whether as the absence of proper consultation, inadequacy of reasons, a lack of transparency, or unfairness - the Commission's decision to exclude Camelot but to continue to negotiate with TPL was wrong and should be set aside.
42. In his oral submissions Mr Pleming emphasised a number of matters. First, GTECH's evidence that the Commission's letter of 28 July was understood to mean that the Commission had decided not to proceed with a determination that GTECH was not fit and proper and that, so long as GTECH implemented the measures it had proposed, it would have addressed the substance of the Commission's concerns. There was not a hint that only "just sufficient" had been done to enable the Commission to write the letter (which is how it is put in Dame Helena's witness statement), or that GTECH's involvement in a new licence remained in serious doubt, or that the Commission's monitoring timeframe had the hidden effect of contributing towards Camelot's disqualification from the new licence. If GTECH had been told that the Commission still had doubts that the agreed remedial measures would be implemented in full, GTECH could and would have taken all possible steps to satisfy the Commission within a much tighter timeframe than that of November 2000 proposed by the Commission. The steps taken could also have included technology and personnel transfers as now proposed. As it was, there was no reason at that time to think that such transfers would be required.
43. Mr Pleming voiced GTECH's suspicion, by reference to the evidence now available, that the Commission had in fact taken a decision against Camelot on 25 July but failed to inform Camelot or GTECH of its continuing concerns until 23 August. It smacked of unfairness for the Commission then to say on 23 August that there would not be enough time for Camelot to address those concerns. The Commission's mind-set was that it was difficult to see how Camelot's bid could be any different in a month's time. But if the Commission had asked, it would have realised that there were alternative ways of dealing with the matter.
The Commission's submissions
44. At the outset Mr Crow emphasises that the central issue is extremely narrow: whether, having lawfully rejected both applications under the ITA, the Commission also acted lawfully in deciding how to take forward its decision-making process under section 5. He submits that the decision about how to take the matter forward was inextricably linked with the Commission's substantive evaluation of the bids themselves and its assessment of the time constraints for a decision on the new licence. The Commission's view as to the appropriate procedure was reasonably open to it. The decision was not unfair, let alone so unfair as to render it an abuse of power or irrational, which is the only way in which arguments of unfairness can properly be raised against it.
45. By reference to the evidence, Mr Crow submits that the Commission was deeply concerned about the revelation concerning the GTECH software incident, which appeared to disclose a highly unsatisfactory corporate culture within GTECH and also a serious lack of control on the part of Camelot over its own software supplier. Camelot was then told the areas in which the Commission was seeking improvements. It was made clear that the GTECH issue should be dealt with by the deadline of 17 July. Camelot had the opportunity to put forward whatever improvements it wished. The truth is, submits Mr Crow, that Camelot, having failed to put forward sufficient improvements to satisfy the Commission, is now kicking itself for not coming up before with the proposal to acquire GTECH's relevant business and is seeking a second bite at the cherry, putting forward what amounts to a different bid. Fairness does not require that it should have the opportunity to pursue that course.
46. The Commission's letter of 28 July did not involve any positive finding that GTECH is a fit and proper person. The decision was to wait and see. Any finding that GTECH was fit and proper would be dependent on the satisfactory discharge of the undertakings, which would be the subject of further monitoring and a progress report in three months' time. Camelot cannot have been misled by the letter into thinking that no further improvements were necessary for the purposes of the new licence. The letter spelled out that only by a process of monitoring could the position be assessed. The deadline for the submission of improvements had already expired by the date of the letter, and Camelot cannot sensibly complain that it has been deprived of an opportunity to improve its bid after that date: it would have been wholly unfair to TPL and inconsistent with the ITA procedure for the Commission to go back after 17 July and invite Camelot to submit further improvements.
47. Mr Crow submits, on the basis of Dame Helena's witness statement, that no improvements were sought or received from TPL after 17 July. He also submits that the issue is irrelevant, given that the decision to reject both bids under the ITA is not being challenged and the only decision under challenge relates to the adoption of the new procedure as from 23 August.
48. As to the decision to adopt the new procedure, Mr Crow submits that it was open to the Commission to form a judgment about how to proceed without consulting the bidders. There was no right to consultation and no clear and unambiguous representation that Camelot would be consulted; there was no substantial purpose in consulting, and no unfairness in not consulting, because Camelot could not be disadvantaged by the negotiations with TPL; there was no realistic prospect of reassessing Camelot's propriety before the November review at the earliest; the Commission was faced with limited options; the very limited time in which a decision had to be taken meant that consultation would have provided little tangible benefit; and the question whether there was any urgency in taking a decision in relation to TPL was one on which Camelot would not have been able to provide any useful contribution in any event.
49. Mr Crow stresses that the two bidders were in a very different position at the end of the ITA procedure. This is a theme to which he reverted repeatedly in the course of his submissions.
50. One major difference was the Commission's assessment that its concerns in relation to TPL's bid could probably be resolved within one month, whereas its concerns in relation to Camelot's bid could not. It is said that the Commission's assessment in respect of Camelot was not only justified on the material before it, but has been vindicated by subsequent events. Camelot's new proposals would require an extensive process of re-evaluation, by reference to various criteria adopted for the evaluation under the ITA procedure (financial soundness, robustness of business plans under various scenarios, overall ability of management, organisational capacity and attention to handling of risk, etc.). The Commission's IT consultants have taken the view that the new proposals cannot be evaluated within one month, and Camelot has not gone as far as to assert that they can be. Even now, not far short of a month after the decision, Camelot has produced no more than the heads of agreement in respect of its proposed arrangements with GTECH.
51. In so far as Camelot contends that the period should in that case have been extended beyond a month, fairness cannot possibly so require - especially since that would force the Commission into granting Camelot an interim licence in order to cover the period before TPL, if successful, could get its lottery up and running.
52. Given the substantial difference between the issues to be addressed in the two bids, it would have been extremely difficult for the Commission to be seen to treat the parties fairly if each had been given one month to satisfy the Commission's outstanding concerns. Any extension of that month in order to accommodate Camelot would be particularly unfair to TPL, since it would risk shutting out TPL altogether (given the required start-up time).
53. In any event it is submitted that the difference between the two bidders as regards returns to the NLDF provides a complete answer to Camelot's case. The court has no basis for rejecting Dame Helena's evidence, in her second witness statement, that the Commission concluded that the level of sales achieved by TPL would be likely at least to equal or to exceed that of Camelot; which, coupled with TPL's higher return at equivalent sales levels, meant that TPL's bid was the more generous overall. The issue of relative returns was mentioned only briefly in the statement of reasons of 23 August because the issue was not central to the decision to reject both bids under the ITA procedure. In that context it was an incidental point, touched upon only lightly. But it was an important issue for the decision to negotiate exclusively with TPL, and it was one on which the Commission had reached an important conclusion. This means that even if Camelot had been able to satisfy the Commission in relation to fitness and propriety, its bid would still have been less attractive to the Commission. That assumes, of course, that during the month of exclusive negotiations TPL satisfies the Commission's concerns on the points outstanding in relation to its bid. But if it does not, then Camelot can come back into the picture; so it will be no worse off as a result of being excluded from the negotiations during that month.
54. As regards reasons, Mr Crow submits that neither paragraph 9(1) nor paragraph 9(2)(c) of schedule 2A applies to a procedural decision of the kind in issue here: this was not a decision taken in the exercise of functions under sections 5-10 of the Act. Nor does paragraph 9 lay down a time for the giving of reasons. Further, reasons have been given in the Commission's evidence, and the court should proceed on the basis of those reasons.
55. Finally, Mr Crow submits that there are no grounds on which a case of irrationality can be advanced. The relevant material was before the Commission and there was a reasoned exercise of discretion. It would have been unfair to TPL to allow Camelot to advance at this stage a substantially different bid.
