S, R (on the application of) v X

THE DEPUTY JUDGE: The defendant is X. It has a statutory power under the Z Act 2000 to investigate and make decisions, including decisions imposing financial penalties, in relation to a number of matters, including market abuse.

There are three claimants. The first claimant is a Canadian company in liquidation. The third claimant is another Canadian company. It owns the assets and the shares of the first claimant. The second claimant is an individual who is President and Chief Executive Officer of the first claimant and is the majority shareholder in the third claimant. The interests of the three claimants, for the purposes of the present litigation, are, to all intents and purposes, identical.

Following an investigation, the defendant issued a decision notice on 6 May 2011 in respect of the conduct of the first and second claimants, making numerous findings adverse to them, including findings that they had indulged in a practice known as layering, by means of which they had fixed the market in certain shares. X decided to impose a penalty of £8 million.

The claimants say that the decision notice contains a number of errors. They have exercised their right to refer the decision notice to the Upper Tribunal. That reference is, essentially, an appeal.

The Upper Tribunal may decide that the decision notice does have some or all of the defects that the claimants identify, but the defendant proposed to publish the decision notice tomorrow. The defendant has now agreed to extend the time for publication until the termination of the proceedings applying for permission for judicial review.

The claimants bring this claim, challenging the decision to publish, and seeking an injunction preventing publication until this claim is determined. There having been no earlier decision on the papers, I adjourned the permission application into court on the claimant's application this morning. I have heard from Mr Engelman for the claimants and Mr Otty, QC for the defendant. I am grateful to both of them for making themselves available at such short notice.

I do not need to deal in any detail with the process of investigation decision and reference. In Mr Otty's skeleton, he points out that a decision notice of the type under challenge follows detailed and largely private scrutiny and repeated opportunities to the person in question to make relevant representations. First, a decision is taken to appoint investigators. That decision is communicated to the person or company under investigation. Investigators gather evidence. A preliminary report is prepared and there is a copy provided to the person affected by it who is invited to make representations. Investigators then consider those representations and either close the investigation in response to them or prepare a final report. That report is a report to X's decision maker, the Y Committee. That Committee decides whether to issue a warning notice. If a warning notice is served, then there is further disclosure to the subject of the investigation, who has a further opportunity to make representations to the Y Committee, either orally or in writing. Again, as a result of those, X may decide to close the case, but if it does not, it issues a decision notice. The decision notice summarises the representations made and sets out the Committee's findings in relation to them.

But even a decision notice is not the end of the story. The person affected has, as I have indicated, the right to refer a decision notice to the Upper Tribunal. The proceedings of the Upper Tribunal are governed in part by sections 133 and 133A of the Act. What the process of referral to the Upper Tribunal, and the process, if there is no referral to the Upper Tribunal following the issue of a decision notice makes clear, is that the decision notice is, in fact, merely a provisional decision. If there is no reference to the Upper Tribunal, the decision notice is superseded by a final decision, normally 28 days after the issue of the decision notice. But the same 28 days following the issue of the decision notice are also the period limited by the relevant Rules for the claimant to refer the matter to the Upper Tribunal.

The Upper Tribunal has powers of case management in Rule 5 of the Tribunal Procedure (Upper Tribunal) Rules, which include a power to order that the effect of the decision notice which has been referred is to be suspended pending the determination of the reference. And in general, section 133A of the Act provides that X must not take the action specified in a decision notice pending determination of the matter by the Upper Tribunal or final determination following any appeal from the Upper Tribunal's decision.

That, then, is the general process involved in making such a decision as the one under challenge in these proceedings. These proceedings, as I have indicated, are not primarily concerned with the accuracy or legality of the decision notice itself. That has been referred to the Upper Tribunal and it is for the Upper Tribunal to make its decision on those issues. These proceedings are concerned with the publication of the decision letter.

What, then, are the rules about publication? Section 391 of the 2000 Act (as amended) contains the following provisions:

Subsections (2) and (3) contain provisions about notices of discontinuance, that is to say that the notices issued by X on deciding that it does not propose to continue with an investigation.

