England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th December 2006

The Honourable Mr Justice David Richards :

1. By this application under CPR 31.19 (5), the claimant challenges the claim of the defendants to withhold inspection of certain documents under CPR 31.19 (3). The documents in question were for the most part sent to the defendants by the Financial Services Authority (FSA), and to the first and second defendants (Aberdeen) by the Jersey Financial Services Commission (JFSC), in the course of investigations undertaken by those authorities. The documents include in particular transcripts of interviews conducted by the FSA and the JFSC with employees or former employees of the defendants. The claims to withhold inspection are based on section 348 of the Financial Services and Markets Act 2000 (the Act) and similar legislation in Jersey, to which I shall refer. It is submitted that these provisions prohibit the disclosure of the documents and that disclosure would constitute a criminal offence. The FSA was notified of the application and provided with copies of the parties' skeleton arguments. It indicated that it did not wish to be heard.
2. The action relates to the flotation of the claimant Real Estate Opportunities Limited (REO) in June 2001 and the subsequent management of its "income portfolio". REO was floated with a split capital structure, comprising 300 million ordinary shares, 75 million zero dividend preference shares and £125 million convertible unsecured loan stock. Its assets comprised a property portfolio invested in real property in the United Kingdom and Ireland and an income portfolio invested in income-producing shares and other securities. Substantial investments for the account of the income portfolio were made in shares and securities issued by other split capital investment companies. Aberdeen was one of the leading fund managers of split capital investment companies. The third defendant (UBS) is an investment bank which had considerable experience in the market for such companies (the splits market).
3. It is REO's case that in the months preceding flotation the proposal to create and float REO was developed by Aberdeen with the assistance of others, including in particular UBS which was appointed as sponsor to the flotation. It contends that the defendants owed duties of care in tort and that Aberdeen owed contractual duties as regards the advice provided as regards the flotation, the financial model to be adopted by it and its investment objectives and policy and that they were in breach of these duties. The claims relate in particular to the substantial level of subscription for new ordinary shares and loan stock of REO made by split capital investment companies using shares in other such companies held by them in their portfolios.
4. Aberdeen was appointed by REO to provide investment management services and REO claims that, in the period after flotation, Aberdeen acted in breach of duty, in particular by making investments in securities of other split capital investment companies.
5. The collapse of the splits market in 2001 led to investigations by the FSA. It used its statutory powers to compel the attendance of witnesses, the provision of information and the production of documents. The investigations encompassed both firms as "authorised persons" under the Act and individual officers and employees of the firms as "approved persons". The areas of investigation included the level of public understanding of the risks associated with investing in split capital investment companies, the use of stock swaps on the flotation of such companies and the possibility of collusion among the principal investment managers specialising in the market. The period covered by the investigations was September 2000 to February 2002.
6. This process culminated in a settlement between the FSA and most of the firms involved in the investigation, including Aberdeen and UBS. It involved the creation of a £194 million fund to compensate investors in zero dividend preference shares, to which Aberdeen contributed about £74 million. Contributions to the fund were made expressly without admission of liability. The FSA made no determination of regulatory breaches and imposed no penalties on any of the firms or individuals involved. Certain individuals agreed to provide various undertakings to the FSA. These included Christopher Fishwick, the former chief executive of the second defendant Aberdeen Asset Managers Limited, who undertook not to apply for any controlled function for a period of seven years.
7. A number of employees and former employees of Aberdeen and UBS were interviewed by the FSA in the course of the investigation, mostly under statutory powers. Aberdeen has not disclosed the number or identity of its present or former employees who were interviewed, but in a recently served witness statement, Mr Fishwick has stated that he was interviewed. UBS has confirmed that four of its employees were interviewed, but has not disclosed their names, although REO believes that they are likely to include two directors who were personally involved in the REO flotation. In each case, transcripts of the interviews were supplied by the FSA to Aberdeen or UBS (as the case may be) as the present or former employers of the interviewees, presumably because the interviews related to the activities of those companies.
8. The JFSC conducted its own review relating to split capital investment companies administered or marketed in Jersey. As a result of this review, it appointed in January 2003 inspectors to conduct an inquiry and report. This inquiry related to eight Jersey-based investment companies, including REO, and to the first defendant which was the fund manager of each of the companies. The scope of the inquiry included matters relating to the issues in the present case, including in particular investment decisions as regards REO's income portfolio. In December 2004, the JFSC announced that the investigation had been settled as part of the settlement with the FSA.
9. An unspecified number of employees and former employees of Aberdeen were interviewed in the course of the JFSC's inquiry and the transcripts were supplied to Aberdeen. UBS was not involved in this inquiry.
10. The documents withheld from inspection by Aberdeen are described in its list of documents as: (a) transcripts and tapes of interviews conducted by the FSA or on behalf of the JFSC, (b) documents received from the FSA in connection with its investigation of Aberdeen's management of split capital investment trusts or from the JFSC and the inspectors appointed by the JFSC, and (c) correspondence between the FSA or the JFSC and Aberdeen and employees of Aberdeen containing confidential information within the meaning of the relevant legislation.
11. The equivalent documents held by UBS are described in its list as follows:

"Documents comprising confidential information received by the Financial Services Authority for the purposes and in the discharge of the FSA's functions and obtained by the Third Defendant and its legal advisers from the FSA in the course of the FSA investigation into the split capital investment trust market, including transcripts of interviews held by the FSA with the employees of the Third Defendant."