Relevant authorities
56. There is no real dispute about the applicable legal principles.
57. It is well established that the exercise of statutory powers is subject to a requirement of procedural fairness. As Lord Bridge expressed it in Lloyd v. McMahon [1987] AC 625, 703A-B:
"... when a statute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness."
58. What precisely is required depends upon the context. In a frequently cited passage in his speech in R v. Home Secretary, ex p. Doody [1994] 1 AC 531, 560E-561A, Lord Mustill sets out a number of propositions which include:
"(3) The principles of fairness are not to be applied by rote identically in every situation. What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. (4) An essential feature of the context is the statute which creates the discretion, as regards both its language and the shape of the legal and administrative system within which the decision is taken. (5) Fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result; or after it is taken, with a view to procuring its modification.
... [T]he respondents acknowledge that it is not enough for them to persuade the court that some procedure other than the one adopted by the decision-maker would be better or more fair. Rather, they must show that the procedure is actually unfair. The court must constantly bear in mind that it is to the decision-maker, not the court, that Parliament has entrusted not only the making of the decision but also the choice as how the decision is made."
59. In relation to the last part of that quotation, it is common ground that it is for the court to decide whether the procedure in this case was unfair, but that in reaching that decision the court should take into account the views of the Commission as to the appropriateness of the procedure.
60. It is also common ground that, at the very least, considerable caution is required before the court concludes that a breach of procedural fairness has not affected the substantive result.
61. In relation to legitimate expectation, Mr Crow points to the line of authority to the effect that it must be founded on a clear and unambiguous representation: see e.g. R v. Jockey Club, ex p. RAM Racecourses [1993] 2 All ER 225, which is based in turn on R v. IRC, ex p. MFK Underwriting Agencies Ltd [1990] 1 WLR 1545. Mr Pannick, however, points to the wider principle, which is not in dispute, that even if the normal requirements for breach of legitimate expectation are not met, a decision may nonetheless be so unfair as to be an abuse of power and unlawful. In R v. IRC, ex p. Unilever plc [1996] STC 681 the Revenue had relied on a statutory time-limit as defeating claims for loss relief, in circumstances which were held to be very unfair. Sir Thomas Bingham MR accepted in general terms a number of points advanced on behalf of the Revenue, including that there was no clear, unambiguous and unqualified representation by the Revenue such as was found necessary in MFK. He went on, however, to say that the courts had not previously had occasion to consider facts analogous to those in the case before it. The categories of unfairness were not closed, and precedent should act as a guide not a cage. Having considered the points in favour of Unilever, he concluded, at 691g-h and 692d-f:
"These points cumulatively persuade me that on the unique facts of this case the Revenue's argument should be rejected. On the history here, I consider that to reject Unilever's claims in reliance on the time-limit, without clear and general advance notice, is so unfair as to amount to an abuse of power ....
The threshold of public law irrationality is notoriously high. It is to be remembered that what may seem fair treatment of one taxpayer may be unfair if other taxpayers similarly placed have been treated differently. And in all save exceptional circumstances the Revenue are the best judge of what is fair. It has not been suggested, however, that the detailed history described above has any parallel. The circumstances are, literally, exceptional. I cannot conceive that any decision-maker fully and fairly applying his mind to this history ... could have concluded that the legitimate interests of the public were advanced, or that the Revenue's duty to act fairly and in accordance with the highest public standards was vindicated, by a refusal to exercise discretion in favour of Unilever. I share the judge's conclusion that this refusal, if fully informed, was so unreasonable as to be, in public law terms, irrational."
It is to be noted that the finding of abuse through unfairness was not dependent upon the finding of irrationality.
62. In an equally interesting passage, at 694h-695b, Simon Brown LJ said this in reaching the same broad conclusion:
"... Of course legal certainty is a highly desirable objective in public administration as elsewhere. But to confine all fairness challenges rigidly within the MFK formulation - requiring in every case an unambiguous and unqualified representation as a starting point - would to my mind impose an unwarranted fetter upon the broader principle operating in this field: the central Wednesbury principle ....
'Unfairness amounting to an abuse of power' as envisaged in Preston and the other Revenue cases is unlawful not because it involves conduct such as would offend some equivalent private law principle, not principally indeed because it breaches a legitimate expectation that some different substantive decision will be taken, but rather because either it is illogical or immoral or both for a public authority to act with conspicuous unfairness and in that sense abuse its power ....
In short, I regard the MFK category of legitimate expectation as essentially but a head of Wednesbury unreasonableness, not necessarily exhaustive of the grounds upon which a successful substantive unfairness challenge may be based."
63. Although it was upon those passages in Unilever that Mr Pannick put particular weight, he also referred in his skeleton argument to the decision of the Court of Appeal in R v. North and East Devon Health Authority, ex p. Coughlan [2000] 2 WLR 622, which provides an up-to-date and very detailed judicial analysis of the whole topic of unfairness, substantive as well as procedural. In that case the court, whilst referring to Simon Brown LJ's judgment in Unilever as a valuable reconciliation of the existing strands of law, did not think it necessary to explain the modern doctrine of legitimate expectation in Wednesbury terms (see 654, para 81). The thrust of the judgment is to treat abuse of power as an underlying and unifying principle. Thus the various Wednesbury categories are to be regarded as the major instances, but not necessarily the sole ones, of how public power may be misused (para 81). So too a decision may be so unfair as to amount to an abuse of power and be contrary to law (see e.g. 653 para 78, referring to Unilever).
64. In the light of such developments Mr Pannick submits that the court should not limit itself to an unduly narrow analysis in terms of established categories but should look at the matter in the round when assessing whether there has been an abuse of power. He drew my attention to a passage in the judgment of Lord Donaldson MR in R v. Takeover Panel, ex p. Guinness Plc [1990] 1 QB 146, 160A-C, which foreshadows the direction in which the law has since developed. Having referred to Lord Diplock's classic categorisation of the principles of public law in CCSU v. Minister for the Civil Service [1985] AC 374, Lord Donaldson went on:
"But [Lord Diplock] added ... that further development on a case by case basis might add further grounds. In the context of the present appeal he might have considered an innominate ground formed of an amalgam of his own grounds with perhaps added elements, reflecting the unique nature of the panel, its powers and duties and the environment in which it operates, for he would surely have joined in deploring any use of his own categorisation as a fetter on the continuous development of the new 'public law court'. In relation to such an innominate ground the ultimate question would, as always, be whether something had gone wrong of a nature and degree which required the intervention of the court and, if so, what form that intervention should take."
65. On the separate issue of the duty to give reasons, Mr Pannick relies on R v. Westminster City Council, ex p. Ermakov [1996] 2 All ER 302, in which the Court of Appeal held that in the context of a duty under the Housing Act 1985 to give reasons at the same time as notifying the decision, a failure to give reasons prima facie entitled an applicant to have the decision quashed. The central passage is in the judgment of Hutchison LJ at 315h-316d:
"(2) The court can and, in appropriate cases, should admit evidence to elucidate or, exceptionally, correct or add to the reasons; but should ... be very cautious about doing so .... Certainly there seems to me no warrant for receiving and relying on as validating the decision evidence - as in this case - which indicates that the real reasons were wholly different from the stated reasons. It is not in my view permissible to say, merely because the applicant does not feel able to challenge the bona fides of the decision-maker's explanation as to the real reasons, that the applicant is therefore not prejudiced and the evidence as to the real reasons can be relied on. This is because, first, I do not accept that it is necessarily the case that in that situation he is not prejudiced; and, secondly, because, in this class of case, I do not consider that it is necessary for the applicant to show prejudice before he can obtain relief. Section 64 requires a decision and at the same time reasons; and if no reasons (which is the reality of a case such as the present) or wholly deficient reasons are given, he is prima facie entitled to have the decision quashed as unlawful.
