Ford v Financial Services Authority & Anor [2012] EWHC 997 (Admin)

Case No CO/12389/2010 andCase No CO/8289/2011[2012] EWHC 997 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/04/2012
Before
The Hon Mr Justice Burnett
Between
Stewart FordClaimant
Hodge Malek QC and Saima Hanif (instructed by Withers LLP) for ClaimantJonathan Crow QC and Eleanor Holland (instructed by the FSA) for DefendantHearing Hearing dates: 21 and 22 February 2012
JudgmentThe Hon Mr Justice Burnett:
[1]This judgment should be read in conjunction with, and as a continuation of, the judgment handed down on 11 October 2011 [2011] EWHC 2583 (Admin). On that occasion, an Order was made which contained a number of declarations relating to the two documents in respect of which I had concluded that the claimant enjoyed joint interest legal privilege. A tight timetable was laid down by agreement of the parties with a view to any outstanding issues relating to remedies being listed for hearing as soon after 26 October 2011 as was convenient for the parties themselves. It provided for the exchange of lists of proposed remedies, necessary evidence, skeleton arguments and the preparation of authorities bundles. The dispute between the claimant and the FSA had also resulted in the FSA issuing a ‘protective warning notice’ on 1 June 2011 to guard against the possibility that the Warning Notice issued by the Regulatory Decisions Committee [“RDC”] on 26 October 2010 would be quashed. An application for permission to apply for judicial review of the protective warning notice (CO/8289/2011) was issued by the claimant on 31 August 2011. The Order made after judgment was handed down provided for that application to be dealt with at the remedies hearing.[2]A lengthy exercise followed in which the parties exchanged evidence. That led to an application for disclosure being issued by the claimant on 15 December 2011. A hearing date for that application was arranged in early January 2012 but the parties vacated it on the basis that both agreed that the issues arising could also be dealt with at the remedies hearing.[3]After the judgment had been handed down, the FSA wrote to various organisations which had seen the privileged material. They were the Serious Fraud Office [“SFO”], the Insolvency Scheme, the Financial Services Compensation Service [“FSCS”], the Complaints Commissioner, the Cayman Islands Monetary Authority, the Commission de Surveillance du Secteur Financier, Baden & Baden and KPMG Sarl.[4]In August 2010, the SFO, FSCS and Insolvency Service had all been provided with copies of a Supplementary Investigation Report [“SIR”], appendices to the SIR and underlying documents. The SIR referred to a total of thirty documents over which the claimant originally claimed joint interest legal privilege, including the eight in respect of which permission was granted by Mitting J, which in turn encompassed the only two I concluded attracted LPP. The Cayman Islands Monetary Authority and the Commission de Surveillance du Secteur Financier are overseas financial regulators (the latter in Luxembourg) which, according to the FSA, are concerned with Keydata issues. These bodies had received the same material at the same time as the British bodies. The Complaints Commissioner received a complaint from Mr Owen, one of the interested parties, that the FSA should be censured for having delivered his SIR, a highly confidential document, to a neighbour’s house. The Complaints Commissioner has secure access to the SIR via a secure portal into the FSA’s database. He upheld the complaint. Baden & Baden and KPMG Sarl are the liquidators of two Luxembourg entities connected with Keydata. Under the FSA regulatory regime they were entitled to copies of the Warning Notices, which were sent to them on 26 October 2010. In paragraph [15] of the judgment it was recorded that ‘no dissemination of the contentious material has occurred’. That was correct in so far as dissemination after the commencement of the proceedings is concerned, but the dissemination here described had already occurred.[5]The terms in which PwC originally waived privilege on behalf of Keydata (as to which see paragraph [8] of the main judgment) contemplated the FSCS seeing the documents. When, in the course of the remedies hearing, Mr Malek QC criticised the FSA for providing material to these other bodies who had not been covered by PwC’s waiver, Mr Crow QC was able to confirm that specific authority was obtained from PwC in each case, save for the Complaints Commissioner, for which he apologised on behalf of the FSA. That was because the Complaints Commissioner has access to the SIR in the way already described.[6]The substance of the letter written to each of the official bodies after the judgment was handed down last October was the same:
“Keydata Investment Services Limited (“Keydata”) Previous FSA disclosure We refer to the letter sent by the Financial Services Authority (“FSA”) to your organisation dated 16 August 2010 (the “Letter”) a copy of which is enclosed. The Letter was provided to you with a CD containing a report, appendices and underlying documents referred to in the report (the “CD Contents”). The Letter and the CD Contents were designated as confidential pursuant to the Financial Services and Markets Act 2000 (“FSMA”). They were disclosed to your organisation in accordance with Regulation 3(1)(a) of FSMA (Disclosure of Confidential Information) Regulations (SI 2001 no. 2188) for the purpose of enabling or assisting the FSA to discharge any of its public functions. The Letter explained that the CD Contents were to remain confidential in your hands and subject to the restrictions contained in section 348 of FSMA and the exceptions permitted by section 349 of FSMA. Disclosure other than in accordance with these restrictions and exceptions is a criminal offence under English law. Judicial Review We refer also to the judgment of Mr Justice Burnett of the High Court of Justice, dated 11 October 2011, a copy of which is enclosed. The judgment concludes that two documents, which had been included within the CD Contents, were, in fact, subject to joint interest legal privilege and should not have been used nor, as a consequence, disseminated by the FSA. As a result of the judgment there will be a hearing to determine relief, following which we will be able to provide you with further clarification on this matter. However, in the meantime, we hereby request that your organisation refrain from relying on, or using, any of the information contained in the Letter and CD Contents. Moreover, we reiterate that the information contained in the Letter and CD Contents should remain confidential and not be relied on, used or disclosed onwards for any purpose. Confidentiality This letter and attachments are confidential. They comprise information that is confidential for the purposes of section 348 of FSMA is (sic) disclosed to your organisation in accordance with Regulation 3(1)(a) of The Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations (SI 2001 no. 2188) to enable the FSA to discharge its public functions. The information remains “confidential” in your hands and subject to the restrictions contained in section 348 of FSMA and the exceptions permitted by section 349 of FSMA. Disclosure other than in accordance with these restrictions and exceptions is a criminal offence under English law.”