Subsections (4), (5) and (6) are important. They are as follows:

Before that date, it was perfectly clear from section 391, that publication was to take place only of decisions which were final or took effect. That is why I read out subsection (5) as well as subsections (4) and (6) to which I have been particularly referred in the course of the hearing today. Subsection (4), without its reference to decision notices, and subsection (5) show that the original provisions were for the publication of final decisions, that is to say, decisions which had taken effect. The insertion of references to the publication of decision notices made under the 2010 Act changes the impact of those provisions.

That is the statutory regime under which this claim has to be decided. I should refer also to provisions of the Upper Tribunal Rules. In those Rules there is, at Rule 14, a rule which applies to all cases before the Upper Tribunal, allowing the Upper Tribunal to make an order prohibiting the disclosure or publication of documents or information.

In Rule 3 of schedule 3 to the Rules there is a provision relating specifically to references of the sort in question in these proceedings. The Upper Tribunal is required to keep a register of references which is to be open to the public, but the Upper Tribunal may direct that certain particulars be excluded from the register.

The effect of those rules is that where there is a reference to the Upper Tribunal, the Upper Tribunal has power in appropriate cases to prevent the publication of certain material. The Upper Tribunal also has general power to regulate its proceedings and so may prevent publication of certain matters until final judgment, for example.

The power of X to publish its decisions and in particular decision notices is the subject of guidance which it has issued. The timetable is of some importance in the context of these proceedings. The provisions of the 2010 Act came into force, as I have indicated, on 12 October 2010. Shortly thereafter, on 14 October 2010, X consulted on how it should execrcise its new power to publish decision notices.

X indicated the way in which it proposed to exercise the power and indeed the duty given to it by the amendment to section 391(4). It proposed that X should publish a decision letter if there was a reference. It noted that there was no need to publish a decision notice if there was no reference because the decision notice would be superseded shortly by a final decision. But where there had been a reference, the decision notice would normally be published, and it is suggested that the reason for the need is the delay that necessarily occurs in tribunal proceedings.

The consultation closed on 14 December 2010, two months after it had begun, and I am told that the majority of respondents opposed that proposal.

X issued its guidance on 25 February 2011, to come into force on 6 March 2011. The guidance relevant to the present proceedings is contained at paragraphs 6.7, 6.8 and 6.8A. I will read it out:

The effect of the general principle in the guidance taken with the statute appears to be that, although in general X's decisions are not published until they are final, the decision notice will be published in one of two circumstances. The first is where it is necessary to publish it before the person affected has taken the decision whether to refer the matter to the tribunal. The reason for that is readily apparent and is set out in the guidance. The other occasion when a decision notice will be published is if the matter is referred to the tribunal and on such reference.

Thus, final decisions by X are normally published. Decision notices are published if there is an urgent need to do so; and are also published where there is no urgent need to do so if they are challenged by reference to the Upper Tribunal.

The claimants say, broadly speaking, that that cannot be right and in particular that it is not right in this case: the practice of publishing challenged decisions before the challenge is resolved is wrong in principle, is unfair to them in the circumstances of their own case, and nullifies the power of the Upper Tribunal to make orders preventing publication of material before it. It is further suggested on behalf of the claimants that publication of a decision notice at the point of referral to the tribunal might discourage a person affected by a decision notice from referring and that the European Convention on Human Rights and the Human Rights Act 1998 prevent X from acting as it has done.

The claim is put under a number of heads. I have reached the conclusion that very few of them are arguable but sufficient are arguable for me to grant permission.

The first head is a matter of statutory construction. The changed wording of section 391(4) of the 2010 Act means that, on its face, the provisions relating to decision notices and final notices are, as Mr Otty points out, identical. But the overriding structure of the section is arguably, nevertheless, that the normal procedure is that decisions be published when they are final.

The need to publish decision notices even when challenged is apparent in certain circumstances. The case which is exemplified in the guidance, where there is a need to publish a decision notice even before time for the person affected to decide whether to challenge it by way of reference to the Upper Tribunal has expired, is a good example of the reason why it was necessary for the legislator to insert provisions as to decision notices in section 391. But it does not follow from that that a general practice of transparency and decision making, which X commendably adopt, means that their approach to the appropriateness of publication of decision notices ought to be the same as their approach to the appropriateness of publishing final notices, or anything like it.