12. Aberdeen and UBS accept that the documents withheld from inspection are relevant to the issues in the present case and satisfy the criteria for standard disclosure in CPR 31.6. For its part, REO seeks inspection only so far as the documents relate to the dealings of Aberdeen or UBS with REO and to their activities in the splits market generally. It is not seeking inspection of documents relating exclusively to third parties.
13. The central issue which arises is whether section 348 of the Act prohibits inspection of the transcripts and other documents supplied by the FSA to the defendants even if those documents do no more than record information provided by employees or former employees of the defendants to the FSA, being information which came to their knowledge in the course of their employment. REO submits that section 348 does not apply in those circumstances, but accepts that to the extent that the transcripts and other documents contain information supplied to the FSA by third parties and not previously known by the defendants or their employees, inspection is prohibited by section 348 and the documents should to that extent be redacted.
14. Although all the defendants objected in their lists to inspection of the withheld documents on the grounds that it was prohibited by section 348, there is now a significant difference between the positions of Aberdeen and UBS. UBS fully maintains the objection. Principally in light of the decision of the Court of Appeal in Arbuthnott v Fagan [1996] 1 LRLR 143, as Mr Howard on behalf of Aberdeen explained, Aberdeen accepts that section 348 does not apply to information which Aberdeen already knew before the documents were supplied to it by the FSA. It therefore accepts that section 348 does not prohibit inspection of the withheld documents in their totality, but they continue to object to giving inspection on the grounds that the process of redaction would be so extensive as to render inspection disproportionate and that inspection should therefore be refused under CPR 31.12. In the alternative, UBS adopts the same position. Neither Aberdeen nor UBS has stated this alternative objection in their lists, as required by CPR 31.3(2)(b), but REO was content that they should be treated as having done so.
15. Section 348 of the Act, so far as relevant provides as follows:

1) Confidential information must not be disclosed by a primary recipient, or by any person obtaining the information directly or indirectly from a primary recipient, without the consent of:

a) the person from whom the primary recipient obtained the information; and

b) if different, the person to whom it relates.

2) In this Part "confidential information" means information which:

a) relates to the business or other affairs of any person

b) was received by the primary recipient for the purposes of, or in the discharge of, any functions of the Authority, the competent authority for the purposes of Part VI or the Secretary of State under any provision made by or under this Act; and

c) is not prevented from being confidential information by subsection (4)

3) It is immaterial for the purposes of subsection (2) whether or not the information was received:

a) by virtue of a requirement to provide it imposed by or under this Act;

b) for other purposes as well as purposes mentioned in that subsection

4) Information is not confidential information if –

a) it has been made available to the public by virtue of being disclosed in any circumstances in which, or for the purposes for which, disclosure is not precluded by this section; or

b) it is in the form of a summary or collection of information so framed that it is not possible to ascertain from it information relating to any particular person.

5) Each of the following is a primary recipient for the purposes of this Part –

a) the Authority...

It is common ground that in this case the "primary recipient" was the FSA. It is convenient to refer to the recipients of information from the FSA, such as Aberdeen and UBS, as secondary recipients.