(3) There are, I consider, good policy reasons why this should be so. The cases emphasise that the purpose of reasons is to inform the parties why they have won or lost and enable them to assess whether they have any ground for challenging an adverse decision. To permit wholesale amendment or reversal of the stated reasons is inimical to this purpose. Moreover, not only does it encourage a sloppy approach by the decision-maker, but it gives rise to potential practical difficulties. In the present case it was not, but in many cases it might be, suggested that the alleged true reasons were in fact second thoughts designed to remedy an otherwise fatal error exposed by the judicial review proceedings. That would lead to applications to cross-examine and possibly for further discovery, both of which are, while permissible in judicial review proceedings, generally regarded as inappropriate. Hearings would be made longer and more expensive."
66. To what extent the conclusion and reasoning in Ermakov can be transposed to the circumstances of the present case are matters best considered as part of my conclusions.
Conclusions
67. As Mr Crow submits, the issue for the court is a narrow one. It is common ground that the Commission acted lawfully in declining to accept either bid under the competitive procedure established by the ITA and in bringing that procedure to an end. The Commission had made clear provision for that possibility in the ITA itself. The court is concerned only with the lawfulness of the Commission's further decision as to the procedure to be followed once the ITA procedure was at an end. The 1993 Act does not lay down the procedure to be followed for the grant of a licence under section 5. It does not require an open competition. The Commission is left with a wide discretion. The question is whether the Commission has exercised that discretion in a way that offends the general principles of public law.
68. In answering that question, it is necessary to examine the individual legal strands identified by Mr Pannick. But I agree with his submission that in this case the strands merge one with the other. At bottom the case is about fairness: whether, in the circumstances existing on the termination of ITA procedure, the decision to carry on an exclusive negotiation with TPL for one month, thereby giving TPL an opportunity to allay the Commission's concerns but denying a similar opportunity to Camelot, was so unfair as to amount to an unlawful exercise of discretion. The various strands all have a bearing on that issue.
69. I have no doubt that the Commission was trying to be fair. In establishing the original ITA procedure it had shown a clear understanding of the importance of fair treatment of bidders, both as an end in itself and as a means of promoting the fulfilment of its duties under section 4 of the 1993 Act. It kept the principle of fairness carefully in mind throughout the ITA procedure, subject to one possible hiccup to which I shall return. It brought the ITA procedure to an end because neither bid met the statutory criteria and it did not feel able to take the procedure further without unfairness to one or the other bidder. There is every reason to believe that in deciding on how to proceed thereafter the Commission still intended to act with scrupulous fairness. Indeed, in reaching my own conclusion on the issue of fairness I must take into account, and give weight to, the Commission's own view that exclusive negotiation with TPL would be a fair way of taking the matter forward, as well as the way best calculated to lead to the discharge of its statutory duties in relation to the grant of a new licence. In that connection I must also take account of the fact that the Commission's decision on the way forward was clearly linked to its evaluation of the rival bids themselves and to its concerns about the overall time constraints for the grant of a new licence.
70. In the result, however, there is in my judgment no escaping the conclusion that the procedure decided on by the Commission was conspicuously unfair to Camelot.
71. Although the competitive procedure was at an end, what had happened during it was obviously relevant to the decision on how to proceed. It had thrown up only two effective bidders. They were competing for a licence of very considerable commercial value and public importance. They were both serious bidders. The Commission had found that each bid had many merits, though each also had important failings: albeit for very different reasons, each had failed under both section 4(1)(a) and section 4(1)(b). The outcome of the ITA procedure was not presented by the Commission in terms of TPL being the clear winner, subject only to a few outstanding points of concern. Camelot was not and could not be described as an also-ran which had simply dropped out of the picture. TPL and Camelot remained very real rivals.
72. I find it remarkable that in those circumstances the Commission chose to allow TPL the opportunity to allay its concerns but to deny a similar opportunity to Camelot. Such a marked lack of even-handedness between the rival bidders calls for the most compelling justification, which I cannot find in the reasons advanced by the Commission in support of its decision.
73. I think that Mr Pannick is correct in his identification of two principal reasons in the Commission's evidence. One is the Commission's view that its concerns in relation to TPL's bid were probably capable of being addressed within a month whereas its concerns in relation to Camelot's bid were not. In my judgment it was wrong in principle for the Commission to proceed on that basis. Fairness required that each bidder should have the opportunity to allay the Commission's concerns, and the requirement of fairness could not be displaced by the Commission's view that Camelot would not come up with anything useful. The events that have occurred, far from vindicating the Commission's view (as submitted by Mr Crow), serve to underline the error in the Commission's approach. It seems tolerably clear that the Commission was thinking only in terms of the improvements that had been offered in the course of the ITA procedure. The Commission did not have in mind the possibility of the proposals now put forward by Camelot for acquiring the relevant part of GTECH's business. The fact that the Commission proceeded on the basis of a mistaken preconception of what Camelot could offer illustrates the vice of denying Camelot the opportunity to try to allay the Commission's concerns.
74. It is no answer to say that Camelot's new proposals will take longer than one month to evaluate. Whether that is so must depend not on the estimate given in the consultants' report, but on what actually happens in the course of negotiations conducted in good faith between the Commission and Camelot. Camelot believes that it can satisfy the Commission on the point. It is entitled to a fair opportunity to do so. In any event the point goes, as it seems to me, only to the court's discretion to withhold relief on the ground that an error in the decision has not affected the outcome. I would not be not prepared to withhold relief on that ground. I cannot predict with sufficient confidence either the speed or the result of the Commission's evaluation of the new proposals.
75. I am not impressed by Mr Crow's attempt to distinguish Camelot's situation from that of TPL by labelling Camelot's new proposals as a new bid or by suggesting that Camelot would be getting a second and unfair bite of the cherry if the Commission were required to consider its proposals. To allay the Commission's concerns, both Camelot and TPL will have to revise their respective applications as they stood at the end of the ITA procedure. It may be that Camelot's revisions will have to be more substantial than TPL's. But the difference between them is at most one of degree rather than one of principle. Camelot would be getting no more of a second bite of the cherry than TPL. There would be no unfairness to TPL in giving Camelot the same opportunity as has been given to TPL to allay the Commission's concerns within a month.
76. There is a further reason why I cannot accept that the Commission's view that Camelot would not be able to allay its concerns within a month was a valid reason for denying Camelot that opportunity. The effect of the evidence before the court is that on receipt of the Commission's letters of 28 July, Camelot and GTECH understood that fitness and propriety would not be a problem in relation to the application for a new licence. There was a sound basis for that understanding. In its letters the Commission accepted that if the undertakings given were discharged, the substance of its concerns would be met. There was no hint that the Commission's timeframe for monitoring discharge would be an insuperable obstacle to the grant of a new licence. If the true position had been revealed - and the evidence pointed to by Mr Pleming suggests that the Commission's position may well have crystallised on 25 July, before the date of this letter - there can be no doubt that Camelot and GTECH would have taken all possible steps to accelerate that timeframe or to put forward alternative proposals. Of course, no further improvements could have been entertained within the framework of the existing ITA procedure. But they could have been communicated to the Commission for consideration by the Commission in the context of any decision on the amendment of the ITA procedure or the establishment of a replacement procedure. The fact that the Commission had been completely silent about its continuing concern contributes to the unfairness of counting Camelot out on 23 August on the ground that it could not meet that concern within a month.
