Canada Inc, R (on the application of) v The Financial Services Authority

MR JUSTICE WYN WILLIAMS: I have before me an application to restrain the defendant, the Financial Services Authority, from publishing a decision notice which it issued and which is dated 6 May 2011. By the terms of that notice the defendant notified Swift Trade Incorporation, the first claimant, that it had decided to impose upon it a financial penalty of £8m pursuant to section 123(1) of the Financial Services and Market Act 2000 for engaging in market abuse. Before considering the issues which arise in the application it is as well to set out at least selective parts of the relevant history.

Until 13 December 2010 Swift Trade Incorporation was a Canadian company incorporated in Toronto, Ontario. From 13 December 2010 it has been voluntarily wound up or whatever the correct expression is in Canadian law. However, over a significant period before its winding up or dissolution, its activities were under investigation by the defendant. The culmination of that investigation was the decision notice to which I have referred a short time ago, publication of which the claimant now wishes to restrain. Following the issue of the notice on 9 May 2011 the claimant sent an objection to the defendant, indicating their objection to the publication of the decision notice. Notwithstanding that objection, on 2 May 2011 the defendant decided to publish the decision notice, in the event that the decision was referred to the Upper Tribunal or, if not referred, there would be no publication of the decision notice but publication of a final notice which would follow automatically once the period for referral to the Upper Tribunal had expired.

The claimant determined to refer the decision notice to the Upper Tribunal. They did so upon a date which is not in the forefront of my mind but is probably late May or early June of this year. The claimant also thought it appropriate to commence these proceedings for judicial review. These proceedings were commenced in early June and, with commendable speed, the proceedings were placed before a judge who decided that the appropriate way to deal with both the issue of permission and the then extant application for interim relief was to convene an oral hearing.

The judge was Mr Mark Ockelton sitting as a Deputy Judge of the High Court. He conducted the oral hearing on 9 June 2011. On any view the judge took the view that the defendant had arguably behaved unlawfully in determining to publish the decision notice. I say that since the judge granted permission to the claimant to apply for judicial review of the decision to publish. He did so on two grounds, as it seems to me, from a reading of his judgment. I will return to those grounds shortly. In the light of his view that the claimant had established an arguable case that the defendant had acted unlawfully, he also thought it appropriate to grant interim relief.

It is necessary at this stage to identify the precise terms of the interim relief granted by the learned judge:

As it seems to me, the meaning to be given to that order is clear. The deputy judge envisaged that his interim relief would subsist on condition that an application as identified was made to the Upper Tribunal. Until that application was determined he made an order which permitted of the possibility, albeit a remote one, that the judicial review proceedings would have been concluded before the application before the Upper Tribunal, but I have no doubt that the reality of the judge's order was to grant interim relief until the Upper Tribunal had determined the application specified.

In accordance with the order of the deputy judge the claimants made the appropriate application to the Upper Tribunal. They made that application on 15 June 2011. On 20 July the hearing took place before an experienced judge of the Upper Tribunal, Sir Stephen Oliver. He did not give an extempore judgment but produced a reasoned written judgment on 2 August 2011. By the terms of his judgment he dismissed the application for an order that there should be no publication of the decision notice to which I have referred. Before dealing with the effect of that order, I should record that an application was made to the Upper Tribunal for leave to appeal against Sir Stevens Oliver's order. As I understand it that remains outstanding. There were further interim applications to seek to prevent Sir Stephen Oliver's order becoming public but they failed both before the Upper Tribunal and the Court of Appeal. Therefore, the effect of the order made in the Upper Tribunal was that the interim relief granted by the deputy judge in this court expired by affluxion of time on or about 16 August 2011.

Realising that that was to be the effect of what had occurred the claimant made an application to this court, in effect for a continuation of the injunctive relief. That was due to be heard by me on 18 August but by that stage no decision had been taken by the FSA about whether or not it was going to publish the decision notice. I say that no decision had been made. Obviously a decision had been made on 20 May but it was made clear to me that the defendant was going to consider again whether or not it was going to publish the decision and that this second decision would likely be made in the week commencing 22 August. That being the state of affairs I made an order adjourning the application for the continuation of an injunction to today's date, making directions on two alternative bases, namely if a decision to publish had been made there would be a hearing of the application for an injunction. If the decision by the defendant was that it did not intend to publish pending a hearing in the Upper Tribunal of the review of its decision, then an appropriate mechanism was set for determining the costs of this application.