16. Section 349 provides for exceptions to the prohibition in section 348 where disclosure is (a) made for the purpose of facilitating the carrying out of a public function and (b) permitted by regulations made by the Treasury under section 349. Regulations have been made under the section: Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 SI 2001/2188, as amended by SI 2001/3437 and SI 2001/3624 and modified by SI 2001/2659 (the Disclosure Regulations). It is common ground that none of the permitted exceptions apply to the disclosure of documents in this action. Any disclosure by the FSA of confidential information involved in the supply of transcripts and other documents to Aberdeen or UBS was permitted by the Disclosure Regulations as being for the purpose of fulfilling its statutory functions.
17. Originally UBS also relied on regulation 7 of the Disclosure Regulations but no longer does so. As regards documents connected with the investigations in Jersey, Aberdeen relies on article 37 of the Financial Services (Jersey) Law 1998 and article 26 of the Collective Investment Funds (Jersey) Law 1988. It was common ground that these provisions are in substantially the same terms as section 348 of the Act and raised no separate issues. The parties' submissions were therefore directed to section 348, as is this judgment.
18. There is common ground on a number of matters. First, section 348 applies to information, not to documents per se. It does not prohibit the disclosure by a secondary recipient of documents supplied by the FSA, if they do not contain confidential information (as defined) obtained by the secondary recipient directly or indirectly from the FSA. Secondly, information must satisfy the cumulative criteria in section 348(2) to be "confidential information" for the purposes of section 348(1), but an absence of prior knowledge on the part of the secondary recipient is not one of those criteria. Thirdly, the issue of prior knowledge arises as a matter of construction of the opening lines of section 348(1), specifically whether a person who already knows the relevant information before it is provided to him by the FSA is a "person obtaining the information" from the FSA. Fourthly, the requirement for the consents to disclosure provided by section 348(1) applies only as regards information falling within the first part of the sub-section, that is confidential information obtained directly or indirectly from the FSA. Fifthly, the prohibition can apply only to information which the FSA has received from another person and does not therefore apply to information originating with the FSA. So, for example, the identity of interviewees or the dates of their interviews is not confidential information.
19. UBS accepts that if it possesses information independently of the FSA, such information will not as such fall within the prohibition imposed by section 348. Accordingly, any other documents containing the information will be subject to the usual disclosure rules. UBS would have to provide the information pursuant to a request for information under the Rules and its witnesses would be required to provide the information in answer to questions in cross-examination. However, UBS submits that if information independently known to it is contained in a document supplied to it by the FSA, the information in the form of that document is information obtained by it from the FSA and the document is therefore subject to section 348. This includes the case where the information in question was supplied to the FSA by UBS or its present or former employees.
20. Three possible situations may be noted. First, the secondary recipient may himself or itself have supplied the information to the FSA. This would most obviously be the case with a secondary recipient who was himself an interviewee to whom the FSA supplied a transcript of his evidence. Secondly, the secondary recipient may be a company whose present or former employees have been interviewed concerning the activities of their employer. They provide information which came to their knowledge in the course of their employment and transcripts of their evidence are supplied by the FSA to their employer. Thirdly, the FSA may provide to a secondary recipient in the form of transcripts or otherwise information which it has obtained from third parties but which the secondary recipient independently knows.
21. Mr Milligan for UBS submits that section 348 would apply to transcripts or other documents recording the relevant information and supplied by the FSA in all three of the situations described above. In support, he relied on three principal points. First, the word "obtained" in section 348(1) carried no connotation that the information was not previously known to the secondary recipient. Secondly, it would be contrary to the purpose of section 348 if a secondary recipient were permitted to disclose a transcript containing such information. Thirdly, it would lead to absurd results. I shall take each of these in turn.
22. As to the use of the word "obtained" in section 348, Mr Milligan contrasted it with "disclosed". He accepted and relied on the meaning of disclosure as requiring that the person to whom disclosure was made did not already know the information: see BCCI v Price Waterhouse [1998] Ch 84 at 101-102. By contrast "obtain" is a neutral word with no such connotation, especially where as here, Mr Milligan submitted, it was used interchangeably with "receive": see sub-sections (1)(a) and (2)(b) of section 348 and the definition of recipient in section 349(4). If it had been intended that the prohibition should not apply where the secondary recipient already knew the information, "disclosed" and cognate words would have been used instead of "obtained".
23. However, as Mr Sumption for REO submitted, as a matter of ordinary language, information is not "obtained" by a person who already knows it and, in the context of section 348, the word is used as the counterpart to "disclose", describing the process by which a recipient comes into possession of information disclosed to him: see sections 348(1) and 349(1).
24. Mr Sumption's construction is supported by a decision of the Court of Appeal and a decision at first instance. In Arbuthnott v Fagan [1996] 1 LRLR 143, a party was ordered to permit inspection of the transcripts of evidence of its employees to a Lloyd's loss review committee, notwithstanding a provision of the relevant Lloyd's byelaw in terms similar to section 348. The byelaw was made under statutory authority and provided that subject to certain exceptions:

"no information obtained pursuant to any exercise of powers under Lloyd's Acts 1871 to 1982 (or any byelaw or regulation made thereunder) shall be disclosed without the consent of (a) the person from whom it was received; and (b) (if different) the person whom it concerns."

25. In his judgment, with which the other members of the Court of Appeal agreed, Staughton LJ expressed his doubts that a byelaw made pursuant to a private Act of Parliament was concerned with discovery in a civil action but continued (at p. 153):

"If, however my doubts are unfounded and the prohibition in the byelaw does affect the obligation of discovery in a civil action, in my judgment it only applies to information which the member has obtained as the result of the exercise of powers under the Lloyd's Acts. It does not apply to information which he already had before those powers were invoked. That was the Judge's view, and I agree with it. It meets the mischief which the byelaw was no doubt intended to prevent; people should not be required or allowed to disclose that which they learn by the exercise of Lloyd's powers. So the members of the Neill Committee would not be allowed to disclose the transcripts. But there is no prohibition on the members agents doing so.

