England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
(MR JUSTICE BURNETT)

		Royal Courts of Justice Strand London WC2A 2LL
		19 July 2013

1. LADY JUSTICE ARDEN: This is a renewed application for permission to appeal against the order of Burnett J dated 12 June 2012. Permission was refused on paper by Mummery LJ. Today Mr Ford renews the application in person, and at the direction of the court the respondent filed a short position statement, for which the court is grateful. As it is an ongoing and longstanding matter, the court was grateful for that assistance. Mr Daniel Burgess has appeared for the Financial Services Authority today and we asked him for assistance on one point on which we required information and we are grateful for that. However, this we see as Mr Ford's opportunity to make his application for permission to appeal. There has been also present in court one of the interested parties, Mr Johnson, who has provided some assistance to Mr Ford but basically the submissions are those of Mr Ford, who has addressed us in person.
2. Mr Ford is a former Director and Chief Executive Officer of Key Data Investment Services Limited. He is also the majority shareholder of that company. Key Data was authorised by the Financial Services Authority to carry on investment business. In a nutshell, the Financial Services Authority started an investigation into it and also decided to make some investigation against Mr Ford as an individual. Key Data entered administration on 9 June 2009. Warning notices have been issued against Mr Ford and in those circumstances Mr Ford sought relief from the court to quash the warning notice that was extant and one protective warning notice and to restrain the Financial Services Authority from using the material.
3. He was successful before the judge in October 2011 in establishing that two emails on which the Financial Service Authority relied were the subject of legal professional privilege and should not have been used by the Financial Services Authority. So the judge stood the matter over so that he could decide on what steps should be taken to give effect to that ruling and to provide appropriate protection to Mr Ford from the use of that confidential and privileged material.
4. There was other confidential material consisting of communications between Grant Thornton Accountants and Mr Ford. That was previously in issue and there was a separate appellant's notice seeking permission to appeal in respect of privileged material. However, with the consent of Mr Ford, that appellant's notice was dismissed today. The principal matter argued on it, and indeed as I saw it the sole matter in the grounds of appeal, related to those communications with Grant Thornton. As a result of the decision of the Supreme Court in R (on the application of Prudential PLC) v Special Commissioner of Income Tax [2013] UKSC 1, it has been established by the Supreme Court that communications from an accountant could not be the subject of legal professional privilege.
5. So the position on this application is, in a nutshell, that Mr Ford advances three topics as constituting the areas in which he seeks relief on this appeal. First, he wants the warning notice to be quashed. Second, he wants the protective warning notice to be quashed. Third, he wants an order that the officials of the Financial Services Authority (now, of course, the Financial Conduct Authority) who had seen the legally professionally privileged material should be removed from this case. So those are the three areas of relief that he seeks and therefore he challenges those parts of the judge's judgment which are relevant to those matters. On this application we are not, of course, concerned with granting those orders but with determining whether or not there is real prospect of success in bringing a full appeal before this court. This is, as it were, an application whereby the court filters the appeal by applying that test.
6. It is clear that by successfully obtaining an order that two emails were the subject of legal professional privilege Mr Ford has established a violation of his rights under Article 8 of the European Convention on Human Rights. That is a right guaranteed by the Convention. It is what we call a limited right, namely it can be restricted in certain limited circumstances. Under the Human Rights Act 1998 the court has jurisdiction to give such remedies as it thinks fit to remedy the violation of a Convention right. So that is, as I see it, the jurisdiction which we must consider to be in issue.
7. In exercising the jurisdiction the court must, of course, act in a way which is just and which is proportionate having regard to all the circumstances but the jurisdiction is not penal, it is not given to the court to impose penalties on a person who has used legally professionally privileged material and, in essence, the court is invested with considerable discretion, a judicial discretion, as to what remedy to grant. But it leads on to this further point that what is just and appropriate involves an evaluation by the judge in the light of all the circumstances placed before him and on this appeal this court would not interfere unless it was satisfied that the judge was wrong. Thus to obtain an order granting permission to appeal, the applicant, Mr Ford, must satisfy the court that he has a real prospect of showing that the judge was wrong. I make those remarks by way of general introduction.
