UK: High Court Finds Unfairness in Disclosure of Pharmaceutical Company´s Dawn Raided Documents

In the United Kingdom as in other countries, pharmaceutical companies, among others, have had their premises raided by regulators such as the Serious Fraud Office and competition and fair trade authorities. The investigative powers of such regulators are broad, enabling the seizure of significant amounts of commercially sensitive documentation. Once seized, there is the prospect that it may be disclosed to other regulators who may, in turn, use it for their own regulatory or civil actions. Questions arise as to the scope of procedural fairness required when such disclosure is proposed. In the recent case of R v Director of the Serious Fraud Office & Secretary of State for Health [2003] EWHC 3002 (Admin) (1), decided on 17 December 2003, the English High Court held that procedural fairness required the Serious Fraud Office ("SFO") to notify Kent Pharmaceuticals ("KP") of proposed disclosures of seized documents to the Department of Health ("DOH") and give KP sufficient time to make representations on the proposed disclosures. The Court also held that after-the-event notice of disclosure was required where the SFO had not notified KP before disclosure took place.

The case arose out of an ongoing SFO investigation into suspected fraud regarding the supply of generic drugs to the National Health Service ("NHS"). (2) Following its receipt of information suggesting that various companies had acted unlawfully in concert so as to increase the price of certain generic drugs (Warfarin and penicillin-based antibiotics), the SFO obtained search warrants under the Criminal Justice Act 1987 ("CJA") and raided the premises of, among other companies, KP. The warrants authorised the SFO to search for and take possession of, among other things, correspondence, notes of meetings at which a conspiracy was alleged to have been discussed, audit papers, accounting records, price lists, external market data, emails, board minutes and internal communications. The warrants were executed in April 2002 and a large amount of material was seized.

On 13 January 2003 the SFO wrote to KP's legal advisors (and those representing the other raided companies) stating that the DOH urgently required access to Warfarin related documents. The SFO stated further that it expected to send "this week" to the relevant parties copies of certain Warfarin documents. (Under section 3(5)(a) of the CJA it has a discretion to disclose such documents to any other government department.) Shortly thereafter, the SFO disclosed Warfarin documents to the DOH and on 16 January notified KP's and the other companies' advisors that it had done so. In February the DOH commenced proceedings against KP and other companies claiming relief based on alleged agreements unlawfully to manipulate and increase the price at which Warfarin was supplied to the NHS. In April KP commenced judicial review proceedings against the SFO, during the course of which it learned that, in August 2003, the SFO had disclosed a further tranche of some 6,000 documents to the DOH.

In the High Court KP argued that:

• certain documents had been unlawfully seized in April 2002;

• the SFO's exercise of discretion to disclose the documents to the DOH was an unjustified interference with KP's right under Article 8 of the European Convention on Human Rights (right to respect for private life, home and correspondence) and therefore unlawful;

• the SFO failed to treat KP fairly because fairness required the SFO to give KP an opportunity to make representations on the proposed disclosures and to give sufficient time for this to happen; and

• the SFO also failed, in respect of the August 2003 disclosure to the DOH, to inform KP of the disclosure, thereby depriving it of the opportunity to take advice and, if appropriate, institute legal proceedings.

The High Court held that the SFO had acted lawfully when conducting its search of KP's premises but had acted unfairly in not giving KP sufficient notice of its disclosures to the DOH and in not informing KP, after the event, of the August 2003 disclosure.

As regards the unfairness in not giving KP sufficient notice of its disclosures to the DOH, the Court's starting point was that it was "axiomatic that the SFO was obliged to treat KP fairly", meaning that in its treatment of KP the SFO was subject to public law requirements of procedural fairness. The issue in this case was the ambit of those requirements. As noted above, KP's position was that fairness required the SFO to give KP the opportunity to make representations on the proposed disclosure and to give sufficient time for this to happen. And in this case, KP pointed out, it could not be said that it was not practicable or desirable to receive and consider KP's representations prior to the decision to disclose: the documents were KP's own documents and there was therefore no security risk in allowing KP to make representations. Moreover, KP was informed prior to the decision, but not in sufficient time to make meaningful representations. The SFO argued that there might be circumstances making it inappropriate to inform the person whose documents were to be disclosed; issues of public interest immunity or the identity of informants could be at stake. The problem the SFO faced, however, was that these problems were not present in this case. The Court said:

As regards the August disclosure, the Court said there was, however, no detriment to KP arising from the SFO itself not having informed KP because the DOH had done so in July, a fortnight before the disclosure occurred.

In judicial review proceedings breach of a public law obligation does not always mean that the court will grant a remedy. The court often has a discretion. In this case the Court said in its judgment that it had yet to receive submissions on relief. It did, however, indicate that relief in this sort of case might be exceptional. In responding to the SFO's concern about the risk of satellite litigation if post-disclosure notice were required, the Court said it could see little scope for such litigation. If the SFO were minded to disclose seized material to a public authority, which was a competent recipient under section 3 of the CJA, and the intended purpose fell within the normal functions of that recipient authority, "the circumstances in which a potential complainant would have any legitimate cause for complaint would be exceptional." (4) For this reason, said the Court, KP faced difficulty so far as the granting of relief was concerned. The Court noted that KP had made no representations following its notice in July of the forthcoming August disclosure and "even now KP seem[ed] somewhat coy about any meaningful representations it could have made." For these reasons the Court repeated its "scepticism about whether it would be appropriate to grant KP discretionary relief." (5)

Although not stated in the publicly available judgment, according to a press release on the SFO's website the Court refused to grant relief and also refused both KP and the SFO leave to appeal. The SFO stated it was considering seeking leave to appeal from the Court of Appeal. The current status of that step is unknown; when asked the SFO would not comment.

This case is significant for its recognition of the procedural fairness that companies in the position of KP ought to be afforded when a body like the Serious Fraud Office, for example, proposes to exercise a right to disclose raided documents to another authority – in particular, the opportunity to make representations on the proposed disclosure and sufficient time to do so. Assuming bodies like the SFO adhere to this standard in appropriate cases (and assuming this case is not overturned on appeal) instead of placing their bets on the courts not granting relief in the event of transgression, in some cases one effect of this decision may be at least a delay in the provision of raided documents to other government departments. The judgment does, however, have its limits. Consistent with the age-old statement that the requirements of procedural fairness are not cast in stone, the Court expressly recognised that in some cases the desirability of informing an interested party of a proposed disclosure may be overridden by other factors. Each case needs to be considered on its merits.

References

* Richard Best is a solicitor at international law firm Ashurst, Frankfurt; Solicitor (England and Wales), Barrister and Solicitor (New Zealand), Registered Foreign Lawyer (Frankfurt, Germany). This article is not intended to be a comprehensive survey of the subject-matter; readers should take legal advice before applying the information contained in the article to specific issues or transactions.

(1) The case is available in full-text on the website of the British and Irish Legal Information Institute: www.bailii.org/

(2) The companies concerned have publicly and strenuously denied any wrongdoing.

(3) Paragraph 32.

(4) Paragraph 36.

(5) Paragraph 37.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.