The question is the circumstances in which it will be appropriate to publish a challenged decision. The guidance indicates a general rule. It appears to me arguable that the guidance does not take a sufficiently nuanced approach to the difference between appropriateness as it applies to the publication of decision notices, and final notices. It is true that the guidance indicates that the decision would be made on a case-by-case basis and that an individual will have an opportunity to make representations. But the position is this: final decisions will be published, decisions of the tribunal will be published because they, too, are effectively final decisions, or final decisions on the investigation in question. Supervisory notices will be published when they take effect. But so far as decision notices are concerned, they will be published if there is a real need to publish them urgently. They will also be published after an expiry of only 28 days even in circumstances where there is no need to publish them urgently. That does not appear to me to be a rational approach to the question of appropriateness. It is for that reason arguable that the guidance is unlawful.

I am not, however, persuaded that a practice of publishing a decision notice at the point where the person affected decides to refer can be any dissuasion from referral. As Mr Otty pointed out, the position is that if there is no referral, the decision notice will transmute into a final notice and will, in any event, therefore be published. There simply is no basis upon which a person has an incentive not to refer arising out of the guidance.

The question of whether the practice of X is inconsistent with the Upper Tribunal's powers to order confidentiality, I will consider in a moment. But I deal before that with an important argument made by the claimant in relation to fairness, which depends on the timetable in relation to consultation which I have already set out.

In the present case, the investigation began in December 2007. The preliminary report was served nearly two years later, on 30 October 2009. It was from that stage that the first and second claimants had the opportunity to respond to the allegations being made by X. They made their first reply on 9 February 2010 and it is clear from the timetable in relation to the 2010 Act, which I have set out, that at that stage there was no possibility of the publication of a decision notice. That possibility only arose in October 2010.

The claimants say that their conduct of response to X's investigation has been prejudiced by the introduction, during the process, of the change to section 391(4), and the issuing of the guidance, which has had the effect that it has had in this case.

It appears to me that that might be an arguable point in another case but not this one. The consultation document showed X's view that from the coming into force of the legislation in October 2010 it has power to publish a decision notice. At that time, therefore, at the very latest - that is to say, if the claimants were not aware of the proposed statutory change before it came into force - at that time at the very latest, the claimant was aware that the decision notice might be published and that an appeal, a reference to the Upper Tribunal, would not necessarily delay publication of the notice.

The circumstances of the present case make it even more difficult for the claimants to establish any unfairness. That is because although the claimants' last written submissions were made on 4 February 2011, before the guidance came into force, after it did come into force, (despite what is now said about the prejudice to them in the way that they organised their representations) they said nothing to X inviting it to put off its decision so that they could make further representations now, that they knew that there was the possibility of a decision letter being published.

Further, I am told by Mr Otty that there was an opportunity for them to make oral representations on 30 March 2011, a time when they must have been well aware of the current guidance; that was an opportunity which they chose not to take.

I am therefore entirely unpersuaded that, on the facts of this case, it is arguable that the claimants were prejudiced by the timetable of introduction of the statutory changes in the guidance, or that there was any unfairness to them in applying the statutory change in whatever manner was lawful.

I turn then to powers of the Upper Tribunal to order confidentiality. The powers of the Upper Tribunal are the powers generally possessed by it in cases over which it has jurisdiction, combined with specific powers related to cases of this sort. The power is one which is, no doubt, appropriately exercised in certain cases. Mr Otty's submission is that there is simply no basis on the material before me indicating that the Upper Tribunal's power is one which should be exercised in favour of prohibition of publication in this case. That may be so, but it is not for the claimants to make their application to the Tribunal here. The position is that the Upper Tribunal has those powers and no doubt will exercise them in, but only in, proper cases. The Upper Tribunal has the same approach to the need for justice to be done in public as any other court. It may be that the question whether there be any order preventing publication is, in all cases, likely a priori to be decided against the applicant. It may even be that is likely in this case. Mr Otty's submission is that in cases where no proper argument for confidentiality has been made, X is in as good a position to decide on publication as the Tribunal is. I find that position difficult to accept. It is arguably wrong.