8. The judge gave a reserved judgment. In essence, he was satisfied that the legally professionally privileged material formed only a very modest part of the overall picture obtained by the FSA's investigation, that it was only a very small part of the detailed material on which the FSA relied in the warning notice and that it was peripheral. The judge distinguished an authority which is relied on in the grounds of appeal drafted by counsel and lodged in this matter, namely a decision of the House of Lords in a case called Berkeley v Secretary of State For The Environment and Others [2001] 2 AC 603. The judge distinguished that case. He held that he was dealing with a different sort of application altogether. Berkeley was a case where the Secretary of State had granted planning permission when he or she was required under European Union law first to have an environmental assessment. The House of Lords held that the judge had no option but to quash the planning permission. It was argued by counsel for Mr Ford before the judge that therefore the warning notice ought necessarily to be cancelled but the judge rejected that argument and held that the authority was distinguishable. He went on to hold at paragraph 20 that it was difficult to see that the warning notice would not have been issued even if the Financial Services Authority had not had the legally professionally privileged material. He held further at paragraph 21 that Mr Ford would be sufficiently protected if the warning notice was redacted ie all references to the privileged material were removed. He was assured that no member of the RDC, the Regulatory Decisions Committee, who had decided to issue the warning notice would have any further involvement in the process and accordingly it was not necessary to make an order in that regard. He made an order against the Financial Services Authority about retrieving material. That is not in issue today but extensive orders were made. At paragraph 21 the judge consider whether anyone who had read the warning notice or the supplementary investigation report into Mr Ford's activities should be taken off the case, that is anyone constituting an official of the Financial Services Authority. The judge took into account that the Financial Services Authority had acted on advice, a matter with which Mr Ford takes issue, and he concluded that the FSA had not acted arbitrarily. The judge concluded that the privileged material played only a small part in the warning notice and that in the circumstances it would be disproportionate to make an order that FSA officials should be taken off the case if they had previously seen the privileged material.
9. The judge then dealt with an application for disclosure and steps that the FSA should take to prevent further dissemination and use of the privileged material. I need not go into that because it is not in issue today. The judge made an order about the material given to third parties. He dealt finally with a protective warning notice which had been issued in case. The warning notice, which is required to be issued within a stipulated time, was quashed by the court. The judge held that in the light of the fact that he was not proposing to quash the warning notice, that the protective warning notice was in fact irrelevant and therefore he did not quash it.
10. So, as I say, the three matters with which we are particularly concerned are the refusal to quash the warning notice, the refusal to quash the protective warning notice and the judge's refusal to order that any official of the FSA who had seen the privileged material should be taken off the case for the future.
11. Mr Ford submitted a witness statement for today's purposes. We are grateful to him for this and we have read it. It was lodged well in time with the court's directions. I will only summarise it briefly as it does not go into the issues which I have just mentioned but it is an important part of his case that he is highly critical of the FSA investigation into Key Data and submits that it was improperly motivated. He refers to the fact that the FSA initiated an investigation by the Serious Fraud Office but that the Serious Fraud Office dropped its investigation in 2009. He submits that the conduct of the FSA in relation to Key Data was not just incompetent but also lacking in integrity and that it broke its own rules in order to engineer, as he puts it, the failure of Key Data. Mr Ford says that the FSA forced Key Data into administration. He says that there have been three preliminary investigation reports and that the first and third of those are no longer proceeded with. He states that he has prepared a malfeasance report and he states that as a result of the FSA behaviour and what he calls the highly selective leakage of material, it is impossible for him to receive any form of fair hearing under the auspices of the FSA, but that is not a matter for today's purposes. He says, as he puts it, that the FSA has form and that he is concerned about the fairness of the disciplinary process. But that, of course, has not taken place as matters have been on hold as he has applied to appeal to this court with regard to the warning notice.
12. So that is the statement which Mr Ford put it. This court has rules about fresh evidence which may be put in an on appeal. We read it for the purposes of this application but it by no means follows that it would be admissible on an appeal because what the court is being asked to do is to review a decision that was made on the basis of the information before it.