77. In that respect there is an apparent contrast, though its full weight and significance cannot be assessed, between the Commission's treatment of Camelot and its treatment of TPL. Dame Helena's evidence is that no improvements were sought or received from TPL after the 17 July deadline and that the Commission went no further than to seek permissible clarification of both bids. I must accept that that is how the matter was viewed by the Commission. But the transcript of Dame Helena's meeting with TPL on 23 August does tend to suggest a greater degree of active encouragement of TPL to remedy the deficiencies in its bid than was the case in the Commission's dealings with Camelot. In the circumstances this cannot make a substantial contribution to the overall picture of unfairness, but equally it is not a point that can be dismissed altogether.
78. The second principal reason advanced by the Commission in support of its decision to negotiate exclusively with TPL is that TPL's bid was preferable in terms of returns to the NLDF. Although the evidence is far from satisfactory, I am prepared to accept that the Commission concluded not only that TPL's bid was more generous at equivalent sales levels but also that the level of sales achieved by TPL was likely to be equal to or greater than Camelot's. But I do not regard this as a knock-out point for the Commission. I am far from satisfied that the Commission would have decided to negotiate exclusively with TPL on this ground alone, i.e. if it had not also relied (erroneously, as I have held) on the view that Camelot would be unable to allay its concerns within the month. Further, there is some force in Mr Pannick's submission that any revisions made to TPL's bid in order to meet the Commission's concerns may have an adverse effect on the Commission's evaluation of returns to the NLDF, so that any superiority of TPL's bid in terms of returns to the NLDF must be treated with caution. In any event I do not consider that this factor is a sufficient justification for the unfairness involved in cutting Camelot out altogether and giving TPL the exclusive opportunity to allay the concerns remaining at the end of the competitive ITA procedure.
79. One of the individual strands to Camelot's case is that it had a legitimate expectation of consultation before the Commission reached its decision on the way forward following the termination of the ITA procedure. In my view the conditions for a legitimate expectation of the kind referred to in the MFK decision were not made out. Although there had been consultation at every stage of the ITA procedure, there was no clear and unambiguous representation that there would be consultation in the different circumstances that prevailed at the end of that procedure. Consultation would certainly have been the prudent course and could perhaps be considered a necessary course in order that the Commission could take a properly informed decision. Had there been consultation, it is difficult to believe that the Commission would have adopted the procedure it did; but that does not of itself make the absence of consultation unlawful. On the other hand, the MFK category of legitimate expectation is not the end of the matter. The absence of consultation is an additional factor to be taken into account in assessing the overall position. Where the actual procedure decided on is very unfair to Camelot, as it is, the fact that it was decided on without giving Camelot any opportunity to make representations about it serves to increase the degree of unfairness overall.
80. I should also deal separately with the issue of reasons. I do not think that the decision in this case was rendered unlawful by a failure to give reasons. On balance I incline to the view that the duty to give reasons under paragraph 9(1) of schedule 2A to the 1993 Act does not apply to procedural decisions of the kind in issue here. True, the language used refers to "any decisions which they make in the exercise of their functions under sections 5 to 10 or schedule 3" and a procedural decision can properly be described as a decision taken in the exercise of such functions. On the other hand, some qualification to the statutory language must be implied, since at the very least Parliament cannot have intended the duty to apply to day to day decisions on procedural matters. Mr Pannick suggests an implied qualification in terms of "significant" or "important" decisions. In my view, however, it is preferable to read the provision as referring not to procedural decisions but to substantive decisions on the matters set out in sections 5 to 10 and schedule 3, e.g. the grant or revocation of licences, or the imposition or variation of conditions. Paragraph 9(2) gives modest support to that view, by referring in sub-paragraph (a) to decisions to grant or not to grant a licence under section 5, and in sub-paragraph (b) to decisions to revoke a licence: the reference to "any other decision" in sub-paragraph (c) can be taken as a reference to any other decision of the same general character as in (a) and (b).
81. Even if paragraph 9(1) did impose a duty to give reasons for the decision under challenge, it laid down no time for the giving of such reasons. I accept that an obligation to provide reasons within a reasonable time is to be implied. The present proceedings were under way before a reasonable time had elapsed. Reasons were then given in the Commission's witness statements in the proceedings. That is not the form of written statement contemplated by the statute, and complaint is made about the piecemeal way they came out in response to Camelot's own evidence. But in the result the deficiencies in the giving of reasons is not so great as to justify the quashing of the decision on that ground. The statutory language and circumstances of the case differ considerably from those which led the court in Ermakov to conclude that failure to give reasons with the decision prima facie entitled the applicant to have the decision quashed. Similarly, I do not think that the observations in Ermakov about the risks associated with the subsequent giving of reasons have the same force in the present case. Accordingly I do not consider that I should decline to have any regard to the reasons given in the witness statements; and although I bear in mind the need for caution and the danger of "ex post" rationalisation, I have placed weight on those reasons.
82. Although I have not accepted some of the individual strands of Camelot's case, I come back to the broader and central issue of fairness. On that issue, for the reasons which I have outlined above and do not repeat, I am persuaded by Mr Pannick's submissions. In my judgment the case is most appropriately dealt with by reference to the Court of Appeal's reasoning in Unilever. The Commission's decision to negotiate exclusively with TPL was, in all the circumstances, so unfair as to amount to an abuse of power. Unilever itself was an exceptional case, but this case, too, can properly be regarded as exceptional.
83. If necessary I would also accept the alternative submission that the decision was Wednesbury unreasonable. One of the problems, as I have indicated, is that the Commission appears to have reached the decision on the basis of a mistaken preconception about what Camelot could offer. It may be that this led the Commission not to consider, or to discount, the option of negotiating both with TPL and with Camelot. Dame Helena's witness statement states that only three options appeared to be available to the Commission. They included exclusive negotiation with TPL, but somewhat surprisingly they did not include the possibility of negotiating with both bidders. However it came to be made, in my judgment the decision to give TPL an opportunity to allay the Commission's concerns but to deny the same opportunity to Camelot fell outside the range of decisions open to a reasonable and properly informed decision-maker.
84. I have taken the view that it is more important to get this judgment out quickly than to refine my reasoning or to cover every point raised in argument. The essence of the judgment is, however, clear. The Commission, while intending to be fair, has decided on a procedure that results in conspicuous unfairness to Camelot - such unfairness as to render the decision unlawful. That broad point is perhaps more important than the precise legal analysis. Lord Donaldson's observation in Guinness, quoted above, is highly pertinent. The ultimate question is whether something has gone wrong of a nature and degree which requires the intervention of the court. In my judgment it has.
Relief
85. Accordingly I hold that the Commission's decision to negotiate exclusively with TPL was unlawful and must be quashed. An order of certiorari will issue for that purpose. Subject to any further submissions counsel may wish to make, I do not think that there is any need for a declaration to the same effect.
86. The effect of the judgment is that the Commission must accord to Camelot the same opportunity to allay its concerns by further negotiation as has been accorded to TPL. That means that Camelot must now be given the month that will have been given to TPL. I reject Mr Crow's submission that some lesser period ought to be allowed to Camelot because it has already made progress in the formulation of new proposals during the course of these proceedings. It is impossible to say what reduction might be made so as to reflect that point; and in any event what Camelot is entitled to is the opportunity to negotiate with the Commission for a month, which is not something that it has been able to do during these proceedings.
87. I am doubtful whether the injunctive relief sought by Camelot is necessary. The Commission, as a responsible public authority, can be relied on to act in accordance with this judgment. I will, however, hear any submissions that counsel may wish to make on the point.
88. I have borne in mind the Commission's legitimate concern about the limited time between now and the beginning of the new licence period in October 2001; the importance of ensuring that, in the event of TPL being awarded the licence, sufficient start-up time is allowed; and the concern about the grant of an interim licence to Camelot if further start-up time is needed. Those matters do not justify the withholding of relief in this case. I should stress, however, that nothing in this judgment is intended to cover the position at the end of a month's negotiation with Camelot. What happens then must be a matter for assessment and decision by the Commission in the light of the circumstances then prevailing.