X makes its decision and communicates it by decision notice. In the proceedings before the Upper Tribunal, it will seek to defend that decision. No doubt X considers that its decision is right. No doubt also it is for that reason amongst others that X considers that that the decision should be published. But where a reference has been made to the Upper Tribunal it will be for the Upper Tribunal to decide whether the decision notice is right. The maker of the decision has no general basis for publishing a decision that may be wrong.

Further, if delay is considered to be a problem, the fact is that the reference will have been made within 28 days and there seems to me to be no good reason why, if an application is made to the Upper Tribunal for any order relating to confidentiality, X should not seek an early directions hearing to have that matter resolved. If it does so, then any danger of further unjustified delay in the publication of a decision notice will be resolved by a judicial body competent to deal with it. In those circumstances, it seems to me arguable that X has entirely failed to make out its case for publication by it in circumstances in which, ex hypothesi, the case is not one in which it thought that urgent publication, regardless of the decision to refer, was necessary in the interests of the public.

As I have said, the claimants rely also on the European Convention on Human Rights. I am not persuaded that the arguments adduced by Mr Engelman under that head add anything substantial to the case. So far as Article 6 is concerned, the point is, in my view, completely unarguable. The reference to the Upper Tribunal is the process required by Article 6 in the determination of the individual's rights. Incidentally, it may be difficult to show that the first and third claimants in this case have rights under the Human Rights Act.

The Article 8 point is perhaps of a little more substance, but not much more. In view of what I have already said, I do not need to express any concluded view on it. But the position may well be that X is amply able to show whatever justification might be necessary for publication, in a case where publication is appropriate.

So far as Article 1 of protocol 1 is concerned, there is no doubt that the £8 million fine amounts to possessions within the meaning of that Article but, again, there is no suggestion that the order for payment of the fine will be effective pending determination by the Upper Tribunal. Mr Engelman was therefore led to make a submission that reputation was a matter which counted as possessions within the meaning of that Article. He cited no authority on that topic and for that reason I do not regard that point as arguable either.

I have therefore granted permission on the points relating to statutory interpretation and to the legality of the guidance as an appropriate interpretation of “appropriate” in section 391(4). In the circumstances, I regard it appropriate also to grant the interim relief sought. I will hear counsel, but my suggestion is that the defendant be restrained from publishing the decision notice until the earlier of either determination of these proceedings or determination by the Upper Tribunal of an application made under Rule 14.

MR ENGELMAN: My Lord, we would prefer an order in the terms of page 19, which should read "restraining the defendant from publication over the hearing of the full application", but I suspect that the Upper Tribunal has different issues with which they are concerned. That is all I want to say on the form of relief, my Lord.

THE DEPUTY JUDGE: If the Upper Tribunal does not prohibit disclosure, is there some reason why X should not disclose? These are matters which you have taken into the public domain by appealing, by referring, subject to any order the Upper Tribunal may make.

MR ENGELMAN: All the Upper Tribunal will do, as I understand it, is they will restrict what goes into the register, which I understand is very limited anyway, and then the issue will be the question of publicity as it comes on. They may be looking at this at a different angle from that of X, is all I am saying. Different considerations.

MR OTTY: My Lord, we prefer your Lordship's formulation, not least because my learned friend's approach gives rise to the spectre of delay that we are concerned about. There would certainly be no prejudice to him were the Upper Tribunal to rule against him on his privacy application.

MR ENGELMAN: May I make just one comment please, my Lord. Your Lordship would say, if your Lordship accepts my learned friend's submissions, perhaps it should be until the determination of either these proceedings or the application for relief before the tribunal, without limiting it specifically to Rule 14.

MR OTTY: Well, no, my Lord, because that then allows my learned friend to say, right, the High Court has ordered that until final determination of the Upper Tribunal proceedings there can be no publication.

MR ENGELMAN: Whichever is the earlier, I should say, I accept that. I accept the qualification it should be whichever is the earlier.

