Zai Corporate Finance Ltd v AIM Disciplinary Committee of the London Stock Exchange Plc & Anor [2017] EWCA Civ 1294

“We do not consider ZAI’s request for an oral pre-hearing review is justified. … ZAI has offered no reason why a departure from Rule 22.1 of the Handbook is justified and therefore the Exchange would request ZAI to explain by way of written submission why it wishes the hearing to be in public.”

“The Exchange states that it sees no good reason why the ADC should depart from its existing direction that the hearing be in private. The good reason is that it is expressly within the rules of AIM that up to five business days before the date of the hearing a party “has the right to ask for such hearing to be conducted in public” by notification to the Chairman of the ADC to that effect. It was thought to be helpful to be transparent on this point at this stage even though we could simply provide such notification shortly before the hearing. It is a point of considerable concern that the Exchange even seeks to make the representations it does in respect of our request the hearing be in public. Such representations are manifestly inconsistent with the rules of its own market. Further, the Exchange, in receipt of advice will, or should, know that the right to be heard fairly in public is a principle generally enshrined in law and to seek to assert a contrary outcome is not consistent with the proper conduct of a regulator and, again, is an example of the Exchange pursuing this matter as though it were a commercial litigation and not a regulatory proceeding. We must reserve our position to come back to this point on another date, in another place or at the hearing itself.”

“…we will refrain from a detailed response. We are, however, bound to note with rising concern the ongoing resistance by the Exchange to our right to have the matter heard fairly in public. This is not a matter of discretion, requiring only notification under the rules, and the Exchange seeking, on advice, to argue otherwise would we believe be viewed very dimly in any forum.”

“C22.1 of the Handbook only states that the general rule is that AIM disciplinary hearings are to be held in private. According to this provision, an automatic exception to the general rule takes effect in the event that a request to have the hearing conducted in public is made. Indeed, the fact that a nominated adviser can require the hearing to be conducted in public and need only notify the ADC Chairman a mere 5 days prior to the hearing taking place makes it abundantly clear that there is no residual discretion of the ADC to deny the request once it has been made. The lack of ADC power to refuse such a request once made is borne out by the fact that nowhere in C22.1 of the Handbook is there a list of factors to be taken into account when deciding whether or not to ‘approve’ a nominated adviser’s request for a public hearing. The ADC’s attempt to rely on a discretion that does not exist is undeniably ultra vires.”

“The Rules only state than an AIM company or nominated advisor has the right to ask for the hearing to be in public and do not state that the ADC must agree to such a request. The ADC does not consider that the inclusion of the word “requiring” contains an obligation on the ADC to conduct the hearing in public once asked. Further, the Rules do not state that the ADC must grant such a request when asked. In the absence of such a rule the ADC considers that it must assess such requests as part of its general case management powers. Rule C21.1 affords the ADC wide case management powers to “give any directions and take any other steps [he] considers appropriate for the clarification of the facts and issues and generally for their just, efficient and expeditious presentation and the determination of the matters in issue”

“… we were mindful of the fact that both the Exchange’s Statement of Case dated 30 December 2015 and ZAI’s Response dated 15 April 2016 named a number of individuals and companies, some of which are still active in the market, and commented on their conduct. The other members of the ADC and I shared the concern that there would be a serious, detrimental and irreparable impact on those individuals and companies if unproven allegations against them were circulated in the public domain. Some of the relevant allegations are summarised in the Confidential Annex to this statement (I invite the Court to hear submissions on the Confidential Annex in private, to avoid causing the very prejudice that our decision to hold a private hearing seeks to avoid. I understand that the consent of the parties participating in these proceedings to this course of action has been sought. The Confidential Annex will be served once agreement has been reached). We therefore considered that holding the hearing in public would be unduly prejudicial to the rights of these individuals and companies, particularly since they had no notice of the Disciplinary. Proceedings and therefore right of reply. We were concerned about the effect this might have on the individuals and companies to which the Statement of Case referred. … we did not consider that holding the hearing in public would alter our approach to hearing the matter brought by the Exchange or have an effect on our duty to be impartial and diligent when deciding the matters before us.”

“While the broad principle is that the Courts of this country must, as between parties, administer justice in public, this principle is subject to apparent exceptions … But the exceptions are themselves the outcome of a yet more fundamental principle that the chief object of Courts of justice must be to secure that justice is done … litigation as to a secret process, where the effect of publicity would be to destroy the subject-matter, illustrates a class which stands on a different footing. There it may well be that justice could not be done at all if it had to be done in public. As the paramount object must always be to do justice, the general rule as to publicity, after all only the means to an end, must accordingly yield.”

“it would be the height of absurdity as well as of injustice to allow a trial at law to protect either to be made the instrument of destroying the very thing it was intended to protect.”

“The third case – that of secret processes, inventions, documents, or the like – depends upon this: that the rights of the subject are bound up with the preservation of the secret. To divulge that to the world, under the excuse of a report of proceedings in a Court of law, would be to destroy that very protection which the subject seeks at the Court’s hands.”

“… to construe the verb in the first sentence as doing no more that expressing a request but construing the verb in the second as granting an entitlement leads to a reading which is nonsensical.”

“… an interpretation should not produce absurd results. Were the interpretation by the claimant to be adopted then, notwithstanding that the rule plainly inclines to privacy, the result would be to leave proceedings in the ADC in a worse position than open court proceedings governed by CPR 39.2. Under that provision the general rule is that a hearing is to be in public but there is a discretion, in certain specified circumstances, to hear a matter in private. One of the exceptions is where the case involves confidential information and publicity would damage that confidentiality. If the interpretation advocated by the claimant were correct then, on asking for a hearing in public, that would have to be granted without scope for refusal on any ground, not even national security. Mr Jaffey QC rightly argues that such a ‘right’ to force a public hearing could be used by a person to defeat disciplinary proceedings against them. For example, ADC hearings may involve market-sensitive information about an AIM company which a nomad has advised is unnecessary to disclose; unproven allegations by the LSE that an AIM company breached the Rules; unproven allegations by a nomad that an AIM company misled or otherwise disabled it from ensuring the company’s compliance; or evidence about confidential governmental contracts entered into by an AIM company, e.g. for the sale of defence or surveillance equipment. In such cases the disclosure of such information could result in serious harm to private or public interests. The very question under examination in the disciplinary proceedings may be whether certain information should have been made public. If nomads could insist on a public hearing, it may force the LSE to abandon the disciplinary action against them. A public hearing could also affect third parties such as former employees, AIM companies and their senior staff.”

“In my judgment the decision made by the ADC was rational and fair and cannot be impugned. It may have been laconic, but that is of the nature of case management decisions. When it comes to case management decisions in my opinion the general rule should be that “less is more”.”

“In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.”

“… while the Court agrees that Article 6(1) states a general rule that civil proceedings, inter alia, should take place in public, it does not find it inconsistent with this provision for a State to designate an entire class of case as an exception to the general rule where considered necessary in the interests of morals, public order or national security or where required by the interests of juveniles or the protection of the private life of the parties, although the need for such a measure must always be subject to the Court’s control. The English procedural law can therefore be seen as a specific reflection of the general exceptions provided for by Art 6(1).”

“… a literal interpretation of the terms of Article 6.1 concerning the pronouncement of judgments would not only be unnecessary for the purposes of public scrutiny but might even frustrate the primary aim of Article 6.1, which is to secure a fair hearing.”

“To apply that rule for the reasons stated by the ADC was in my opinion wholly compliant with the terms of article 6.1.”