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POST JUDGMENT DISCUSSION
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Thursday 21st September 2000
MR JUSTICE RICHARDS: I am very sorry that everybody has been kept waiting for so long; the problem lay in producing copies of the approved judgment. First, relevant personnel were delayed by the train chaos and then I understand the equipment broke down. Anyway, I am handing down judgment in the case. Copies are now available, only relatively few, but further copies are being printed off at this moment.
For the reasons that I give in the judgment handed down, I decide the case in favour of Camelot. In essence, what I have decided is that the National Lottery Commission, while intending to be fair, decided in its decision to negotiate exclusively with The People's Lottery, adopted a procedure that resulted in conspicuous unfairness to Camelot, such unfairness as to render the decision unlawful. The decision will therefore be quashed. I will hear from counsel about the question of any other relief.
MR PANNICK: I am very much obliged to your Lordship. As your Lordship has indicated, a quashing order, an order of certiorari, is being made by your Lordship. In the light of that, I am not seeking any other relief because your Lordship has also indicated in paragraph 86 of the judgment that the consequence is that Camelot must now be given the one month negotiations that have been given to The People's Lottery. I understand from Mr Crow, who will confirm in a moment, that the intention is that negotiations with The People's Lottery will cease at the end of their one month period, which is on Saturday. Negotiations with Camelot will commence on Monday next, and the one month period of negotiations exclusively with Camelot will continue for that one month. If I have understood correctly what the Commission intends, then it does seem to me that no further relief is required.
MR JUSTICE RICHARDS: That would certainly give effect to what I have said in my judgment. As I also indicated in my judgment, the Commission as a responsible public body can be expected to comply with the law as laid down and no further order should be needed.

(Comments re: Amending any typographical errors in the handed-down judgment.)

MR JUSTICE RICHARDS: Mr Pannick, is there anything else?
MR PANNICK: Yes, there is an application for costs, but I thought you may prefer to deal with other matters.
MR JUSTICE RICHARDS: Yes, let us deal with consequential relief before costs.
MR CROW: I do not want to take up unnecessary time, but I just wanted to make sure what I think is, in any event, the obvious, which is that by quashing the impugned decision that does not have the consequence that anything done pursuant to that decision has been in any way invalidated. I think I can say that has been accepted by my learned friend on behalf of Camelot, but I just wanted to make sure that that is stated openly.
MR JUSTICE RICHARDS: Yes.
MR CROW: I am grateful.
My Lord, the proposal that the Commission has made in order to give effect to your Lordship's judgment is to do with Camelot what was done with TPL, and that is to write a letter, as we did on 25th August to TPL, to Camelot inviting them to confirm the existing bid, subject to the new proposal that has been made in the heads of agreement that you will have seen exhibited to Mr Osborne's second statement, and to have the month starting from Monday to allay the Commission's concerns under section 4(1) of the 1993 Act. My Lord, it is hoped that that is not going to lead to any further wrangling as to exactly what needs to be done in order to implement your Lordship's judgment. In case there is any further dispute, I do not think it would be appropriate and convenient for the parties to have liberty to apply to your Lordship. If there is any dispute, for instance about the parameters of the letter that the Commission writes -- I am not going to say that there will be but simply in order to ensure we do not have to litigate new proceedings in order to resolve matters.
MR JUSTICE RICHARDS: Yes, I will give that liberty to apply.
MR CROW: I am very grateful for that.
The only other point about the relief is this, my Lord. The skeleton we put forward invited your Lordship to consider asking for an undertaking in relation to the acceptance by Camelot of any necessary interim licence that might be needed. The way it was presented to your Lordship, if I could remind you on page 18 of your Lordship's judgment, paragraph 37, your Lordship identifies in some numbered subparagraphs the way my learned friend Mr Pannick put his case. In the middle of the page, subparagraph 3 says:
"If the deficiencies in Camelot's bid are not capable of being addressed within the timetable the Commission is obliged to extend the timetable to give Camelot a fair opportunity to allay the Commission's concerns. If necessary, by extending the process until October [which is what is now going to happen] and November and granting a short extension in Camelot's existing licence."
So the submission that was being put to your Lordship was what we could and should have done would have been made feasible by granting a short extension to Camelot's existing licence - putting that, as my learned friend did in his submissions and as your Lordship correctly reflects here, on the basis that that was a matter that lay within the Commission's hands. That is simply that the offering of the extension would produce the result that the licence would be extended. Now, my Lord, what we do not want is to have a position in which a month starts running from Monday. We get to 25th October and let us assume for the sake of argument that Camelot has not satisfied us on the section 4(1) issues, we do not want a situation to arise in which Camelot's bid then falls away. We turn back, having not been able to speak to them for a month, to The People's Lottery and they say: Well, I am sorry, we cannot give you a lottery starting at the beginning of October 2001 because we do not now have a twelve month lead-in period. If that situation arises, as on the evidence of Mr Harris it will arise -- your Lordship will remember the evidence in opposition to the injunction application, where Mr Harris explained the need on the part of TPL for a twelve month lead-in period -- what we do not want to have is a situation in which the relief your Lordship's grants leaves us in the situation either that the National Lottery is just going to have to stop for some indeterminate period of time or we are left then opening negotiations with Camelot to see whether they would be prepared to take an interim licence. Your Lordship obviously is exercising a discretion in granting relief. We would ask your Lordship to exercise the discretion on the basis that Camelot does give an undertaking to make good what appeared to be putting forward by my learned friend as a matter of no difficulty to Camelot.
MR JUSTICE RICHARDS: Does it remain the Commission's position, then, that if you wait until 25th October inevitably if The People's Lottery were to be granted the new licence it would not have a sufficient lead-in period? I had not understood that to be so during the argument.
MR CROW: That is absolutely -- and I am sorry if your Lordship was not aware of that -- the position. In a sense it is not the Commission's position; it is the Commission's understanding of The People's Lottery position. That does emerge from the witness statement of Mr Harris which was made in relation to the injunction application. It is in tab 5 of the second bundle.
MR JUSTICE RICHARDS: Yes. The relevant passages start at page 431, paragraph 8. Really paragraph 9 is the crucial paragraph in this regard.
MR JUSTICE RICHARDS: Yes. The letter there referred to is at page 437; is that right?
MR CROW: I believe so.
MR JUSTICE RICHARDS: I mean, it is not put forward in terms of impossibility; it is 'severe prejudice' to the date.
MR CROW: The beginning of the third paragraph on 437:
"In order for us to effect the smooth and unaffected handover our key suppliers have made it clear that the very minimum implementation period they require is twelve months."
So if there is no twelve months there is not going to be a smooth and uninterrupted handover.
MR JUSTICE RICHARDS: I see.
MR CROW: That is, in a sense, TPL's position. It is not our evidence. Of course we simply have to accept that. So, as we say, what we do not want is a position in which we are simply left with no negotiating position as a result of the relief granted in your Lordship's discretion. So, for those reasons, we do ask for your Lordship to extract an undertaking as a condition of the order for certiorari that your Lordship has indicated you are minded to grant.
MR JUSTICE RICHARDS: Thank you. Let me hear from Mr Pannick.
MR PANNICK: My Lord, the position is this. Your Lordship has stated in paragraph 88 of the judgment that the concern about the possible need for further start-up time does not justify withholding relief in this case - that is the first point.
The second point is that that must, with respect, be right in principle. If there has been, as your Lordship has found, conspicuous unfairness by denying us the one month accorded to The People's Lottery, then we are now entitled to the same benefit. We cannot, I would submit, be denied that benefit unless we are prepared to provide something extra to the Commission as the price of it.