The letters to the foreign regulatory authorities referred in the closing sentence to confidentiality governed by international agreements. The letters to Baden & Baden and KPMG Sarl opened in a different way:
“Keydata Investment Services Limited (“Keydata”) – Third Party SLS Capital SA We refer to the letter sent by the Financial Services Authority (“FSA”) to your organisation dated 26 October 2010 (the “Letter”) a copy of which is enclosed. The Letter was provided to you with Statutory Notices issued by the FSA against Keydata, Mr Steward Ford, Mr Peter Johnson and Mr Mark Owen (the “Warning Notices”). You were provided with these Warning Notices in your capacity as a third party. These Warning Notices stated the information contained therein was confidential “and should not be disclosed to a third party (except for the purpose of obtaining advice on its contents)”
. The Warning Notices also referred to section 391 of the Financial Services and Markets Act 2000 (“FSMA”) which provides that neither the FSA, nor a person to whom a Warning Notice is given, may publish the notice or any details concerning it.” These passages were then followed by two paragraphs relating to the judicial review suitably adapted to reflect the receipt of the Warning Notices only, rather than the SIR and supporting evidence on CD. Previous FSA disclosure Judicial Review

Confidentiality

[7]On behalf of Mr Ford, Withers have contacted the Complaints Commissioner, the Insolvency Service, the SFO and Baden & Baden to ask what they have done with the material identified as privileged in the judgment sent to them. The Complaints Commissioner has confirmed that he has caused all the material to be deleted from his database. The SFO has confirmed its willingness to do the same. The Insolvency Service has stated that the CD containing the SIR and appendices is securely held, that no copies of any documents have been made, and that the information has not been relied upon nor has it been disseminated.[8]The application for disclosure is now limited to(a) copies of the letters of August 2010 sent to the official bodies and of October 2010 to the Luxembourg liquidators which enclosed, respectively, the SIR and attachments, and the Warning Notices; and(b) any replies received by the FSA in response to those letters.[9]The substantive relief sought by the claimant in these proceedings may be summarised in this way: i) A quashing of the Warning Notice issued by the RDC dated 26 October 2010, together with those issued to the interested parties; ii) The destruction of all copies of the two documents identified as attracting LPP and held by the FSA, together with their permanent deletion from databases and email accounts within the FSA; iii) The destruction of all copies of the SIR and Warning Notices held by the FSA and their permanent deletion from databases and email accounts within the FSA, at least by way of redaction of the offending passages; iv) The redaction from all hard copy and electronic documents held by the FSA of quotations from or references to the substance of the two LPP documents. The requirement to remove the LPP Material from its databases etc. would be subject to two caveats. First, the claimant recognises that copies must be available for the purposes of this litigation. Secondly, the claimant recognises that copies of the documents, the SIR and Warning Notice must be kept for audit trail purposes, so long as that is done securely and without any possibility of further use being made of the material; v) An injunction restraining the further use of the LPP Material; vi) A order that nobody within the FSA who has read the LPP Material or is aware of its substance may continue to work on the Keydata investigation; vii) An order that the FSA shall take ‘all necessary steps to ensure that third parties do not retain or use the LPP Material’, and shall provide a witness statement explaining what has been done; viii) An order that members of the RDC who issued the Warning Notices (and the protective warning notices) should recuse themselves from further involvement; ix) The quashing of the protective warning notices.[10]By contrast, the FSA contends that it is sufficient to[11]Both parties approached the question of remedies from the common position that whatever the proper outcome regarding the claimant himself, it should be adopted in respect of the LPP Material found in any documentation relating to the interested parties. The interested parties acted in person in the remedies hearing, as they had in the substantive judicial review challenge, and supported the contentions advanced on behalf of the claimant.

The Warning Notice

[12]The circumstances leading to the issue of the Warning Notices by the RDC are summarised in the judgment between paragraphs [10] and [15]. The Warning Notices were dated 26 October 2010. It was unnecessary for the purposes of resolving the dispute about LPP to identify the underlying facts concerning the failure of the Keydata. It is appropriate to do so here, albeit briefly. Keydata sourced and distributed structured investment products to retail customers. It did so via independent financial advisers who acted on both an advised and an execution only basis. At the time of its liquidation, Keydata had about £2.8 billion under administration. The FSA regulatory action is concerned, in particular, with four products in which over £500 million was invested by more than 37,000 retail customers. The various products were sold as PEPs, ISAs or direct investments. To put it neutrally, the FSA says that the products were flawed given the structures put in place by Keydata and the claimant particularly with regard to fees, with the consequence that the retail investors lost vast amounts of money. The evidence shows that the FSCS has paid out compensation of £267 million which has been funded from levies it imposes on the industry. The claimant is the subject of serious allegations of misconduct which stretch over a period of four years. The regulatory case advanced by the FSA, which is disputed, is that the claimant (and interested parties) failed to act with honesty and integrity in running Keydata. It is alleged that they misled the FSA about the risks involved in the products.[13]The Warning Notices, which remain confidential documents, are very detailed. The Notice served upon the claimant extends to 58 typed pages and over 200 paragraphs. A Warning Notice is not a final decision but rather akin to a ‘minded to’ letter. It sets out the action that the FSA proposes to take, the reasons for the action, the relevant statutory and regulatory provisions, the facts and matters relied upon, an analysis of the regulatory breaches, an analysis of the proposed sanctions and a conclusion. The Warning Notice is issued following a decision of the RDC. It gives details of the right of the recipient to make written and oral representations to the FSA. It explains that if, having considered the representations or in the absence of such representations, the FSA decides to take the action proposed in the Warning Notice, a Decision Notice will be provided. From such a decision there is a right of appeal to the Upper Tribunal. The Warning Notice identifies the third parties to whom a copy is being sent, together with their rights to make representations. Those third parties in this case were the liquidators of the various Keydata entities.