The members agents in the present case already had the information which was encapsulated in their evidence to the loss review committee. It is true that the proceedings of that committee placed it in a convenient package - the transcript produced by the shorthand writers. That is a bonus for the Names, who might otherwise have had to extract it from the members' agents by a most laborious collection of interrogatories, if at all. But I can see no reason to deny them that bonus."

26. It seems clear, and Mr Milligan for UBS accepted, that the above passage contained the ratio for the decision of the Court of Appeal. Mr Milligan also accepted that there was for present purposes no material distinction between the terms of the byelaw and section 348.
27. In In re Galileo Ltd [1999] Ch 100, Lightman J came to the same conclusion when considering section 82 of the Banking Act 1987. Section 82 is a direct predecessor to section 348, although confined to investigations into banks, and was expressed in very similar terms. The liquidator of Galileo Limited applied under section 236 of the Insolvency Act 1986 for an order against Hambros Bank requiring disclosure of the transcripts of evidence given by employees of Hambros and others to Norton Rose, who had been appointed under powers contained in the Banking Act to conduct an inquiry into the conduct of Hambros while it was acting as Galileo's financial adviser. The application was also treated as raising, as a matter of principle, whether such an order should be made against the interviewees individually. In considering whether section 82 would prohibit the disclosure of the transcripts, Lightman J said at pp113-114:

"The starting point in both cases is that section 82 places an embargo on information (oral or in writing) obtained by Norton Rose so far as it was communicated to Hambros and the interviewees. Nothing in section 82 prevents Hambros and the interviewees from disclosing to the liquidator without the need for any consent what they already knew and all underlying documents in their possession relating to the bid. What they must however be most careful to avoid is disclosure of any supplement to that knowledge furnished by Norton Rose.

I shall consider first the position of Hambros. It is clear that the report and the transcripts contain a considerable amount of fresh information previously unknown to Norton Rose (and so far as it is relevant to Hambros) relating to the business and other affairs of others beyond those of Galileo. Such information is clearly not disclosable to the liquidator in the absence of the required consents of Norton Rose and the informants and those to whom it relates (including Hambros) and it is common ground that these have not been forthcoming. The only issue can accordingly be whether the report and the transcripts can and should be redacted so as to edit out from the report and transcripts the embargoed material. Section 82 creates no bar against this exercise being undertaken. Whether or not this should be ordered is a question to be decided in exercising the jurisdiction under section 236 of the Act of 1986.

I turn next to the position of the interviewees. If and so far as the transcripts merely record the information communicated by the interviewees to Norton Rose, I can see no obstacle created by section 82 of the Act of 1987 to disclosure of them by the interviewees. What they already knew when they were interviewed and a record of such disclosures by them (as opposed to disclosures by Norton Rose or Hambros) would not constitute disclosure of information "received" or "obtained" under the section by them…

I therefore conclude that section 82 precludes any disclosure by Hambros of the entire report or transcripts which they have retained; at most it allows for disclosure of redacted versions."

28. Both these decisions are against the construction for which UBS contends. In In re Galileo Ltd, Lightman J held that the interviewees were not precluded by section 82 of the Banking Act 1987 from disclosing the transcripts of their interviews, provided there was redacted from them information which they had not previously known. This covers the first of the situations which I noted above. The second situation, involving disclosure by a company of the transcripts of interviews with its present and former employees, is covered by the decision in Arbuthnott v Fagan. The members' agency was ordered to disclose the transcripts of interviews with its present or former employees. No point was taken that a distinction should be made between the employer and the employees or that the knowledge of the employees was not also the knowledge of the employers.
29. Mr Milligan sought to distinguish Arbuthnott v Fagan on two bases. First, no argument was addressed as to the distinction between "disclose" and "obtain". This would not be a proper basis for not following a decision of the Court of Appeal but, in any event, the argument is not in my view well-founded for the reasons which I have already given. Secondly, and more substantially, the purposes of the Lloyd's byelaw, arising under private legislation, were different from section 348 and lacked the broader public interest concerns of the latter, to which I now turn.
30. Mr Milligan submitted that it would be contrary to the purpose of section 348 if it were construed so as to permit the disclosure by the secondary recipient of information in a document supplied by the FSA even though the information was previously and independently known to the secondary recipient. The purpose of section 348, like the Lloyd's byelaw, is in part to prevent the misuse by the FSA or secondary recipients of information received by the FSA for the purposes of its functions under the 2000 Act. In addition, Mr Milligan was in my view right in his submission that part of its purpose is to protect sources of information and encourage candour. Referring to the equivalent provisions of the Banking Act 1987, Lord Woolf MR, giving the judgment of the Court of Appeal in Barings Plc v Coopers & Lybrand [2000] 3 ALL ER 910 said at para 16:

"The maintenance of confidentiality under Pt V of the 1987 Act for information provided to the Bank is plainly of great importance. Protecting those who provide information to the Bank encourages voluntary disclosure from institutions, third parties and whistle blowers, any of whom might otherwise be unwilling to divulge material. The Bank is of the view that, absent such protection, it would be deprived of the raw material it requires for effective supervision."