On 23 August of this year a senior officer of the defendant — whether it is an officer or officers matters not — prepared a memorandum for consideration by the Acting Director of Enforcement of the defendant setting out the relevant material, as those officers saw it, upon which a decision about publication could be made. The memorandum runs to seven pages of fairly close typescript. On 24 August the Acting Director of Enforcement of the defendant decided that the decision notice would be published on or after 29 August 2011 unless such publication was restrained by this court or for that matter any higher court. So it is that I have to determine now whether to grant injunctive relief in the light of that history and background. There is another important aspect of the history and background to which I should refer.

Given that the Upper Tribunal had produced a reasoned judgment rejecting the application for a prohibition of the publication of the decision notice, and given that the judgment was itself a public judgment, there can be no doubt that a significant amount of material has come into the public domain which bears upon the issues with which the decision of this court is concerned. Essentially, it is in the public domain that the three claimants were the subject of the investigation which provoked the decision notice. It is in the public domain that they were adjudicated to have engaged in the practice of layering and that this was thought to be market abuse, and it is in the public domain that a fine of £8m has been imposed upon them. Essentially, therefore, it seems to me that Mr Engelman is correct when he says that there is in the public domain all the relevant conclusions to which the decision notice refers, but there is scant detail, that I accept, of the reasoning process or factual basis upon which those conclusions were based.

This being an application for an interim injunction it seems to me that the well established principles in American Cyanamid apply. It is first necessary for the claimant to establish that there is an arguable case that the decision of the 24 August is unlawful. Mr Engelman submits that it is on a variety of bases, but, as it seems to me, there are a number of core points which are at the heart of his submissions.

It is his first and primary submission that the defendant has misinterpreted the statutory power under which it purports to act. The second submission is that the defendant has issued guidance about the way it will interpret the statute which reinforces that misinterpretation and alternatively that it is irrational. Those are the central points on the statutory interpretation point which have been canvassed before me. Mr Engelman also submits that human rights points can be taken to establish the arguable illegality of the defendant's decision. He finally submits that there is a particular provision within the statutory provisions which demands that no publication should take place if that publication would be unfair to the claimant, and that on the facts as known to this court the court should conclude, at least arguably, that publication would be unfair.

I should say by way of some elaboration at this stage that Mr Engelman accepts that the material upon which he relies for this last submission was never put before the defendant before the defendant reached the conclusion on 24 August that publication should take place. None the less, Mr Engelman submits that this court should take the material into account in deciding whether or not to exercise its jurisdiction to grant or refuse the injunction.

Before dealing with the statutory interpretation point let me set out the relevant statutory provisions. They are to be found in sufficient detail in the judgment of the deputy judge, Mr Ockelton. The relevant part of section 391 of the 2000 Act is as follows:

The best guide, at least at this stage, to the way in which the defendant interprets section 391(4) in particular can be found by reference to its own guidance. Its published guidance is in the following terms:

Essentially, that guidance demonstrates that the FSA take the view that the statutory regime confers a wide discretion upon it. Clearly the discretion is limited, in the sense that the FSA is to publish material only which it considers appropriate, and it is potentially further limited by the terms of subsection (6) which appear to preclude publication if, in the opinion of the FSA, it would be unfair to the person with respect to whom action had been taken. Subject to those limitations, however, to repeat, it is clear that the FSA considers that a wide discretion has been conferred upon it.

Mr Engelman disagrees. In effect, his submission is that, properly interpreted, a decision notice which had properly interpreted the statutory provisions means a decision notice which has been referred to the Upper Tribunal and should only be published if there is an urgent or pressing need to publish it. As is clear, there is a substantial divide between the parties. This point is as applicable to the decision which is before me as it was applicable to the decision which was under consideration by Mr. Ockelton. In my judgment, it is at least a reasonable interpretation of Mr Ockelton's judgment that he considered that Mr Engelman's interpretation of the statutory provision was arguable.

Both in the written submissions and in the oral submissions there was a considerable debate about the weight I should attach to Mr Ockelton's judgment. Not surprisingly, Mr Engelman advanced the proposition that I should essentially adopt the same approach as Mr Ockelton had done to the arguability of the statutory interpretation point. He accepted that I was not bound by it but he invited me to follow the approach of Mr Ockelton. Miss Richards correctly pointed out that Mr Ockelton had determined no more and no less than that it was appropriate to grant permission to apply for judicial review so that this point could be tested at a full hearing. On that basis she invited me to the view that I should attach comparatively little weight to Mr Ockelton's judgment on the statutory interpretation point and essentially follow my own judgment as to the meaning of the words of the statute.