[14]Mr Malek submits that the Warning Notice should be quashed because it refers to and quotes from the LPP Material. He submits that the LPP Material was therefore an important factor in the formulation of the content of the Warning Notice and also in the penalty which the FSA has indicated it is minded to impose. He submits that the normal remedy in such circumstances would be to quash the Warning Notice. Mr Malek accepts that substantial elements of the criticism of the claimant found in the Warning Notice are unrelated to the matters touched on in the LPP Material (which was concerned with what are called ‘the Lifemark Products’). He accepts that in respect of one of the matters under scrutiny, namely the ISA, there is an argument available to the claimant that any new Warning Notice would be out of time. Mr Crow, by contrast submits that the LPP Material, in so far as it is relied upon, substantially duplicated the Grant Thornton material such that its removal from the Warning Notices would, for practical purposes, make very little difference. To quash the Warning Notices in those circumstances would be unnecessary and disproportionate in the context of an important investigation being conducted in the public interest.[15]The submissions made by the parties on the question whether the Warning Notice should be quashed call for an evaluation of the impact of the LPP Material upon the decision to issue them. For these purposes it is important to appreciate that the technical advice provided to Keydata, in respect of which the claimant enjoys no LPP, came from Grant Thornton. It is the substance of that advice which principally informs the relevant criticism. So, for example, that part of the email of 7 February 2008, which I have held to be privileged, quoted from in the Warning Notice referred to the opinion of Grant Thornton found in a non-privileged document. The extract from the advice given in conference (found in the email of 18 April 2008) goes much further. But it nevertheless flows from the content of a non-privileged report from Grant Thornton relating to one of the Lifemark Products, known as the Defined Income Plan. In my judgment, the LPP Material forms a very modest part of the overall picture painted by a detailed exposition of the facts and matters upon which the FSA relies. It is peripheral but not irrelevant. Yet it is in essence parasitic upon material from Grant Thornton which is at the heart of the criticism relating to the Lifemark Products.[16]Mr Malek relied upon the decision of the House of Lords in Berkeley v Secretary of State for the Environment and another [2001] 2 A.C. 603 in support of his proposition that the Warning Notice should be quashed. At first instance and in the Court of Appeal in that case, the claimant had established that the Secretary of State had failed to obtain an environmental impact assessment when one was required by EU and domestic law, but nonetheless the planning permission in issue was not quashed. The essence of the reasoning in those courts was that such an assessment would have made no difference to the outcome. In the House of Lords, the Secretary of State did not seek to support that reasoning but, instead, sought to argue that there had been substantial compliance with the relevant Directive and Regulations. The House of Lords allowed the appeal. The Secretary of State's alternative argument was rejected on the facts but his concession accepted as being properly made. The conclusion of their Lordships was that the Directive and Regulations required information to be obtained via an environmental impact assessment, and imposed additional requirements. It was not open to a court to dispense retrospectively with that requirement on the ground that the outcome would have been the same. The court ought not to exercise its discretion to uphold the planning permission granted contrary to the provisions of the Directive and Regulations, since to do so would be inconsistent with the court's obligations under European law to enforce Community rights. Mr Malek also referred to a series of authorities in which decisions had been quashed where decision-makers had failed to take account of material considerations, or taken into account immaterial considerations. Both parties referred to the speech of Lord Hoffmann in R (on the application of Edwards) v Environment Agency [2008] Env. L.R. 34, where a breach of the common law duty of consultation was found. At paragraph [62] – [63] Lord Hoffmann said this:
“That brings me, finally, to the question of whether the judge and the Court of Appeal were right to refuse relief for the one procedural irregularity which they found established ... It is well settled that “the grant or refusal of the remedy sought by way of judicial review is, in the ultimate analysis, discretionary” (Lord Roskill in Inland Revenue Commissioners of the National Federation of Self-employed and Small Businesses Ltd [1982] A.C. 617,656) But the discretion must be exercised judicially and in most cases in which a decision has been found to be flawed, it would not be a proper exercise of the discretion to refuse to quash it. So in Berkeley v. Secretary of State for the Environment… it was conceded, and the House decided, that the Court of Appeal had been wrong to refuse to quash a planning permission granted without the impact assessment required by the EIA directive on the ground only that the outcome was bound to have been the same. The relevant domestic legislation provided that in such a case the grant of permission was to be treated as not within the powers of the Town and Country Planning Act 1990. Lord Bingham of Cornhill said (at p. 608) that even in a domestic context, the discretion of the court to do other than quash the relevant order "where such excessive exercise of power is shown" is very narrow. The Treaty obligations to give effect to European law reinforces this conclusion. I made similar observations at p. 616. But I agree with the observation of Carnworth L.J. in Bown v. Secretary of State for Transport, Local Government and the Regions [2004] Env L.R. 509, 526, that these speeches in Berkeley need to be read in context. Both the nature of the flaw in the decision and the ground for exercise of the discretion have to be considered. In Berkeley, the flaw was the complete absence of an EIA and the sole ground for the exercise of the discretion was that the result was bound to be the same.”