However, my Lord, I can offer the Commission this comfort. I am instructed that Camelot has shown itself over the past six years to be devoted to the successful and efficient running of the National Lottery. We are more than willing to discuss with the Commission whether there is a need for an interim licence for the reasons Mr Crow has identified; and, if so, we will see whether we can extend our existing contracts with suppliers, with landlords, with employees and with others after 1st October 2001 so that we can help out. What we want to do is to sit down with the Commission, as we will on Monday, and discuss all outstanding issues in a conciliatory manner that focuses on the future rather than the past.
My Lord, Camelot, of course, can afford to be generous when it has just won a very large prize; and that is the approach that I am instructed we want to take. I therefore suggest that, given that your Lordship has indicated liberty to apply, the sensible course is for Camelot and the Commission to discuss this matter, amongst others. If, unhappily, the matter cannot be resolved then we can always come back to your Lordship.
MR JUSTICE RICHARDS: Yes.
MR PANNICK: That is our position.
MR CROW: Could I respond on that very briefly? So far as paragraph 88 of your Lordship's judgment is concerned, all your Lordship was saying there is that the possible difficulty of any interim period is not enough to refuse relief. I am not asking you to refuse relief. I am asking your Lordship to make relief conditional. I am not suggesting that this is now reopening the substantive argument and asking you not to grant the quashing order you are minded to grant. What we are suggesting to your Lordship is that, given this is a discretionary remedy, your Lordship should make that order conditional. If, with respect, your Lordship -- and it is entirely my fault -- was not aware of the force of Mr Harris' statement when your Lordship said what you did in paragraph 88, then your Lordship is, in my submission, entitled to, and required, with respect, to, revisit that provisional view as to whether or not it is appropriate to extract an undertaking at this stage.
The second point, my Lord, is that merely being offered some nebulous assurance at this stage provides absolutely no comfort whatsoever. The way that the matter was put by my learned friend in his skeleton argument and reflected in your Lordship's judgment was absolutely that:
"If the deficiencies in Camelot's bid are not capable of being addressed in the timetable, the Commission is obliged to extend the timetable to give Camelot a fair opportunity to allay the Commission's concern. If necessary, the Commission should extend the bidding process until October and November and grant a short extension to Camelot's existing licence."
There was no suggestion in the course of argument that that was in any way a problematic matter. It was being put forward positively as one of the obligations upon the Commission. For Camelot to now to start suggesting: Oh, it is actually much more difficult and we really cannot give you anything more than some sort of nebulous assurance that we will sit down and talk about if we think it is necessary, in our submission, is an unacceptable volte-face from the way the matter was put before you in argument.
The evidence on behalf of the Commission from TPL is that the twelve month period is needed. By eating into October we are opening up an interim period after the end of the existing licence that needs to be covered. In our submission it is appropriate to extract the undertaking that we have described at the end of our skeleton.
MR JUSTICE RICHARDS: Mr Pannick, my concern is that what has happened here should not prejudice the ultimately outcome, that the matter can now be decided fairly and properly by the Commission.
MR PANNICK: Certainly.
MR JUSTICE RICHARDS: Having regard to the matters raised by Mr Crow and your indication of a clear willingness to cooperate with the Commission over this, is it not possible and appropriate for Camelot to give an undertaking to cooperate with the Commission in relation to the grant of an interim licence if necessary? I think what you are saying is that you could not give an undertaking in categoric terms because there would be problems about extending contracts et cetera, but it would not be necessary to go that far in order to give the Commission and all concerned the kind of comfort that is needed to ensure that matters hereafter proceed smoothly and without the ultimate outcome being prejudiced one way or the other.
MR PANNICK: Is your Lordship asking me to take instructions to see whether or not I can give an undertaking that we will use our best endeavours to enter into an agreement with the Commission for a short interim?
MR JUSTICE RICHARDS: Should it be necessary.
MR PANNICK: Should it be necessary.
MR JUSTICE RICHARDS: I am asking will you take instructions in relation to that.
MR PANNICK: Well, as your Lordship can see, Camelot are more than happy to take that approach, in what we hope is the constructive spirit that the Commission will also share. But we will use our best endeavours to try to secure agreement with the Commission, if they think it necessary, for a short interim licence after 1st October 2001. I hope that will meet Mr Crow's concerns. As I indicate, we are trying to be helpful, not trying to be obstructive.
MR JUSTICE RICHARDS: Yes.
MR CROW: If the undertaking is to use best endeavours, I do not think today I can ask for more than that. I am obliged.
MR JUSTICE RICHARDS: I think that is a very fair and sensible way of dealing with the matter.
MR CROW: Would my Lord leave it to junior counsel to try reflecting that in a form of minute that can be submitted to your Lordship for the sake of clarity?
MR JUSTICE RICHARDS: Yes, by all means.
MR PANNICK: I am grateful to my friend.
Camelot asks that their costs be paid by the Commission. It is Camelot's costs.
MR JUSTICE RICHARDS: Yes. Mr Pleming?
MR PLEMING: On behalf of GTech, I also have an application for costs. I hope you received the written note which I prepared to put into writing our submissions.
MR JUSTICE RICHARDS: It looks rather longer than your skeleton argument was.
MR PLEMING: My Lord, if I had been able to predict one comment from your Lordship that would have been it. I hope your Lordship, having read the note, will have --
MR JUSTICE RICHARDS: I have not read the note because it had not been given to me in advance, I am afraid. I had better read it now.
MR PLEMING: I am sorry, my Lord. It was sent to your clerk earlier but there was a difficulty with your Lordship's fax.
MR JUSTICE RICHARDS: Yes, I think everything has been in a degree of chaos early this morning.
MR PLEMING: I can read through it.
MR JUSTICE RICHARDS: Would you take me through it?
MR PLEMING: In the first four paragraphs we deal with jurisdiction.
MR JUSTICE RICHARDS: Yes. I do not think jurisdiction will be in issue.
MR PLEMING: Then I have moved on to discretion.
"The general rule is that one set of costs will be ordered subject to exceptions."
We have used word 'rule' with some reservation because you will see in footnote 2:
"The important starting point is that all questions to do with cost the fundamental rule is there are no rules."
That is the Bolton Metropolitan District Council case and House of Lords. What we then do in paragraphs 5 and 6 is set out the principles to be applied: in particular an extract from Lord Lloyd in the Bolton case. That was a planning case where the metropolitan district council sought its costs, as did the developer.
MR JUSTICE RICHARDS: Yes.
MR PLEMING: The section proposition, my Lord, attached to this skeleton is the Weekly Law Reports' judgment. This is an extract from page 1178 at G. If your Lordship perhaps goes to the judgment rather than my note --
MR JUSTICE RICHARDS: Yes.
MR PLEMING: -- you will see that his Lordship sets out various propositions, having said "the fundamental rule is there are no rules". Then proposition (2):
"The developer will not normally be entitled to his costs unless he can show that there was likely to be a separate issue on which he was entitled to be heard, that is to say an issue not covered by counsel for the Secretary of State; or unless he has an interest which requires separate representation. The mere fact that he is the developer will not of itself justify a second set of costs in every case."
Proposition 3 deals with the consequences if one moves up the appellate ladder. Over the page there is another comment by Lord Lloyd in which he accepted that the issues, the third line at B:
"I accept that the issues were all capable of being covered by counsel for the Secretary of State but the case has a number of special features."
Going back to my note, my Lord, at page 2, paragraph 7 --
MR JUSTICE RICHARDS: Yes.