13. Now I want to go to the grounds on which Mr Ford has advanced his application. I do so by reference to the grounds of appeal drafted by counsel as well because Mr Ford relies on those as well. The first ground is that the warning notices should have been quashed because there had been non-compliance with the rules of natural justice because the FSA must have been influenced by the fact that it had legally professionally privileged material. This is ground 1 in the document which was drafted by counsel. What ground 1 states is that the warning notice should have been quashed because they are promulgated in flagrant breach of the principles of natural justice and/or the FSA's enforcement guidelines. The guidelines are set out in this document but they set out the procedure, they do not add to the points which are material for the purposes of this application. What the skeleton essentially says is that Mr Ford had no proper opportunity to comment on the material which is now in the warning notice because the documents on which he was invited to comment were infected by reliance on the privileged material and he could not respond to that without risking waving his legal privilege.
14. This has been repeated orally by Mr Ford and he has stressed that he considers that he has been deprived of an opportunity to deal with the matters in the warning notice because of the use of the legally professionally privileged material. But the position is that the warning notice, as the judge explained, was a minded to notice. It is only the first step in the investigation and it is quite clear that the stage for making oral representations did not arise before the warning notice was issued but is now available. At 9.2 the notice says: you have the right to make written and oral representations to the FSA. It then goes on to say that the RDC had decided to immediately stay the proceedings and that they were not required to be made immediately. But there clearly is an opportunity to make representations and if Mr Ford still considers that the actions of the RDC are wrong he has a right of appeal to the Upper Tribunal.
15. So the question of the rules of natural justice, of course they are important and he should have an opportunity to address the points that he wishes to do so but that point has not yet come to pass, it is something which lies in the future. Therefore, in my judgment, there is no real prospect of success in saying that the warning notice should be quashed because they were promulgated in flagrant breach of the principles of natural justice.
16. I move on to the point about the legally professionally privileged material. As I have explained, the judge said that this was, in essence, peripheral. We invited Mr Ford to point us to the parts in the warning notice which were damaging to him because they used legally professionally privileged material and we alternatively asked him to show us what was particularly damaging in the two emails that were found to be professionally privileged or were matters which we should particularly take into account. Mr Ford submits that the whole attitude of the FSA was coloured by the fact that he had taken advice early on but he was not able to point us to any specific matters in the warning notice or in the emails that he wanted us to take into account. There is, therefore, in my judgment, no basis for saying that the judge was wrong to reach the evaluation that he did. Mr Ford referred to the judge's assessment that the legally professionally privileged material was the tip of the iceberg, that it was a small part of the case. It seems to me that there is no basis on which this court could interfere with the judge's assessment and therefore there is no prospect of success on that matter.
17. Mr Ford is dissatisfied with the conduct of the FSA. That is clear from the statement which he has put in for today's purposes and which I have summarised in this judgment. But the remedy is not on this appeal. That would involve a challenge to much more in the warning notice than anything that could be attributed, if anything, to the legally professionally privileged material. So it drives me to the conclusion that the real essence of the dispute here is not about use of legally professionally privileged material in the warning notice, which is going to be redacted in any event when the order becomes operative, but it is a more general dissatisfaction with the FSA conduct, which, as I say, cannot be brought under this appeal.
18. In ground 2 in the grounds of appeal counsel argued on Mr Ford's behalf that the court had no discretion to refuse to quash the warning notices. This is the Berkeley point to which I have already referred. I have considered what counsel said and, in my judgment, there is no real prospect of success on this point in law. Mr Ford established a violation of Article 8 but the court, as I have explained, has a discretion as to the form of the remedy and it is not compelled to take the step of quashing the warning notice.
19. Ground 3 was that the judge was in error in concluding that the legally professionally privileged material made no difference. This is the point which I have already covered under ground 1.
20. Next, ground 4 states that the judge was wrong to find that the Financial Services Authority took legal advice at all times. That was a question of fact for the judge. Even if it were not so, the judge made an evaluation that the FSA had not acted arbitrarily. The position is that that is not a matter which assists on the remedy application because, as I have explained, the jurisdiction is not a penal jurisdiction but one in which the court seeks to find what is just and appropriate to put, as the judge put it at one point, the genie back in the bottle, to put the position back as far as it can to the position whereby no legally professionally privileged material is available to the FSA or is in the warning notices.
21. Ground 5 in counsel's document dealt with the Grant Thornton point, which is not longer pursued because of the decision in Prudential.