[17]Mr Malek points to the following features of the circumstances in which the LPP Material came to be in the Warning Notice and its impact on the claimant as informing the context. The FSA used compulsory powers to obtain the material from the administrators. They used the material to inform their investigation and included it in the SIR without first informing the claimant or others who might have joint privilege in the material. The Warning Notice itself was issued by the RDC after the claimant and interested parties had raised the LPP issue. To use the material breached a fundamental right. Furthermore, the claimant was disabled from responding to the SIR because it contained material which he contended was privileged in his hands. The potential limitation problem, should the Warning Notice be quashed, was referred to by Mr Malek and by Mr Crow but not developed in argument. It related in particular to the allegations of misconduct concerning the sale of the ISA upon which the LPP Material has no bearing. Mr Malek understandably reserved the claimant's position relating to that, should the Warning Notice be quashed and another issued in due course. If the ISA allegations fell away in consequence, the FSA would only have itself to blame for what the claimant characterises as high-handed behaviour. He submits that the RDC has taken into account material they should not have done (an irrelevant factor for Wednesbury purposes), namely the LPP Material, and that in the circumstances the Warning Notice should be quashed whatever the consequences.[18]It has been a constant theme of these submissions made on the behalf of the claimant, both at the substantive judicial review and in the remedies hearing, that the FSA behaved high-handedly in the way it dealt with the LPP Material. I do not consider that to be a fair characterisation. In particular, the evidence of Miss Philippou is that the FSA took legal advice at all times. The view taken by the FSA and its legal advisers has been vindicated to a very substantial degree. The argument relating to the majority of the documents in respect of which the claimant asserted LPP failed to get past the permission stage. Of those in respect of which Mitting J gave permission, only two have been adjudged to attract LPP in the hands of the claimant. I accept that the claimant was in some practical difficulty in responding to the SIR given that he was asserting LPP over a very broad range of material, but the reality is that he could have responded to significant aspects of the allegations made against him which did not engage the LPP argument at all. So far as the balance is concerned, it was the Grant Thornton material upon which the FSA particularly relied. The difficulty in establishing LPP over that material was clear. The decision of the Court of Appeal in R (Prudential) v. Income Tax Special Commissioner [2011] 2 WLR 50 was handed down on 13 October 2010. The Court dismissed the appeal from the decision of Charles J in the Administrative Court. So, as the issue of LPP was developing between the FSA and the claimant in the late summer and autumn of 2010 the weight of authority was against the claimant with the judgment of the Court of Appeal becoming available shortly before the claimant threatened judicial review proceedings. The final word on the topic of privilege in advice coming from organisations like Grant Thornton must await the decision of the Supreme Court in the Prudential case.[19]Mr Malek is, of course, correct in his submission that on the strength of my conclusions the FSA relied to an extent on the LPP Material when they should not have done. In doing so they trespassed upon an important right of the claimant. However, it is in my judgment to mischaracterise what happened by equating it with the public law concept of "taking into account an irrelevant matter". It is more accurate to consider the error as equivalent to a judicial or administrative body acting, in part, on inadmissible evidence. The evidential material prayed in aid by the FSA is very extensive. That is not to say that it would necessarily support the conclusions that the FSA Enforcement Division invites the RDC to draw in the light of any representations that the claimant might give. That is a matter for argument between the parties in the regulatory proceedings. Yet the circumstances of this case are very far removed from the facts in Berkeley where the Secretary of State granted a planning permission when the Directive and Regulations, properly construed, gave him no power to do so. This is not an excess of power case.[20]The Warning Notice shorn of the offending references to the LPP Material, both direct and indirect, remains a coherent, seamless and powerful document. None of the points which the FSA seeks to make is substantially diminished in the absence of that material. Mr Malek submits that it is far from clear that, absent the LPP Material, the RDC would have issued the Warning Notice and, furthermore, that the proposed sanctions might have been different. I do not accept that submission. Taking the Warning Notice as a whole, it is extremely difficult to imagine that the it would not have been issued by the RDC whether or not it referred to the LPP Material. Furthermore, the nature and extent of the alleged regulatory wrongdoing is such that the indicated sanction could not realistically have been different. The financial element of the proposed sanctions rests substantially on the alleged benefit to the claimant of his alleged wrongdoing. The balance of the sanction proposed is, in the context of this FSA investigation, unremarkable as a proposal.[21]Taking account of all the circumstances to which the parties have referred I am satisfied that, as a matter of discretion, I should not quash the Warning Notice. The position of the claimant (and the interested parties) will be sufficiently vindicated by an order that the LPP Material be redacted from the Warning Notice, and the regulatory proceedings continue upon the redacted document.[22]The FSA has agreed that no member of the RDC who decided to issue the Warning Notice will have further involvement in the process. That practical concession has been made without any further concession that the precaution is required as a matter of law, given the make up of the RDC hitherto involved, full details of which are set out in a witness statement of David Choyce on behalf of the FSA. But it has the effect of ensuring that the claimant’s response to the Warning Notice, and the decision made in the light of that response, will be considered by individuals who have no knowledge of the LPP Material.