As a matter of approach, in my judgment Miss Richards is right. Of course I pay attention and take account of the views which were expressed by Mr Ockelton in his judgment on the permission hearing. However, it seems to me that ultimately I should make up my own mind as to the weight to be attached to this argument, central as it is both to the application before Mr Ockelton and to the application before me. For my own part I am nowhere near as convinced as Mr Ockelton appeared to be that the statutory interpretation urged upon the court by Mr Engelman is correct. I think it much more likely that Miss Richards' interpretation would likely find favour if this point is ever tested at a contested full hearing. It does seem to me that it was the intention of Parliament to confer a broad discretion upon the Financial Services Authority, leaving it to them to consider whether it was appropriate to publish and leaving it to them to consider when it would be unfair to publish. On that issue, therefore, while clearly Mr Engelman has presented an argument to the court to demonstrate that the defendant has acted illegally in its interpretation of the statute, I regard that argument as comparatively weak and likely to fail. If that view is right it also seems to me to follow that it would be difficult to demonstrate that the guidance which the FSA has issued is irrational. I remind myself that the guidance says in terms that each case is to be treated case by case, albeit it is likely that publication will follow in very many cases when decision notices are issued. For my part, given the broad discretion which I believe is conferred upon the FSA, I see nothing irrational about the way it has phrased its policy.

Accordingly, on the basis of the point which found favour with Mr Ockelton, I would be less inclined to think that that would be likely to succeed. In my judgment, however, that is not in any way conclusive, because it seems to me that Mr Ockelton was clearly of the view that his injunctive relief should subsist only until the Upper Tribunal had reached a reasoned decision upon the publication or otherwise of the decision notice in question. That seems to follow not just from the terms of his order but from those paragraphs of the judgment to which I was referred, and in particular paragraphs 40, 41 and 45. The plain fact is that the Upper Tribunal has now delivered a reasoned judgment as to why there should be no prohibition on publication. Like Mr Ockelton I regard that body as eminently suited to determining questions of that type. I would take a great deal of persuasion that this court should now depart from that decision based upon alleged illegalities which I find it difficult to perceive as being a strong contender for a final resolution of the judicial review in the claimant's favour. Given that the Upper Tribunal has pronounced in the way it has, and given that so much material is in the public domain, although I accept that there are many details contained within the notice which are not in the public domain, it seems to me that this court would take a great deal of persuading that it was now appropriate to grant an injunction.

Mr Engelman seeks to overcome that hurdle by reference to points he has canvassed both before Mr Ockelton and the Upper Tribunal, namely the human rights point. I mean no disrespect to his argument when I say that, having been rejected by Mr Ockelton and by the Upper Tribunal, it would hardly surprise him if I reach the same conclusion as those tribunals. Assuming that article 8 and article 1 of the First Protocol are engaged, it seems to me that there is substantial material here which justifies the conclusion that the defendant is likely to justify any infringement of the human rights which has occurred, even applying the stringent test for article 8, that there needs be a pressing social need. It seems to me that there is a pressing social need that what has been characterised as market abuse should be published for the reasons which are advanced by the Financial Services authority. Accordingly and admittedly in comparatively short form, I am not persuaded that there is anything related to the alleged human rights claims which would cause me to review my decision that I should refuse this application for an injunction.

That leaves the point of unfairness to the claimants. Obviously, as I have described, the claimants assert that publication would be unfair. They rely upon section 391(6) of the 2000 Act to suggest that since the Financial Services Authority has not considered their evidence squarely, this court should consider the evidence and use that as the basis for granting further injunctive relief. The evidence relates in particular to Mr Beck, the personal claimant. He has very belatedly in my judgment sworn a witness statement seeking to establish the prejudice or unfairness he might suffer if publication takes place. At paragraph 13 of his witness statement he makes the assertion that it is likely or at least there is a substantial risk that the value of his shareholdings will fall as a result of the adverse publicity that would be generated as a result of the publication of the decision notice. There are many instances in which it is permissible for the court to make inferences from assertions of primary fact. I am not equipped to accept or wholeheartedly reject that assertion on the part of Mr Beck. It is for him to prove to me or to this court that he will suffer personal prejudice if publication takes place. I do not find that one sentence sufficient for those purposes given the time lapse which has occurred between the first stated intention to publish, namely on 20 May, and where we are today, the 26 August. The remainder of the statement, insofar as it identifies prejudice, is correctly characterised by Miss Richards as being an attempt to persuade this court to grant an injunction so that a Canadian regulator will not have before it in its dealings with Mr Beck the contents of the decision notice.