In In re Galileo Ltd, Lightman J said at p 110:

"The maintenance of confidentiality as provided in section 82 is of vital importance to the discharge by the bank of its supervisory responsibilities under the Act of 1987. Confidentiality is vitally important to encourage the maximum free flow of information from supervised institutions and third parties whether such disclosure is obligatory or voluntary."

31. I would accept that the context of section 348 suggests a wider purpose for that section, more clearly rooted in the general public interest, than the Lloyd's byelaw. I do not, however, consider that such considerations lead to a different interpretation of provisions which are, as Mr Milligan accepted, in materially the same terms. The language of the byelaw was not tailor-made but involved the use of standard language used in a number of public Acts of Parliament with similar purposes to section 348. Examples include section 19 of the Banking Act 1979, section 82 of the Banking Act 1987, and section 179 of the Financial Services Act 1986. An older example of similar language is section 17(2) of the Agricultural Marketing Act 1931 to which Laddie J refers in BCCI v Price Waterhouse at p.104. With substantially the same formulation being used in a wide variety of contexts, the expectation must be that they should carry the same meaning, in the absence of a clear indication to the contrary in any particular enactment. Further, the same view was taken by Lightman J in In re Galileo Ltd on section 82 of the Banking Act 1987, which shares a common context and purpose with section 348, at least as regards disclosure by an interviewee of transcripts of his interviews recording information provided by him to the FSA.
32. By contrast, there is no obvious purpose served by restricting the disclosure of information already known to a person, simply because it is recorded in a document supplied by the FSA. This does not interfere with the protection of sources and in particular whistle-blowers. In the present case, the issue concerns the transcripts of the interviews with present and former employees of Aberdeen and UBS. If any of them were whistle-blowers, their position was compromised by the decision of the FSA to supply the transcripts to their employers. In fact, it is not suggested that any of them were whistle-blowers. Mr Milligan raised the issue of interviews with third parties and the protection of those third parties if transcripts of their interviews were supplied by the FSA to secondary recipients. This has not occurred in the present case and it raises issues which do not now need to be decided. However, it may well be the case that the fact of the third party's knowledge of particular information, if not previously known to the secondary recipient, would be protected from disclosure.
33. As to absurd results, Mr Milligan gave two instances. First, the FSA might receive confidential information from one source which it was therefore prohibited from disclosing. It would be absurd if it could then disclose the same information, if it received it a second time from another source, on the grounds that it already knew the information from the first source. The answer to this, as it seems to me, is that disclosure of the information when received a second time would necessarily constitute disclosure of the information previously received and would therefore be prohibited. The second example involved the FSA sending to a secondary recipient a draft report containing confidential information not previously known to the secondary recipient, followed later by the final report containing the same information. It would be absurd if the secondary recipient could disclose the final report because it already knew the confidential information from the draft report. The answer to this example is the same as to the first. Disclosure of the final report would involve a prohibited disclosure of the information previously supplied in the draft report. These examples do not provide an analogy with the case where a secondary recipient already knew the information independently of any disclosure to it by the FSA. By contrast, it would strike me as absurd if section 348 were construed to prohibit a person from disclosing a transcript of information given by that person to the FSA, when he was not prohibited from disclosing the information itself.
34. My conclusion is therefore that section 348 does not prohibit the disclosure by a secondary recipient of transcripts either of his own interviews with the FSA or of interviews by the FSA with present or former employees of the secondary recipient, insofar as the transcripts contain information already and independently known to the secondary recipient.
35. This leads to the further issue which arises where, as here, the secondary recipient is a company and the information obtained by the FSA was provided in interviews by present and former employees of the secondary recipient. What constitutes the prior knowledge of the company? A company can only have knowledge through the knowledge of its officers, employees or other agents and Mr Sumption submits that the usual rules of attribution will identify the information which was already within the knowledge of the company. If, as I have held, an individual secondary recipient is not prohibited from disclosing a document supplied by the FSA and containing information already known to him, it should follow that the same applies to a corporate secondary recipient, applying the rules of attribution.