The LPP Material held by the FSA

[23]For centuries, or so it would seem, LPP Material has fallen into the hands of someone not entitled to see or use it. One of the obvious remedies available in such cases was the return of the material and of any copies made of it, alternatively their destruction. Mr Malek submits that a position as close to that as is feasible should be ordered in this case. Mr Crow submits that the relief sought by the claimant is unnecessary. He is adequately protected by a prohibition on the further use of the LPP Material and the reassurance that it will not be placed before the RDC. He further submits that it will be costly and inconvenient to have to retrieve hard copies of documents which refer to the content of the two LPP documents and more difficult still to identify and excise it from emails and other electronic storage. Its potential electronic locations are identified by Miss Philippou on behalf of the FSA in her evidence.[24]Miss Philippou’s evidence explains the various ways in which the FSA stores material electronically. It also demonstrates that a list of those who have worked on the Keydata investigation is available. It was compiled for time keeping purposes. A total of 70 is mentioned. Neither party produced evidence of the mechanisms that might be adopted to search emails and document databases for the LPP Material, or of how to redact passages from documents so identified.[25]The claimant, for entirely understandable reasons, does not want copies of the LPP Material (metaphorically) left lying around for staff at the FSA to stumble across in the future. The FSA does not, for equally understandable reasons, want to be put to what it considers to be unnecessary trouble and expense.[26]The FSA’s contention that it is sufficient to redact the LPP Material from the SIR, Warning Notices and any other documents now to be deployed, and refrain from using or disseminating unredacted copies does not, in my judgment, meet the claimant’s legitimate concerns. Mr Malek reminded me of the citation from R v Derby Magistrates’ Court ex parte B [1996] 1AC 487 quoted in paragraph [39] of the main judgment. LPP is not a rule of evidence but a fundamental condition on which the adjudication of justice rests. It is a right protected by the ECHR. Mr Malek cited a number of authorities in support of his proposition that the default position when LPP has fallen into the wrong hands is its return, including R(Cummins) v Manchester Crown Court [2010] EWHC 2111 (Admin) and Lord Ashburton v Page [1913] 2 Ch 469. The claimant does not press for the return of every hard copy of the SIR or Warning Notices, or even of the LPP Material itself, because a significant number of copies are likely to exist. Equally, because the underlying material was provided in electronic form and, across the FSA, there will be copies and extracts stored in electronic form, the claimant seeks a more refined remedy. To my mind there is no reason why the FSA should not identify and destroy such copies of the LPP Material itself which exist, together with such copies of the SIR and Warning Notices. Suitably redacted versions can be produced in substitution for those who need them. Similarly, deletion or redaction of electronic copies is an appropriate alternative to delivery up. I consider that the correct approach in this case. The claimant is entitled to an order requiring the FSA to use its best endeavours:(i) to retrieve from its employees all hard copies of the two LPP documents, SIR and Warning Notices and destroy them,(ii) to search for, identify and delete all electronic copies of the two LPP documents,(iii) to search for, identify and either delete or redact all electronic copies of the SIR and Warning Notices,(iv) to require all its employees to destroy or redact any hard copy documents which quote from the two LPP documents or refer to their substance,(v) to search for, identify and either delete or redact all electronic documents which quote from the two LPP documents or refer to their substance.[27]I accept, as Mr Crow submitted, that this type of exercise may not locate every last reference of substance to the LPP Material but that cannot provide a reason not to attempt the task. Whilst a large number of people have worked on the Keydata Investigation over the years, I do not accept that the task is unmanageable. It would bear many similarities with the mechanisms used for undertaking a disclosure exercise in civil litigation, including electronic searching. Both Leading Counsel spoke on instructions of the ease or difficulty in undertaking the electronic searching and redacting exercise, but neither party deployed evidence on the point. There will be liberty to apply to vary the Order should, for example, grave difficulties be encountered in the searching or redaction exercises.[28]The two caveats referred to after paragraph 9(iv) above will be reflected in the Order. The FSA must be permitted to retain copies of the LPP Material and the unredacted SIR and Warning Notices for the purposes of this litigation. Furthermore, copies must be kept securely for audit purposes. The claimant has suggested that for the purposes of maintaining the necessary audit trail his solicitors, Messrs Withers, would be prepared to undertake to the court to keep securely copies of the two LPP documents, the SIR and the Warning Notices. If any of the documents are needed for audit purposes in the future, in default of an agreement between the parties as to their use, the matter would be resolved on application to the court. That provides proper security for the FSA and appropriate protection for the claimant. Continuing involvement of FSA staff and legal advisers to the RDC who have read or are aware of the content of the LPP Material[29]The claimant seeks an order that anyone who has read the two LPP documents or is aware of their content should be removed from further involvement in the FSA investigation into the affairs of Keydata, its associated companies and executives. The position contended for by the claimant is that anyone who has read the SIR or Warning Notice in this case should be debarred from taking any further part. The essence of the argument advanced by Mr Malek is that such people are likely to be irredeemably poisoned against the claimant but that in any event the appearance matters. As a matter of fairness, he submits, such people should be removed from the investigation. He draws an analogy with the principles applicable in apparent bias cases. The parties relied upon a number of cases which have arisen in circumstances where privileged material has fallen into the hands of lawyers acting against a person entitled to claim privilege, or where a lawyer who once acted for a person finds himself, at a later date, acting against that person. Counsel have been unable to locate any decision dealing with the problem in the context of regulation and investigators. My attention was drawn to Ablitt v. Mills & Reeve (a firm) and another, a decision of Blackburne J given on 24 October 1995, Koch Shipping Inc v. Richards Butler [2002] EWCA Civ 1280, Stiedl v Enyo Law LLP [2012] PNLR 4; [2011] EWHC 2649 (Comm) and the decision of the Supreme Court of Canada in Celanese Canada Incv. Canadian Bearings Ltd & Others [2006] 2 SCR 189.[30]Each of these cases arose in a private law dispute. Nonetheless, both parties submit that the approach identified in the private law context to the question whether a lawyer in possession of privileged material should be restrained from acting is a useful guide to the exercise of discretion in the public law field when something analogous has occurred. That is because the grant of injunctive relief in the private law sphere has a discretionary element. Subject to one caveat, I accept that joint submission. The caveat is this: when the question arises in judicial review proceedings there will necessarily be a public law element in the underlying dispute. Private law proceedings are generally unconcerned with the public interest. The public interest may form an important element in any discretionary decision made in judicial review proceedings.[31]Mr Malek relied heavily on the Canadian case, which arose from the execution of an Anton Piller order in consequence of which material subject to LPP was seized. The plaintiff's lawyers partially reviewed the material seized pursuant to the order. The defendant sought an order prohibiting the plaintiff's solicitors from acting. The Supreme Court of Canada recognised that the dispute presented a clash between two competing values, namely LPP and the right of a party in legal proceedings to choose his own lawyers. The court resolved the conflict in that case by restraining the plaintiff’s lawyers from acting. In the judgment of the court delivered by Binnie J, he said this at paragraph [59]:
“In helpful submissions, the interveners ... suggest a number of factors to be considered in determining whether solicitors should be removed: (i) how the documents came into the possession of the plaintiff or its counsel; (ii) what the plaintiff and its counsel did upon recognition that the documents were potentially subject to solicitor-client privilege; (iii) the extent of review made of the privileged material; (iv) the contents of the solicitor-client communications and the degree to which they are prejudicial; (v) the stage of the litigation; (vi) the potential effectiveness of a firewall or other precautionary steps to avoid mischief. Other factors may, of course, present themselves in different cases, but I agree that the foregoing list of factors is appropriate and seems to be sufficient to dispose of the present appeal.”