MR PLEMING: -- we refer to that extract from his Lordship's speech. We say this:
"In this case, even if it could be argued that counsel for Camelot could have put before the court all the issues raised by counsel for GTech [which we do not accept], the court is also looking to see whether or not there is here an interest of GTech's which requires separate representation."
Paragraph 8:
"In this case it is clear that GTech's have interests which require separate representation from Camelot. It is GTech's commercial interest, separate from Camelot's commercial interests, which are also at risk."
My Lord, we have referred you there to Bruce Turner's witness statement.
If I could summarise; GTech's name and its reputation have been trailed through these judicial review proceedings. We have referred-- and I read on:
"Although GTech did everything within its power to satisfy the Commission that it is a fit and proper person and received the assurances set out in the letter of 28th July [which your Lordship has referred to in your Lordship's judgment], it was GTech's reputation that was threatened by the comments made by the Commission in its publicly released reasons [and we give you the reference]. It is also that same reason, directed at least in part at GTech, which was relied upon by the Commission for its justification for excluding Camelot from the new procedure."
Again, we refer to an extract from Dame Helena's first witness statement.
In paragraph 9:
"Faced with such evidence GTech was left with little choice but to put its own evidence before the court...."
That is Bruce Turner's witness statement
"... and make such limited written and oral submissions as may assist your Lordship in reaching a decision on Camelot's application."
My Lord, we then expand that argument in paragraph 9.
At paragraph 10 we refer to your Lordship's judgment, where there have been reference to the limited submission that is we have made.
We say at paragraph 11 that, in all the circumstances our interests did require separate representation and that this is an appropriate case for the award of costs.
My Lord, I hope again I have put it modestly and shortly, as I did in the main submissions.
MR JUSTICE RICHARDS: Thank you very much, Mr Pleming. Yes, Mr Crow?
MR CROW: Can I deal with GTech first? My Lord, really there are three short points. We accept there is jurisdiction; there is no dispute about that. The question is whether this is an appropriate case in which your Lordship should exercise your discretion. If I could just reemphasise to your Lordship two very short passages on page 1178 in the Bolton decision. The very top of the page, his Lordship, Lord Lloyd, refers to Birmingham City Council case. He says:
"... all costs were, in one way or another, met either by the Legal Aid Board, or otherwise at public expense. Here there is no question of any of the costs being funded by the Legal Aid Board. But similar considerations apply. The House will be astute to ensure that unnecessary costs are not incurred. Where there is multiple representation, the losing party will not normally be required to pay more than one set of costs, and unless the recovery of further costs is justified in the circumstances of the particular case."
So that is the general test that your Lordship is provide to apply.
At the foot, towards the bottom of the same page, numbered paragraph 2, just by letter G --
MR JUSTICE RICHARDS: Yes.
MR CROW: -- your Lordship has had that, I think, drawn to your attention:
"The developer will not normally be entitled to his costs unless he can show there was likely to be a separate issue on which he was entitled to be heard, that is to say an issue not covered by counsel for the Secretary of State; or unless he has an interest which requires separate representation."
Just going to my learned friend's submissions in order to try to get himself within those criteria, what he is actually saying in paragraphs 8 and 9 of this written submission is that the commercial risk to GTech of being found not fit and proper is obviously going to have a great impact on it. If one looks at the very top of page 3 --
MR JUSTICE RICHARDS: Yes.
MR CROW: -- from the bottom of the page 2:
"... GTech's commercial interest, separate from Camelot's commercial interests, which are also at risk. Although GTech did everything within its power to satisfy the Commission that it is a fit and proper person and received the assurances set out ... on 28th July, it is GTech's reputation that was threatened by the comments made by the Commission in the publicly released reasons."
The published reasons, my Lord, are not impugned in this application. The published reasons were for reasoning both bids under the ITA. So those published reasons were not the subject matter of these proceedings. The fact that GTech may wish to come along to court in order to use the court as an opportunity to provide an apologia for its own conduct does not satisfy the test set out in Bolton, which is where GTech has an interest in the proceedings, not just some nebulous commercial interest in defending its reputation and using court proceedings as an opportunity to do so. So the platform upon which my learned friend wished to be heard was not in fact one of the issues in these proceedings. In fact, as your Lordship is only too well aware from my submissions in relation to whether or not you should hear GTech at all, the whole point is GTech's only interest in these proceedings is purely parasitic on Camelot's, because it is a supplier to Camelot. So, in our submission, it does not fall within the criteria set out by Lord Lloyd in the Bolton case.
The other point, my Lord, we can simply make is this. In paragraph 9, what my learned friend says is that, faced with the evidence in the case:
"... GTech was left with little choice but to put in its own evidence before the court."
It could easily have done that without incurring the costs from instructing counsel to make representations. In our submission it is not appropriate to make an award for costs in a situation where in fact the submissions that you have heard did not represent the expression of any separate interest or any separate point that was not able to Camelot.
For those reasons, we strongly resist any order that two sets of cost be awarded.
Turning to the costs of Camelot, there are two aspects to this. The first is that there was the injunction application on 25th August. That application failed and the costs of that application were reserved. So, if your Lordship does not make a separate order for costs, the costs of the injunction, the interim application, will be swept up in any general order for costs your Lordship makes in favour of Camelot. We would invite your Lordship to award us the costs of the interim injunction application. It was a self-contained application and it failed. One of the reasons it failed -- in fact really the only reason it failed -- was that the judge who heard it came to the view that, if Camelot succeeded in the substantive proceedings, they would be given what they seek, which is the opportunity to be treated then, as in their language, equivalently to TPL. That is what your Lordship has given to them. In light of that, they are not in fact now pursuing the application for a final injunction either. So the whole application for an injunction, interim and final, was unnecessary. It was a self-contained element within the application and it failed.
MR JUSTICE RICHARDS: The injunction application was not dealt with as part and parcel of the permission hearing?
MR CROW: It was dealt with at the same hearing, but we avowedly turned up not to oppose the permission hearing, we were not there to oppose permission; we made quite clear. It was quite clear in our skeleton argument that, whilst we hoped that the substantive application would fail, we were not opposing permission. The argument on that day was addressed entirely towards the question whether or not interim relief should be granted.
MR JUSTICE RICHARDS: How substantial was the argument that day? How many hours was spent on it?
MR CROW: If I can just check my own note on that. (Pause.) It started at 3.29, I think. Sorry, that was the evening before. The 29th, I think, was the substantive hearing, when we started at 2 o'clock. We finished -- or the judgment started being delivered at 5 past 4, so we had the afternoon.
MR JUSTICE RICHARDS: Are you saying that the Commission would not have appeared at the permission hearing had it not been for the injunction application?
MR CROW: My Lord, if there had only been a permission hearing, we were not opposing it, absolutely. We certainly were not opposing the directions that were sought, namely for expedition. I think I am right in saying we even agreed a timetable for us to put in our evidence in response.
MR JUSTICE RICHARDS: Yes.
MR CROW: My Lord, so both the interim and the final injunction were unnecessary. There was no need to seek them. So we asked for our costs of that element.

So far as the main costs are concerned, obviously my learned friend has succeeded, but there are a number of points to draw to your Lordship's attention. You will look in vain in their Form 86A for any reference to the language upon which my learned friend ultimately relied, namely abuse of power and irrationality. The case was entirely advanced on the basis of procedural unfairness. The additional arguments that were run in the Form 86A and which failed were that the decision should be quashed for want of reasons. Your Lordship dealt with that specifically and that argument was rejected. The other way it was put in the Form 86A, apart from unlawfulness for want of reasons, was to say that there was a legitimate expectation to be consulted. Your Lordship also dealt with that and rejected that. So, whilst I entirely accept that as presented in court the argument succeeded, it was not the argument that was reflected in the Form 86A. In the circumstances, my Lord, our submission is that the justice of the case will be served in relation to costs if your Lordship ordered the Commission to pay Camelot's costs of the hearing but not the costs incurred before then. My Lord, those are my only submissions on costs.