MR OTTY: The two hypotheses as the earlier date are either final determination by the Upper Tribunal or conclusion of these proceedings.

THE DEPUTY JUDGE: Well, may we cut through this? The Upper Tribunal has an application in the reference. Let us see exactly what that is.

MR ENGELMAN: Paragraph F, my Lord.

THE DEPUTY JUDGE: It is not so much finding the paragraph, it is finding the document.

MR ENGELMAN: Yes. It is exhibit DJPM/2, it is the witness statement that was handed up to my Lord at the beginning of these proceedings so it will not be in the bundle.

THE DEPUTY JUDGE: Yes, that is an application under Rule 3 of schedule 3 to the Upper Tribunal Rules. It is not an application under Rule 14. Unless you make an application under Rule 14, the Upper Tribunal will publish, or will not prevent disclosure of any material before it. Is the appropriate outcome of these proceedings that there be an order in the terms I have suggested subject to your making an application to the Upper Tribunal under Rule 14 within, say, 14 days?

MR ENGELMAN: Certainly.

THE DEPUTY JUDGE: Then that produces the proceeding under Rule 14, which, if those representing X consider that there is undue delay in, they can get that application on before the Upper Tribunal.

MR ENGELMAN: Certainly. The only reason for pause is that the Upper Tribunal have taken the application made by those instructing me both being an application under schedule 3, Rule 3, and an application for privacy, under Rule 39. It is the letter which I handed up to my Lord, from them.

THE DEPUTY JUDGE: I think it would still be better. If that needs supplementing by an application under Rule 14 then that had better be done.

MR ENGELMAN: Certainly, my Lord.

THE DEPUTY JUDGE: So what I envisage is an order that X do not publish the decision notice or its contents or details of what it is, until the earlier of the outcome of the determination of the these proceedings or the Upper Tribunal's determination on issues relating to privacy, that order being conditional upon the claimants making an application under Rule 14 to the Upper Tribunal within 14 days.

MR ENGELMAN: Yes. Just for the avoidance of doubt, Rule 14 and Rule 39, I think, as well.

THE DEPUTY JUDGE: Yes, you say you have already made an application under Rule 39.

MR ENGELMAN: That is understood, that is fine.

THE DEPUTY JUDGE: “Subject to the claimants making all appropriate applications to the Upper Tribunal within 14 days”.

MR ENGELMAN: I am grateful, yes.

THE DEPUTY JUDGE: I had better leave counsel to draw that up and I will look at it in due course.

MR ENGELMAN: Yes.

MR OTTY: Yes.

THE DEPUTY JUDGE: Thank you all, specially you [shorthand reporter] for staying so late in order to be with us.

MR OTTY: Yes, I will echo our thanks to the court staff as well.

MR ENGELMAN: I have got two issues to raise with my Lord, if I may, but I do not want to interrupt.

MR OTTY: No, that is all I was going to say.

MR ENGELMAN: The first one relates to publication of this decision. It is an important matter for those in the financial services industry, both in this country and generally. I wonder if your Lordship will make a direction under CPR 39, I think it is, to have the identities of the parties deleted and referred to by letters instead so that your Lordship's decision can be published.

THE DEPUTY JUDGE: Well it is a permission decision and it would not normally be published or be citable. It does not seem to me very obvious that it would be appropriate to give the order to make it citable unless the proceedings are terminated following my decision. If there is no substantive decision then there may be reason to make this decision citable, but if the matter does proceed to a full hearing, then it is that decision rather than mine which should be the subject of any publication or reference, I should have thought.

MR ENGELMAN: Certainly, I am happy with that.

THE DEPUTY JUDGE: So far as publication of this decision is concerned, I think it is appropriate to make an order, despite Mr Otty’s reservations expressed at the beginning of the hearing In view of the content of the decision I have made, I will make an order that the parties to these proceedings be anonymised under CPR 39.2 in the usual terms.

MR ENGELMAN: I am very grateful. The other matter relates to costs. I ask for costs.

THE DEPUTY JUDGE: It seems to me that costs should be reserved.

MR ENGELMAN: Thank you.

MR OTTY: Thank you very much, my Lord.