Canadian law places a burden upon the lawyers concerned to show that a reasonably informed person would be satisfied that no use of confidential information would occur (see paragraph [66]). Subject to that, the list of matters referred to suggests that the Canadian approach weighs a number of features: the conduct of those who have wrongly seen the LPP Material, the extent to which their knowledge of the content prejudices the person entitled to LPP, the practical impact of removing lawyers from acting and precautions which can be put in place to mitigate any prejudice.[32]By reference to the list of matters identified by Binnie J, Mr Malek relies particularly upon the fact that the question of joint privilege was not raised with the claimant (or interested parties) for their comments when the documents were obtained from the administrators and that when the question of privilege was raised the FSA continued with the regulatory process rather than allowing the issue to be resolved immediately. The LPP Material was fully reviewed and relied upon. Those passages referred to in the Warning Notice are prejudicial. That is why they were relied upon. He recognises that the issue arose at a relatively late stage in the regulatory process. As Binnie J made clear at paragraph [64] the later the stage in litigation, the more extreme would be an order removing lawyers from acting.[33]Mr Crow submits that such guidance as can be given by the private law cases comes from the domestic authorities which draw a clear distinction between cases where there has been a previous relationship of solicitor and client, and those in which there has been no previous relationship. In the former case, where a solicitor is possessed of confidential information, an injunction to restrain him from acting against his former client will ordinarily be granted. By contrast, submits Mr Crow, in the latter type of case the court will ordinarily do no more than restrain the use of privileged material which has come into the hands of the opponent. The FSA is more than content for an order restraining such use.[34]Ablitt v. Mills & Reeve was a case which involved a deliberate reading by the defendant’s main case handlers of their opponents’ highly confidential documents which were directly relevant to the issues in the litigation and concerned the opponents’ preparation for that case and the advice given to the plaintiff. The solicitors acted on the instruction of their insurer clients in doing what they did. The opportunity arose because of an error made in counsel’s chambers when his papers were returned to the wrong solicitors. Preparation for the trial of the action was well advanced. Blackburne J accepted that the solicitors themselves had acted in good faith. He concluded that the trial would be unfair if the two solicitors concerned continued to act and in those circumstances restrained their firm from doing so. The reality was that, whether the case went to trial or attempts were made to settle it, the defendant’s solicitors would have complete insight into the thinking of the plaintiff’s legal team. The question of a Chinese wall was raised in the course of argument because, as the judge observed, it seemed clear the way the wind was blowing. However, there was no evidence before him of how such an arrangement would operate. This was a case of very clear prejudice to the plaintiff if the defendant’s solicitors continued to act.[35]This case, together with a large number of other authorities, was reviewed by Beatson J in Stiedl v. Enyo Law LLP, where the circumstances were less striking. The detailed facts are immaterial. Privileged material of Mr Stiedl, who was a defendant in an action for fraud, came into the hands of the claimants’ solicitors innocently via a liquidator. After a convoluted litigation process, an application was made to restrain the solicitors from acting against Mr Stiedl. Beatson J accepted that a distinction should be drawn between those cases where a firm had previously acted for, and had had possession of confidential privileged information in relation to, someone against whom they were now acting, and those cases where a solicitor came into possession of such information in respect of someone he had not previously represented. In the latter type of case, the remedy would normally be restricted to an order restraining the solicitor from using the confidential information. Beatson J noted that in the former category of case, namely a “previous relationship” case, earlier authority suggested that an injunction would be granted restraining the solicitor from acting. The question upon which Beatson J focused was whether the circumstances of the case in front of him called for a departure from the normal approach. He asked himself whether there was “a real risk that information in the documents over which Mr Stiedl claimed privilege and confidentiality could be used to yield an advantage to the claimant or a disadvantage to him”. In particular, he concluded that no one now involved in the case at the solicitors would remember the content of the very few documents they saw in the context of tens of thousands of others. The judge endorsed the view that in cases where privileged material had fallen into the hands of an opponent "a realistic approach" was called for, a view earlier expressed by the Court of Appeal in Koch Shipping where Tuckey LJ had said: “... each case must depend upon its own facts. But I think there is a danger inherent in the intensity of the adversarial process of courts being persuaded that a risk exists when, if one stands back a little, that risk is no more than fanciful or theoretical. I advocate a robust view with this in mind so as to ensure that the line is sensibly drawn.” (paragraph [53]) The additional question that Beatson J identified as being relevant to the issue whether, in a case not involving a previous relationship, the solicitors should be prohibited from acting, was whether such an order would be proportionate and necessary.[36]In the discretionary area of activity, whether in the private law or public law arenas, the starting point recognised in the authorities depending upon the basic facts is a useful guide. But it does not provide a straitjacket, or a substitute for an evaluation of all factors that might inform the exercise of discretion. That, as I understand his judgment, is what Beatson J was emphasising in looking at the issues of harm and proportionality and what the Court of Appeal had in mind in Koch when noting that all cases depend upon their individual facts. The factors identified by Binnie J in Celanese Canada might all fall to be considered on that basis.[37]The circumstances surrounding the acquisition and use of the claimant’s LPP Material by the FSA does not fall neatly into one of the two distinct categories identified by Beatson J in Stiedl. The FSA is an external regulator and it is its investigators, as much as its lawyers, at whom the claimant aims. The nearer analogy is with the category of case which does not involve a previous relationship. Despite the usual position being that solicitors in those circumstances are not restrained from continuing to act against the person whose LPP has been compromised, questions of real harm and proportionality fall to be considered. The conduct of the party which has obtained the LPP Material might well be material and so too would be mitigating factors to insulate its use.