36. Mr Milligan submitted that applying any rules of attribution of knowledge in this context was unworkable. However, none of his examples in my view supported his submission. First, he asked what the position would be if the interviewee was a former employee and the current employees of the company did not have his knowledge. The answer is that assuming the relevant knowledge of the former employees was properly attributable to the company, the company would have that knowledge and the lack of knowledge on the part of present employees would be irrelevant. His second example related to information which an employee had learnt in the course of his employment but had forgotten until reminded by the FSA before or at the interview. This information would be attributed to the company from the time that the employee first learnt it. His third example related to mistaken evidence given by a present or former employee. A misstatement is not information. Fourthly, what was the position as regards the contradictory evidence of two employees. This is no different from the second example. The correct evidence will, if properly attributable, be information within the employer's knowledge and the incorrect evidence is not information.
37. Mr Milligan submitted that it would be difficult to identify those employees whose knowledge should be attributed to the company. I think it unlikely that any significant difficulty will arise. Knowledge acquired by an employee in the course and for the purpose of his employment is properly attributable to the employer. This is knowledge of the type characterised by Hoffmann LJ in El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685 at 703 as cases in which an agent has actual or ostensible authority to receive communications, whether informative or performative. See also Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 506 B-G and 507 B-C. No issue here arises as to any special rule of attribution applicable to determine a company's liability for a criminal offence, as discussed in the Meridian case.
38. UBS has not disclosed the identities of its employees who were interviewed by the FSA, but, while it is impossible to be certain at this stage, it seems likely that their knowledge will be attributable to UBS. There is no suggestion in the evidence that there was any reason for interviewing them except that they were employees of UBS during the whole or part of the period under investigation and were involved as employees of UBS in the relevant activities. The fact that some or all of them may themselves have been "approved persons" and answerable personally for their conduct does not mean that their activities were carried on, and their knowledge gained, other than as employees of UBS.
39. In the case of Aberdeen, which has also not identified the relevant employees, there are additional issues not relevant to UBS. Specifically, some of its employees were also directors of investment trusts whose portfolios were managed under contract by Aberdeen. The question arises as to whether their knowledge of the affairs of a particular trust is to be attributed to Aberdeen. I do not have evidence of any actual instances but I doubt whether any real difficulty will arise. As a general rule, the directors of investment trusts do not undertake executive functions as directors but meet on, perhaps, a quarterly basis to receive reports from the fund managers, to determine investment policy, and to consider other matters relating to the trust. Knowledge obtained by an individual while performing his functions and duties as a director of the trust would be attributable to the trust and not, as a general proposition, to Aberdeen. However, in the performance of Aberdeen's contractual functions as fund manager, an employee of Aberdeen will be acting as an employee of Aberdeen and not (or not only) as a director of the investment trust. Knowledge acquired by him in those circumstances will be attributable to Aberdeen.
40. I therefore conclude that transcripts of interviews with present and former employees of Aberdeen and UBS are disclosable by those companies in these proceedings, except and to the extent that they contain information which was not previously known to them, applying for these purpose the ordinary rules of attribution. The exceptional material will therefore be either confidential information (as defined) put by the FSA to the interviewee or information known to the employee but not attributable to his employer.
41. Aberdeen and UBS accept that, if section 348 does not prohibit the inspection of transcripts and other documents supplied by the FSA in their entirety, the documents could be redacted so as to excise information not previously known to them. However, they submit that the cost and difficulty of doing so, particularly when set against the value of what would be left, would make this a disproportionate exercise, and that accordingly the court should exercise its discretion under CPR 31.12 to refuse to order inspection.
42. The principal point made by Aberdeen and UBS is that in the course of the interviews with their present and former employees the FSA has put to the interviewees information gathered from third parties and not previously known to Aberdeen or UBS (as the case may be). In addition, some interviewees were provided in advance with materials prepared by the FSA and based on a large number of sources including material from third parties as well as from their employers. As regards information given by the FSA as part of the questions asked, Mr Marks, a partner in Aberdeen's solicitors, says in his witness statement:

"It is a task of some complexity even to identify all the information which may be contained in any given question and each interview contains a large number of such questions."

43. It might also be that answers contain information which the interviewee had not acquired in the course of his employment with Aberdeen or UBS, but it seems unlikely that this would be so much of a problem. There is no evidence that the interviewees had sources of information other than their employment and information provided by the FSA, and, in the case of some Aberdeen employees, their additional positions as directors of funds and trusts. It appears to me unlikely that there will be much information acquired by the employees in those other capacities which was not also known to them as employees of Aberdeen.
44. In his witness statement Mr Marks gives evidence of the difficulties involved in producing redacted versions of the transcripts. He states:

"41. I have considered whether it would be possible to redact the interview transcripts so as to permit inspection of relevant parts which do not contain confidential information within the meaning of section 348…

42. My firm has undertaken a review of the interview transcripts for relevance, which has involved my assistants and myself in reviewing these documents in detail. Having been through this exercise, I have given considerable thought to whether a further exercise of redaction could be carried out, but I have reached the very clear conclusion that it would be well nigh impossible and certainly not possible within any sensible limits as to time and cost and without taking some risk of accidentally disclosing protected information.

43. The reasons why I have formed the view that redaction would not be possible include the following:

a. The length of the transcripts. Each interview transcript ranges from approximately 75 to 180 pages in length. The total number of pages of all interview transcripts is in the region of 3000;

b. The complexity and difficulty of the task of identifying what information is included in each part of each document;

c. The need to identify the persons that each piece of information (a) relates to and (b) come from;

d. In relation to information which may belong to or concern employees of Aberdeen, or REO, or UBSW, it may be very difficult to establish whether a particular piece of information known to an individual was known to him in his capacity as agent for another trust. Furthermore, it may not have been obtained by the FSA from Aberdeen or REO in those circumstances;

e. The complexity of working out which parts of the documents are relevant to the pleaded issues is, of course, overlayed onto the foregoing difficulties;

f. The fact that a single mistake in all of the literally thousands of decisions set out above would result in potential criminal liability, both for Aberdeen and for the lawyers involved; and

g. In many cases, the finally redacted document would contain nothing, or not very much, of any value, because the amount of redaction necessary would render it meaningless or positively misleading.

44. In particular, as I have mentioned above, the disputed documents contain information which related not only to the business or other affairs of Aberdeen, but to the affairs of a considerable number of individuals and entities going far beyond Aberdeen. This number includes, of course, the interviewees themselves. I have considered by way of illustration a five-page sample from an interview transcript of a former Aberdeen employee. In this sample, the questions and answers refer to the business or other affairs of some twenty four (24) individuals, partnerships, corporations and corporate groups, not including Aberdeen or REO."

45. Mr Marks' conclusions are in part based on a misunderstanding of the effect of section 348 on the transcripts. He refers in paragraphs 43 (b) and (c) and 44 and elsewhere to the need to identify the persons to whom each piece of information related and the source of each piece of information, and to the need to obtain their consents to disclosure. This exercise is not required where the relevant information was known to Aberdeen and for this purpose information acquired by the interviewee in the course of his employment by Aberdeen will have been known by Aberdeen. If it is apparent from the interviewee's answer that he knew the information, it can be assumed to have been known by him as an employee, unless the contrary is indicated. If a third party source is identified in the transcript, the name or other identification should be redacted.
46. I accept that the task of redacting the transcripts is onerous, particularly as regards information supplied by the FSA in its questions. However, I bear in mind Mr Marks' own description of the interview process as consisting of "question and answer sessions relating to the individuals' recollection of past events." Likewise, Mr Allen, a partner in UBS's solicitors, states that the interviewees did most of the talking in the interviews. Save where those recollections come from knowledge acquired otherwise than in the course of the interviewee's employment by Aberdeen or UBS, their recollections will be information already known to Aberdeen or UBS. These recollections were provided in 2002 and 2003 at a time much closer to the relevant events than the trial of this action fixed for mid-2007 and may well be of significant value.
47. In my judgment, the balance of likely value as against the problems associated with redaction favour an order for inspection, rather than a refusal of inspection.
48. Both Aberdeen and UBS rely on factors listed by Lightman J in In re Galileo Ltd at pp 114-115:

"I should first say a few words on redaction. The jurisdiction of the court under section 236 to order disclosure of facts or documents is subject to the limitations imposed by the need to comply with section 82 of the Banking Act 1987. Speaking quite generally I have no doubt that the court has jurisdiction to order, and in appropriate cases has ordered, production of documents subject to redaction of material whose disclosure for any of a multitude of reasons may be unnecessary or undesirable or unlawful. Accordingly, I have jurisdiction to order Hambros and the interviewees to provide redacted copies of the report and the transcripts which exclude information whose disclosure is objectionable under section 82 of the Act of 1987. But in a case such as the present, concerned with information embargoed by section 82 of the Act of 1987, that is a jurisdiction to be exercised with the greatest caution. There must be taken into account a number of factors of some importance, for example: (1) the making of such an order may be seen as undermining the protection afforded by section 82; the possibility of this exercise being required or undertaken may prejudice the free flow of information to the bank; (2) the difficulty of the exercise. The exercise can only be undertaken by a person with lawful access to the embargoed information. For this reason the liquidator assigns the task in respect of the report and transcripts in Hambros' possession to Hambros. But Hambros may well need the assistance of Norton Rose and the interviewees to identify the supplemental information disclosed by Norton Rose. Likewise the interviewees will in all likelihood require the assistance of Norton Rose to redact their copies. The required assistance may not be provided readily or at all; (3) the risk that an erroneous omission to edit out a passage may constitute a criminal offence; (4) the danger that the redacted document (by reason of the excisions) may prove misleading; and (5) the problems which may be created by such disclosure, e.g. for a witness at a trial or on an examination by the liquidator faced with a truncated document and required to answer questions on it, yet barred from explaining his answers by reference to the passages omitted. In short the process may be time consuming, complicated, expensive and (on occasion) impracticable, and the end product may be of dubious value."