In my judgment that is not a basis for this court to conclude that it would be unfair for publication to take place. As Miss Richards points out, if the material in the decision notice is relevant to the proceedings of the Canadian regulator justice demands that they should have access to that material. If it is not relevant, then no doubt a reputable and expert body will put it out of its mind when dealing with the claimant. In my judgment, upon close analysis there is nothing in the statement of Mr Beck which would permit me to say that it would be unfair for publication to take place. I do not propose to rely upon his witness statement in order to reach a conclusion that it is appropriate to grant interim relief.

I am conscious that it may be that I have not dealt in terms with each and every point taken, either orally or in the helpful written submissions of counsel, but I do consider that I have given my reasons on the main issues for me to come to the conclusion that it is not appropriate to grant the injunction which the claimant seeks. I dismiss the application.

MISS RICHARDS: The existing order in relation to anonymity and the documents on the file not being open to inspection, in the light of what is in the public domain and your decision today, there is no basis for either of those orders to remain in place.

MR JUSTICE WYN WILLIAMS: That must be right.

MR ENGELMAN: My instructions are to apply for permission to appeal.

MR JUSTICE WYN WILLIAMS: I anticipated that. The way to deal with that is to make the order Miss Richards seeks so that you have a compendious set of adverse orders. I can give you permission or not. If I do not, when you go to the Court of Appeal you will have a set of compendious orders.

MR ENGELMAN: Would you permit me time to go to the Court of Appeal with the anonymity and non-disclosure provisions in place?

MR JUSTICE WYN WILLIAMS: The real question is whether I should grant a stay for a comparatively short time to permit Mr Engelman to go to the Court of Appeal.

MISS RICHARDS: It would be pointless to do so because, if one takes away the anonymity, that which would be known about these judicial review proceedings is no more than already known. You have not read out in court nor referred to in court the detail of the decision notice. We have made reference to the identity of the claimant and to the court's conclusion; likewise, in terms of the court file what would normally be available for inspection on the court file would be the pleadings and skeleton order and not all the documents attached to witness statements.

MR JUSTICE WYN WILLIAMS: I think I can satisfy both of you by saying that the anonymity order should be lifted immediately. I see no reason why there should be a stay on that. I will however grant a stay on inspection of the court file pending a suitable time, on the outside chance that you can look at more than the pleadings and orders.

MISS RICHARDS: Bearing in mind that the decision to publish was one until 31st August, that gives 4 working days. Would you use the same date?

MR JUSTICE WYN WILLIAMS: You are going to have to go to the Court of Appeal this afternoon.

MR ENGELMAN: I submit that given this weekend it is an unrealistic timescale. May I have until the end of next week, Friday, 2 September?

MR JUSTICE WYN WILLIAMS: What am I being asked to do? To make it absolutely clear, I do not think it is right that I should grant permission. This is an interim hearing. I have exercised my discretion. It would be unusual for a judge to say that I have exercised my discretion wrongly. You must seek to persuade their Lordships. I have rejected your application for an injunction. I see no harm in saying that the prohibition on the inspection of the file should continue until 4 pm a week today. I cannot see that is causing any major problem to anyone.

MISS RICHARDS: There is no objection to that. That is distinct from the FSA's publication.

MR JUSTICE WYN WILLIAMS: I am not proposing to stay publication. If Mr Engelman and his client are sufficiently aggrieved by my decision they are going to have to move swiftly. This has been going on a long time.

MISS RICHARDS: I turn to the question of costs. There is a costs schedule that has been served. I ask for an order that the claimant pay the FSA's costs of the hearing of 18 August and today. You have the schedule which sets out the total amount.

MR JUSTICE WYN WILLIAMS: Have you seen it?

MR ENGELMAN: I have.

MR JUSTICE WYN WILLIAMS: You cannot avoid the principle. On the face of it the amounts…

MR ENGELMAN: I do not object to the principle. My instructions are to ask for a detailed assessment.

MR JUSTICE WYN WILLIAMS: It is not appropriate in my judgment to burden the parties with a detailed assessment. It is usually the case now that interim hearings are dealt with summarily in terms of costs. I will say that costs should be taxed summarily by me. Obviously, if you wish to make observations about the figures you can.

MR ENGELMAN: I have no observation.

MR JUSTICE WYN WILLIAMS: Admittedly after a very quick look at this schedule I am being asked to assess costs in the sum of £7,521.90 in respect of the preparation for two hearings where substantial issues were at stake and considerable work was, I am sure, necessary. In my view this is a reasonable sum to award in favour of the defendant.

MISS RICHARDS: It is payable within 14 days.

MR JUSTICE WYN WILLIAMS: MR JUSTICE WYN WILLIAMS: Yes. I have to complete the form giving brief reasons. This was an exercise in judicial discretion. I believe I applied the correct legal principles. Accordingly, I do not consider that there is a realistic prospect of a successful appeal.