[38]The FSA was entitled to use its statutory powers to obtain the emails of the claimant (and interested parties) from the Keydata database through the administrators and should not be criticised for doing so. Its approach to the potentially LPP Material was informed by legal advice and was not arbitrary or abusive in the way suggested by the claimant.[39]In considering whether the Warning Notice should be quashed, it is necessary to evaluate the impact of the LPP Material on the Warning Notice as a whole. A similar exercise informs the question whether all those who have seen it should be insulated from the continuing investigation. The LPP Material plays a small part and, as I have already indicated, adds little to the Grant Thornton material. It is true that the note of the conference with counsel included discussion about how to deal with some aspects of the investigation. However, the events under consideration have long since passed, indeed had passed before that note was provided to the FSA by PwC. So there is no parallel with Ablitt.[40]A lingering memory of the content of the LPP documents would not provide any real advantage to the FSA investigators. The investigation is substantially complete albeit that the procedures of the RDC enable the Enforcement Division to respond to representations made by the claimant and others in answer to the Warning Notice. Subject to continuing litigation, the FSA investigation and regulatory process is drawing to its close. To exclude all those who have seen the SIR and Warning Notice would very substantially interfere with the final stages of the process. To require all those who have seen the LPP Material to recuse themselves from further involvement would be disproportionate and contrary to the public interest in the just and expeditious conclusion of the regulatory proceedings. I do not consider that the fact that the investigators and in-house lawyers have seen material which cannot now be used, nor which will be before the RDC, creates any real prejudice to the claimant. This head of relief is refused.[41]The argument is a fortiori so far as the legal advisers to the RDC are concerned. Disclosure and the steps the FSA should take to prevent further dissemination or use of the LPP Material[42]The disclosure application is now limited to two categories of document. First, the letters to the regulatory bodies and liquidators under cover of which the CD containing the SIR and supporting evidence or Warning Notices were sent. Secondly, any responses to the letters from the FSA sent after judgment was handed down last Autumn, which are set out in paragraph [6] above. The argument advanced on behalf of the claimant relies upon the principles applicable to disclosure within judicial review proceedings, and also seeks disclosure of these documents as a form of substantive relief. Either way, it is sought to enable the claimant to understand how his LPP Material had been used, and how it might be used. The claimant also argues that a coercive order is required to force the FSA to take positive steps to ensure that the overseas regulators and liquidators destroy the LPP Material they hold and agree not to use it. The claimant became more sanguine about the domestic bodies which have the material in the light of indications given by the SFO and Complaints Commissioner that the material would be deleted, and by the Insolvency Service that it is kept securely and they have no interest in it.[43]The parties had focussed, as part of the relief, on an injunction restraining the FSA from using the LPP Material. That much is agreed. However, the LPP Material is the paradigm of confidential material. All those who received that material from the FSA did so on terms of strict confidence. There is no reason to suppose that the confidence has been breached. Nonetheless, some additional protection to the claimant would be garnered by an injunction restraining the FSA from publishing or further disseminating the LPP Material. As with any injunction protecting confidential material, those with knowledge of the injunction who breach the confidence would be vulnerable to contempt proceedings.[44]The claimant’s disclosure argument was advanced in a number of different ways but eventually Mr Malek agreed that the touchstone must be the approach of the House of Lords in Tweed v. Parades Commission for Northern Ireland [2007] 1 A.C. 650, in particular the statement of principle found in paragraph [3] of Lord Bingham’s opinion:
“In the minority of judicial review applications in which the precise facts are significant, procedures exist … for the disclosure of specific documents to be sought and ordered. Such applications are likely to increase in frequency, since human rights decisions under the Convention tend to be very fact specific … But even in these cases, orders for disclosure should not be automatic. The test will always be whether, in the given case, disclosure appears to be necessary in order to resolve the matter fairly and justly.”
[45]The foundation for the application for disclosure is identified in the sixth witness statement of Harvey Knight dated 16 February 2012. He is the partner at Withers with conduct of these proceedings on behalf of the claimant. In particular in paragraph [52] he distils the argument. His reference to ‘Third Parties’ is to those who have been sent the LPP Material in one form or another:
“In order that Mr Ford can be assured that [his] LPP has been protected, has not been further undermined and will not be in the future, in respect of each of the Third Parties it is important that the following information is obtained: (1) The purpose for which the LPP material was provided to the Third Parties and what they were told at the time as regards the use to which they could put the information and/or restrictions (this will become apparent from the covering letters that the FSA sent to the Third Parties); (2) What use has in fact been made of the material; (3) Whether the third party has provided the LPP material or disclosed it to anyone else; (4) Whether the Third Party has retained copies of the LPP material, and whether it has been incorporated or referred to in another document; (5) Confirmation that they will not longer use the LPP material; (6) Destruction of any copies of the LPP material and any other document which contains or makes reference to the same; (7) What response, if any, there has been to the FSA putting them on notice of the Court’s judgment.” (1) The purpose for which the LPP material was provided to the Third Parties and what they were told at the time as regards the use to which they could put the information and/or restrictions (this will become apparent from the covering letters that the FSA sent to the Third Parties); (2) What use has in fact been made of the material; (3) Whether the third party has provided the LPP material or disclosed it to anyone else; (4) Whether the Third Party has retained copies of the LPP material, and whether it has been incorporated or referred to in another document; (5) Confirmation that they will not longer use the LPP material; (6) Destruction of any copies of the LPP material and any other document which contains or makes reference to the same; (7) What response, if any, there has been to the FSA putting them on notice of the Court’s judgment.”