49. As appears from that passage, Lightman J was concerned with whether to make an order for the production of documents to a liquidator under section 236 of the Insolvency Act 1986. By that section, the court is given a broad discretion, to be exercised in accordance with the principles established in authorities such as In re British and Commonwealth Holdings Plc (Nos 1 and 2) [1993] AC 426. As appears from pp 116-117 of the judgment, Lightman J took account of a wide range of factors in reaching his decision to refuse an order under section 236 for the production of redacted transcripts. It was a relevant factor, and one which was significant in the judge's decision to refuse an order under section 236, that the liquidator would have ready access to the information contained in the transcripts by seeking the information directly from the interviewees and if necessary obtaining orders against them under section 236: pp 109 and 115.
50. The discretion given to the court by CPR 31.12 is different. The right of a party to refuse inspection of a relevant document is that it would be disproportionate and the court's task under CPR 31.12 is to determine whether that is so. Ready access to the relevant document by some other means could well be a relevant factor, but it is not available to REO in this case.
51. That is not to say that at least some of the factors to which Lightman J refers may not also be relevant on an application under CPR 31 and I turn now to consider them. The first, undermining the protection afforded by section 82 (section 348 in this case), is not in my judgment applicable to the present application. Full effect must be given to section 348 by redaction of all prohibited information but, once that has been done, neither the section nor its underlying policy could justify a refusal to allow inspection under CPR 31. The second, the difficulty of the exercise, is a factor which I have already considered. In contrast to the case before Lightman J, I am not satisfied, on the evidence before me, that Aberdeen and UBS will require assistance from the interviewees or from the FSA.
52. The third factor is the risk that an erroneous omission to redact a passage may constitute a criminal offence. Care must of course be taken in the process of redaction but the concern must not be overstated. In Bank of Credit and Commerce International (Overseas) Ltd v Price Waterhouse, to which Lightman J referred in his judgment, although not specifically on this point, Laddie J held that section 82 of the Banking Act 1987 created an absolute offence. The risk of inadvertently committing an offence was on that basis significant. In Barings plc v Coopers & Lyband, the Court of Appeal overruled Laddie J, and held that section 82 required "mens rea in the normal way". In giving the judgment of the court, Lord Woolf MR said at para 39:

"An offence is, then, only committed if the person alleged to have committed the offence had knowledge of the circumstances which mean that the information is information to which section 82(1) applies."

The position as regards a breach of section 348 is that disclosure of information in contravention of section 348 is an offence (section 352(1)) but it is a defence for the accused to prove that he took all reasonable precautions and exercised all due diligence to avoid committing the offence (section 352 (6)(b)). If Aberdeen and UBS apply the approach set out in this judgement, it appears to me that they will not commit an offence.

53. In this context it was submitted for UBS that Aberdeen and UBS could not take legal advice as to whether a particular passage should be redacted because, if its disclosure was prohibited, it could not be shown by Aberdeen or UBS to their legal advisers. This was a curious submission because, as the evidence makes clear, their legal advisers already have the transcripts, which they have read and scrutinised. In my judgment this involves no breach of section 348. The solicitors have received the transcripts as agents for Aberdeen and UBS. It would in any case be extraordinary if the section were construed as preventing the parties from showing the transcripts to their lawyers for the purposes of taking legal advice on their obligations as regards the transcripts.
54. The fourth and fifth factors listed by Lightman J and relied on by Aberdeen and UBS were the danger that, once redacted, the transcripts might be misleading and the problems which could arise at trial. These are, as it seems to me, matters for the trial judge and the mere possibility of such risks does not in my view justify a refusal to order inspection of redacted transcripts.
55. A further submission made on behalf of UBS was that inspection of redacted transcripts by REO would serve no useful purpose in the litigation, because REO would itself be an indirect secondary recipient of the confidential information contained in the redacted transcripts and so subject to the restriction on disclosure in section 348. This would prevent REO from disclosing the transcripts in court. I reject this submission. The information contained in the redacted transcripts will be information which has not been obtained within the meaning of section 348 by Aberdeen and UBS from the FSA. Nor therefore will REO indirectly obtain the information from the FSA when disclosed to it by Aberdeen and UBS in the redacted transcripts.
56. A particular point was raised by Mr Milligan as regards warning notices sent by the FSA under section 385 of the Act. He submitted that inspection of them was prohibited by section 391(1) which provides that neither the FSA nor a person to whom a warning notice is given or copied "may publish the notice or any details concerning it." Mr Milligan submitted that inspection would involve the defendants in publishing the notices. I do not accept this submission. While "publish" carries a range of meanings in different contexts, its ordinary meaning is to make known to the public or a section of the public. In the context of the Act, it is to be contrasted with the word "disclose" used in section 348. Inspection by parties to litigation in accordance with, and subject to the restrictions imposed by, rules of court is not in my judgment publication for the purposes of section 391. Use of the warning notice or its contents in open court might involve publication, but the court can take steps, such as imposing reporting restrictions or sitting in private, to deal with it.
57. I therefore order the defendants to permit inspection of the documents in issue, subject to redaction in accordance with the principles set out in this judgment. It has been agreed that prior notice should be given to the individual interviewees, to enable them to raise objections referable to their particular circumstances.
58. A separate point was raised as to the listing of documents. The withheld documents should have been separately listed, except where the description of the document would itself disclose confidential information contrary to section 348, e.g. minutes of a board meeting of a third party company held on a particular date.