The High Court judgement in R (Stewart Ford) v Financial
Services Authority [2012] EWHC 997 (Admin) has emphasised the
importance of legal professional privilege and that it does work
when properly implemented, but also demonstrated that winning the
legal argument does not necessarily provide the desired outcome.
The court ruled that privileged material should not have been used
by the FSA in issuing a warning notice, but nonetheless refused to
overturn the warning notice simply by virtue of the inclusion of
that material.
Keydata Investment Services Limited was in the business of
providing marketing and sales information and products to
independent financial advisers. The Financial Services Authority
(FSA) had reason to believe that certain FSA rules had been
contravened by Keydata with regards to the way they were selling
and marketing a particular product. As a result, the FSA carried
out investigations on Keydata. Irwin Mitchell advised Keydata as a
company and a number of their executives in a personal capacity
throughout the investigation process. While the investigation was
ongoing, Keydata was put into administration. Using their
compulsory powers, the FSA obtained a substantial volume of data
from Keydata's administrators, including Irwin Mitchell legally
privileged emails and attachments. The FSA obtained express
confirmation from the administrators that Keydata waived its legal
professional privilege in relation to such documentation. As a
result of the investigations the FSA's Regulatory Decisions
Committee (RDC) issued a warning notice against the claimant in
this case, who was one of the individual executives who had been
advised by Irwin Mitchell in a personal capacity.
The claimant's challenge was formed on the basis that the
emails in question were subject to joint legal privilege shared
between Keydata itself and the executives who had been personally
advised by Irwin Mitchell, and so should not have been used by the
FSA when drafting the warning notice. In the substantive judgement
the court agreed that joint interest privilege did apply as Irwin
Mitchell were acting for the executives personally as well as for
Keydata, therefore the FSA had acted unlawfully in using material
that was subject to legal professional privilege.
Despite the claimant's victory, the result was bittersweet.
The claimant, Mr Ford, argued that the warning notice to be quashed
as it referred to privileged material; and that any FSA member of
staff who had read the emails should have no further involvement in
the investigation going forward. Both arguments failed.
In relation to the warning notice, the court considered that the
use of emails was similar to the use of inadmissible evidence, and
could be dealt with by simply removing the privileged material from
the notice. The court did not accept that the warning notice would
not have been issued if it did not refer to the privileged
material; in fact the judge confirmed that the warning notice still
worked as a "coherent, seamless and powerful document"
even without reference to the privileged material. This was partly
because the substance of some of the privileged material referred
to in the warning notice could also be derived from other documents
over which no privilege was enjoyed. Disregarding the privileged
material was therefore unlikely to have a significant effect on the
FSA's decision to issue the notice. . The court held that it
would be erroneous to equate what the FSA had done with the public
law concept of "taking into account an irrelevant
matter". The judge did, however, agree with the claimant that
the FSA should use its best endeavours to retrieve and destroy all
hard and electronic copies of the privileged material and original
warning notice from employees.
With regards to the continuing involvement of FSA staff who had
read the privileged material, consideration was given to the
private law approach – whether a lawyer in possession of
privileged material should be restrained from acting. In this case
the FSA investigation was at such a late stage that to exclude all
of those who had been involved would significantly interrupt the
finalisation of the process. Also, the court's view was that
memory of the privileged materials held no significant advantage to
the FSA investigators. On that basis it would be
"disproportionate and contrary to public interest" to do
as the claimant desired in terms of bringing the investigation to a
conclusion. It seems therefore that the court placed
significant weight on the underlying public interest at the heart
of what the regulatory body was seeking to achieve.
The decision underlines that legal privilege which is properly put
in place will allow a party to withhold privileged material from a
regulator carrying out an investigation, however unauthorised use
of privileged material will not of itself invalidate action taken
by a regulator if there are other good grounds for the decision it
has reached.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 14/06/2012.
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