[46]Mr Malek supports these contentions and adds that the claimant should be told who within any external organisation has seen the material and for what purpose. The starting point, he submits, is disclosure of the documents identified followed by a requirement that the FSA discover the position regarding outstanding matters and insist upon destruction of the LPP Material.[47]Paragraphs [3] – [6] above identify the recipients of the SIR and supporting material in August 2010 and the bodies sent the Warning Notice in October 2010. It is to my mind abundantly clear from the letters written by the FSA after judgment to the various recipients of earlier material for what purposes it had been sent, together with the restrictions on its use. The material sent to other regulators was confidential. The statutory basis for disclosure was set out and the purpose identified. Statutory restrictions on its use were identified. The Warning Notices sent to the liquidators of SLS and Lifemark were subject to confidentiality and the Warning Notices themselves told the claimant and the interested parties that they were being copied to those with a proper interest, as part of the regulatory process.[48]I am unpersuaded that disclosure of the covering letters is necessary in order to resolve the matter of relief fairly and justly, or otherwise needed to vindicate the claimant’s right to enforce his LPP.[49]Similarly, I do not consider disclosure of any responses received from either the regulators or liquidators following the FSA’s post-judgment letter to each falls to be disclosed on Tweed principles. The FSA’s letters reminded the recipients of their obligations of confidence. It explained that the LPP Material was to be found on the CD content (in the case of the regulators) or was referred to in the Warning Notice. The letters contained an explicit request that pending the remedies hearing no use should be made of any of the material provided. Mr Malek relied upon the duty of candour required of public bodies in judicial review proceedings to support the claimant’s argument on disclosure. The FSA is well aware of its duty of candour. There can be no doubt that if the FSA had received a response from one of the regulators or liquidators to the effect that, despite the request, it intended to use the LPP material, the fact of such a response would fall to be disclosed. But what the claimant seeks is an order which polices the FSA via disclosure when there is no reason to suppose that anything is amiss. That is inappropriate.[50]The question then arises of what steps the FSA should be required to take, if any, to retrieve the LPP material. The question is in reality hypothetical so far as it touches the domestic regulatory bodies. The Complaints Commissioner has deleted it. The SFO will do the same. The Insolvency Service is no longer interested in the material. I have no doubt that it will return the CD to the FSA when asked. If a copy without the LPP Material is needed by the Insolvency Service (or the FSCS) there would be little difficulty in providing one. So far as the foreign regulatory bodies and the overseas liquidators are concerned, whilst I recognise (as Mr Crow submits) that the FSA has no power to require any recipient of the LPP Material to take any specific step, its earlier post-judgment letters suggest the appropriate course. Such organisations are likely to comply with requests made by the FSA in aid of a judgment given by an English court.[51]The legitimate aims of the claimant are(a) for the FSA to retrieve the CDs and Warning Notices that contain the LPP Material;(b) to ensure that the LPP Material is neither used nor disseminated by those who received it; and(c) to ensure that any copies made of it (whether paper or electronic) are deleted.[52]I do not accept the claimant’s submission that he should be provided with details of who within the various organisations has seen the LPP Material nor precisely what has been done with it hitherto. But I do accept the submission that the FSA, having been responsible for disseminating LPP Material, should be required to assist in limiting the damage that exercise might entail. With that end in mind, I consider that the following steps should be taken by the FSA:(i) All the bodies to which the CD containing the SIR and supporting documents was sent should be asked by letter (a) to return the CD (with, if the FSA considers it appropriate, an offer to replace it with a CD absent the LPP documents and the SIR suitably redacted); (b) for reassurance that the LPP Material will not be used in any way, nor disseminated; (c) to destroy/delete any paper or electronic copies of the LPP Material, together with copies of the SIR which refers to it; and (d) that if the LPP Material has been provided to advisers, as permitted by the terms of its confidentiality, they have been required to take similar steps.(ii) All those who received the Warning Notices should be asked by letter (a) to destroy them (with, if the FSA considers it appropriate, an offer to replace them with redacted versions); (b) to ensure that all copies are destroyed or deleted; (c) for reassurance that the LPP Material will not be used in any way, or disseminated; and (d) that if the LPP Material has been provided to advisers, as permitted by the terms of its confidentiality, they have been required to take similar steps. The letter should enclose a copy of this remedies judgment and require a response within 21 days.[53]The purpose of this exercise is to enable the claimant, if necessary, to take steps against others to enforce his privilege. In my judgment, it follows that the claimant’s solicitors should be provided with copies of the letters which will be written by the FSA, together with the responses or an indication that there has been no response. There is an element of seeking to put the genie back in the bottle when formulating relief appropriate in circumstances where LPP Material has been disseminated in the manner which has occurred in this case. The status quo ante bellum may not be restored perfectly, but these steps, none of which is especially onerous, will go a very long way to providing the claimant (and interested parties) with reassurance that the material will not be inappropriately used.

The protective warning notice

[54]The protective warning notice, issued by the RDC on 1 June 2011, is an edited version of the original Warning Notice with all references to the material from the eight documents in respect of which Mitting J gave permission struck through. The same three members of the RDC made the decision to issue this protective warning notice. Their bona fides in doing so has not been questioned. It suggests that even with a great deal more material excised than is necessary to protect the LPP in the two relevant documents, the RDC considered that the regulatory action and proposed sanction were justified. The protective warning notice was necessary to avoid the possibility, if the original Warning Notice were quashed, of all regulatory action being time barred under the statutory regime in place. In view of the conclusion I have reached that the original Warning Notice should not be quashed, the protective warning notice becomes irrelevant for the purposes of the FSA’s regulatory action, as does the application for permission to apply for judicial review in connection with it. In those circumstances permission is refused

Conclusion

[55]I invite the parties to draft an order within seven days of hand-down reflecting the substance of this judgment, dealing with the material relating to the claimant and to the interested parties. I will deal with any unresolved details in writing. Any other ancillary or consequential applications will be received in writing.

order

“2.1.1 that the FSA should not use or disseminate the LPP Material; 2.1.2 that the FSA must therefore redact the LPP Material from – (i) the Warning Notices and (ii) any other documents, including the Supplementary Investigation Reports to the extent that such documents are deployed in any regulatory or other proceedings, and must not use or disseminate any unredacted versions of such documents; 2.1.3 that any future decisions by the Regulatory Decisions Committee in relation to the FSA Investigations should be taken by a panel which has not seen the LPP Material.” (i) the Warning Notices and (ii) any other documents, including the Supplementary Investigation Reports to the extent that such documents are deployed in any regulatory or other proceedings, and must not use or disseminate any unredacted versions of such documents;

Cited in 2 later judgments