22. The next ground was that the judge should have quashed the warning notices. But since, in my judgment, there is no ground for giving permission to appeal against the warning notices, the judge was right to say that the protective warning notices fall out of the picture and that therefore there is no real prospect of success on this matter.
23. The next matter with which I must deal is ground 6 in the grounds of appeal, the cross-heading to which is the judge's erroneous conclusion that there would be no real prejudice caused to Mr Ford if the relevant FSA employees remained involved. The position is that Mr Ford is concerned that no person who was previously involved in this matter should continue to be involved. He wants, as I understand it, the FSA to come to his case with a completely fresh mind. What the judge held was that it would be disproportionate to remove the officials from this case in the light of his earlier conclusion that the material was, really, peripheral. That was his evaluation. Nothing has been put forward to suggest that that evaluation was wrong. Thus, in my judgment, there is no real prospect of success on this ground of appeal.
24. I would say that, as far as I can see, the Financial Services Authority would be under a continuing obligation to consider what action to take and whether it was appropriate to continue with action and that would apply whether or not there was a change of personnel dealing with the case and that the Financial Services Authority would have to act as a reputable public body. We obviously have not heard any argument on that but I make the point provisionally in the absence of argument that those would be my views as to its continuing responsibility.
25. Ground 7 was that the FSA took legal advice at all times, which I have dealt with.
26. Grounds 8 and 9 relate to the Grant Thornton matters, which I have referred to.
27. In all the circumstances, and the court has heard this matter for nearly 2 hours, I have come to the clear conclusion that there is no basis on which this court could give permission to appeal. Mr Ford has said that his integrity has been put in issue by the actions of the FSA. I can well understand that. He goes on to say that that entitles him to question the FSA's integrity as well. In my judgment, that does not follow. To bring a case in a court of law there must be material on which the court can act. In my judgment, for the purposes of the application for permission to appeal that has not been shown. I would therefore dismiss the application.
28. LORD JUSTICE BEATSON: I agree. I add three things. The application of the rules of natural justice and the principles of public law fairness at the preliminary stages of regulatory investigations has been a matter which has come before the courts in a number of cases. It is clear that there is a balance even at the preliminary stage between the need for regulatory bodies to be able to investigate and to make preliminary findings and the fairness to an individual who may, particularly in a complex investigation, find that the process takes a long time. Having considered the judge's judgment and the material in the documents put before us by Mr Ford, including his counsel's skeleton argument and his recent witness statement and the supporting documents, I am unable to discern a ground upon which it can be said that the judge erred in relation to this question.
29. Grounds 2 and 6 of the grounds of appeal contend that the judge should have proceeded on the basis that he had no discretion but to quash the warning notice and that he erred in considering that there was no real prejudice to Mr Ford if the employees who had seen the privileged material continued to act together. The latter was, as my Lady has stated, a question of evaluation. There is no material before us which suggests that the judge made an error of principle, failed to take account of anything relevant, or took into account any irrelevant matter in making his evaluation.
30. As far as the no discretion point is concerned, that is quite inconsistent with the approach that has been used in these contexts in the past. For example, in the decision in Koch Shipping Inc v Richard Butler (A Firm) [2002] EWCA Civ 1280, referred to by the judge at paragraph 36, Tuckey LJ referred to the need for the courts to assess whether there is a real risk or whether a risk is no more than fanciful or theoretical.
31. For those additional reasons, as well as all the reasons Arden LJ has given, I have concluded that Mr Ford has not put material before us which enables us to say that there is more than a fanciful prospect of setting aside the judge's order on appeal.
32. I appreciate the strength of his feeling about what has happened to him in this regulatory process. He has said that he is more than ready to defend himself if he can do so in a fair procedure. The fact that he has no confidence in those officials of the FSA who have been involved in the past being involved is no doubt something that the FSA will take into account as they decide how to proceed. But absent specific reasons for impugning the impartiality of the individuals involved, the mere fact that they will have seen the documents, and before they were found to be privileged, to have used them is not enough to put into question their ability as quasi-public servants of a regulatory body, to act as such persons should.
33. LADY JUSTICE ARDEN: Are there any other applications? No. Thank you.