MR JUSTICE RICHARDS: Thank you very much.
MR PANNICK: My Lord, in relation to Camelot, can I deal with the substantive costs first of all? Mr Crow cannot seriously suggest that if the arguments presented in court had been put in the Form 86A in precisely the form in which they finally appeared that the Commission would not have opposed this application for judicial review. Nothing whatever turns on the precise way in which the grounds were formulated. Mr Crow at no time during the hearing suggested that he was put in any difficulty whatever in responding to the substantive arguments that were presented. Therefore, we should be entitled to all our costs save for the costs of the interim injunction application.
In relation to those costs, we submit that the appropriate order should be no order as to costs. There should be no order because I am instructed that we did not know until the morning of the application that the Commission were not opposing leave. I was not there -- and I will be corrected if I am wrong -- but because of the speed with which these matters occurred the Commission had no opportunity prior to the commencement of the proceedings in court to make its position clear. In any event I would submit that, given that we have succeeded in the substantive application, it would be wrong in principle to make us pay the costs of the interim injunction application. I therefore say no order for costs in the interim application.
MR JUSTICE RICHARDS: When you say the 'application', in effect we are talking about the costs of the hearing of that application?
MR PANNICK: Yes, I am, my Lord.
MR JUSTICE RICHARDS: Because there are no discrete costs. Maybe there are. There are some affidavit costs.
MR PANNICK: There was an affidavit from the respondent specifically in relation to the interim injunction application which has played no part in the substantive matters, but I do not think there are any other costs that are specific to the interim injunction application other than the costs of both sides appearing in court.
MR JUSTICE RICHARDS: Yes.
MR PANNICK: Of course we had to persuade Elias J that it was a case fit for the grant of permission. It is true the Commission were not opposing it, but Elias J still needed persuasion. We had to be there. I say the justice of the case is met by no order for costs in relation to that application , otherwise we should have our costs.
MR JUSTICE RICHARDS: Yes.
MR PLEMING: My Lord, very briefly on behalf of GTech - two points are raised against GTech. Could I take your Lordship back to paragraph 8 of your written submission?
MR JUSTICE RICHARDS: Paragraph?
MR PLEMING: Paragraph 8, my Lord, on page 3.
MR JUSTICE RICHARDS: Yes.
MR PLEMING: Mr Crow focuses on the sentence beginning, "Although GTech did everything in its power", that is only an introduction to the sentence which follows.
"It was that same reasoning, directed at least in part at GTech, which was relied upon by the Commission in the new procedure."
It is the reasoning in the published decision that is then trailed into the new procedure which excludes or is used to exclude Camelot from further involvement.
We say again in paragraph 9 that GTech was left with little choice. It would be wrong to limit that involvement to the indeed quite expensive costs of preparing the witness statement. We did make, we hope, useful limited written submissions and oral submissions which we were justified to make.
MR JUSTICE RICHARDS: Thank you very much.
JUDGMENT AS TO COSTS
MR JUSTICE RICHARDS: With regard to costs, I will deal first with Camelot's costs.
The Commission will pay all of Camelot's costs of the judicial review proceedings save those relating to the interim injunction application. It is true that Camelot did not win on all issues and that they did in fact win on a basis not fully reflected in the Form 86A, but the issues were all closely linked. At bottom, the case was about fairness. It is plain that the Commission was opposing the application, however precisely it was put. On the central point the Commission lost: Camelot won. In my view the justice of the case requires that the Commission pay Camelot's costs.
So far as the interim injunction application is concerned, I accept Mr Pannick's submission that there should be no order as to costs. I do so on the basis that the interim injunction hearing was linked with the hearing of the application for permission to apply. It was necessary for Camelot to attend in any event in order to satisfy the court that permission should be granted. The Commission's position in relation to the grant of permission and necessary directions was not, I am told, made known until the day of the hearing. So, in that case, I accept that justice is met by making no order as to costs.
So far as concerns GTech's costs, I heard Mr Pleming for GTech in the exercise of my discretion. It is common ground that there is nonetheless jurisdiction to make an award of costs in favour of GTech and against the Commission. Two sets of costs are not normally awarded, though everything depends on the circumstances of the individual case. I have been referred by Mr Pleming and by Mr Crow to the relevant passages in the speech of Lord Lloyd in the Bolton case [1995] 1 WLR 1176.
In the present case, I take the view that the issues raised in the judicial review proceedings were capable of being covered and were covered by Camelot. I accept that GTech had a separate commercial interest and it is understandable why GTech wished to be heard. But, in my judgment, its interest was not one that necessitated or required separate representation. I accept the detailed submissions made by Mr Crow. The fact is that, although I thought it right to hear Mr Pleming for GTech, I do not think that that should result in a second set of costs being paid by the Commission. Looking at the circumstances of the case and at the overall justice of the matter, I am satisfied that the recovery of two sets of costs is not justified. Therefore, there will be no order as regards GTech's costs.
Is there any further matter?
MR CROW: Before your Lordship rises, there is a meeting of the Commission later today, I do not know now, obviously, what will be decided, but in order to provide them with the opportunity to consider the matter, with this application having been made, could I ask for permission to appeal? I do not think it will be pursued, as I say, but obviously I will need to have made the application to your Lordship first.
The relevant test is your Lordship's assessment of the point upon which an appeal will stand a reasonable prospect of success, which is substantially an assessment of law, as to what fairness required in this particular case. In my submission it is impossible to say that the Court of Appeal could not take a different view from your Lordship as to what the legal requirements of fairness were in the circumstances of the case. In that case, my Lord, I ask for permission to take the matter further.
MR JUSTICE RICHARDS: Mr Pannick?
MR PANNICK: My friend is asking for permission to preserve the position. If your Lordship refuses leave , the position will be preserved. In my submission it would be inappropriate to grant permission for these reasons. Your Lordship pointed out at paragraph 56 that there is no real dispute about the applicable legal principles. Your Lordship accepted at paragraph 67 that the issue for the court is a narrow one. Your Lordship made it very plain what your Lordship's views were; and I say there is no real reason to think that the Court of Appeal will take a different view. In my submission, for your Lordship to grant permission would, unhappily, encourage an appeal. We would hope that the Commission would reflect on your Lordship's judgment and decide that it is in the best interests of everyone, in particular the National Lottery, for matters now to proceed with Camelot having its month of negotiations, and the Commission then proceeding to an informed decision on the vital question of who is to receive the new licence. Those are my submissions.
JUDGMENT ON APPLICATION FOR LEAVE TO APPEAL
MR JUSTICE RICHARDS: Mr Crow, I am of course aware of the importance of the case all round. I am also aware that if I refuse permission and the Commission decides to seek permission from the Court of Appeal I may have given rise to some further delay, albeit, I would hope, a very short further delay. But I think that the right approach is to consider the test that has been laid down for the grant of permission; that is to say whether there is a reasonable prospect of success, as you yourself have submitted.
For the reasons that I have given in my judgment, I take the view that there is no reasonable prospect of success in the Court of Appeal, so I am going to refuse permission. I make clear that if the Commission were to seek to persuade the Court of Appeal differently then I have no doubt that the authorities would endeavour to have the matter expedited so that as little delay as possible would be incurred by my adopting that course. But, in effect, I do not think it right, on the grounds of expediency, to grant permission that I would otherwise refuse.
MR PANNICK: Can I thank your Lordship on behalf of all the parties for the speed with which your Lordship has produced so full a written judgment? We are very grateful.
MR JUSTICE RICHARDS: Thank you.


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