19 September

Background 

The defendant Electoral Commission conducted assessments of the campaign spending returns of the interested parties, Vote Leave and another campaigner for a ‘leave’ outcome, G. The assessments included consideration of their spending in connection with services provided by a Canadian firm specialising in online advertising (AIQ). The Electoral Commission concluded that there were no reasonable grounds to suspect that there had been any incorrect reporting of campaign spending or donations. 

The claimant issued proceedings, challenging that conclusion and the decision of the Electoral Commission not to open an investigation into the spending of Vote Leave and G. 

Application allowed.

Issues and decisions 

Whether the Electoral Commission had been correct to conclude that, on the proper interpretation of s 111(2) of the Political Parties, Elections and Referendums Act 2000 (the PPERA 2000), the payments made by Vote Leave were not ‘referendum expenses’ incurred by Vote Leave, but only donations made by Vote Leave to meet expenses incurred by G.  

As a matter of ordinary English usage, the phrase ‘expenses incurred’ was most naturally understood in the broad sense contended for by the claimant, such that expenses might be incurred by voluntarily making a payment which diminished a person’s assets, as well as by assuming an obligation or liability to make such a payment. It was natural to describe a person as having incurred an expense whenever he had spent money or incurred a liability which, in either case, reduced his financial resources (see [41] of the judgment). 

As a matter of ordinary language, incurring an expense did not mean the same as incurring a liability, as had been argued on behalf of Vote Leave.  An ‘expense’ and a ‘liability’ were different concepts.  It was also to be expected that, if the intention had been to restrict the meaning of ‘referendum expenses’ to expenses which there was a liability to pay, the legislation would say so expressly and that the word ‘liable’ or ‘liability’ would appear in the definition (see [42] of the judgment).  

Nevertheless, as a matter of language it would not be said that the phrase ‘expenses incurred’ was incapable of being used in the narrower sense contended for by Vote Leave, such that only a sum of money which a person became liable to pay (typically by making a contract) was to be regarded as an expense incurred by that person (see [44] of the judgment). 

It did not follow from the fact that separate sets of rules applied to donations made to permitted participants and to referendum expenses incurred by permitted participants that there could not be transactions to which both sets of rules applied. There was no reason in principle, or based on the structure or terms of the legislation, why some transactions which constituted donations seen from the recipient’s point of view should not constitute referendum expenses when looked at from the point of view of the donor. Further, it could not be seen to matter if the consequence of having two sets of rules was that some payments or other transactions were required to be reported as donations by the recipient and as referendum expenses by the donor (see [59], [62] of the judgment). 

Furthermore, a payment made to a supplier of advertising services to defray the cost of such services purchased from the supplier was, on any reasonable understanding of the words, to be a payment made ‘in respect of’ advertising, even if the person who made the payment was not the person who had contracted to purchase the services (see [72] of the judgment).  

It was always necessary in interpreting statutory language to consider, not just the ordinary meaning of the words used, but the context in which the words appeared and the underlying policy of the legislation. However, those  considerations did not justify adopting the implausible interpretation of the words ‘in respect of’, as they were used to define ‘qualifying’ expenses, for which the Electoral Commission contended (see [74] of the judgment). 

While giving the words ‘expenses incurred’ their natural meaning, a coherent distinction could be drawn, which accorded with the language and purpose of the legislation, between donations which were referendum expenses incurred by the donor and those which were not. The distinction was between ‘general’ and ‘specific’ donations. The standard instance of an ordinary, ‘general’ donation was a gift of money made to a permitted participant to be used in whatever way the recipient chose in seeking to promote a particular outcome of the referendum. Such a donation would be an ‘expense incurred’ by the donor ‘for referendum purposes’. However, the expense would not be incurred ‘in respect of’ a matter falling within PPERA 2000 Pt I Sch 13. Therefore, the donor would not have incurred any ‘referendum expenses’ (see [80] of the judgment). 

On the other hand, if money was paid directly by the donor (by agreement with the donee) to discharge a liability of the donee to pay for goods or services falling within PPERA 2000 Pt I Sch 13,  was paid pursuant to an agreement to pay or reimburse the donee for the cost of such goods or services purchased by the donee, or was given on terms (binding on the donee) that it was to be used to purchase or pay for particular qualifying goods or services, the expenses incurred in making such a ‘specific’ donation were appropriately regarded as incurred ‘in respect of’ a matter falling within PPERA 2000 Pt I Sch 13 and hence as ‘referendum expenses’ (see [81] of the judgment). 

On the proper construction, the Electoral Commission had misinterpreted the definition of ‘referendum expenses’ in PPERA 2000 s 111(2). The source of its error was a mistaken assumption that an individual or body which made a donation to a permitted participant could not thereby incur referendum expenses. As a result of that error, the Electoral Commission had interpreted the definition in a way that was inconsistent with both the language and the purpose of the legislation (see [94] of the judgment). 

Email communications showed that Vote Leave had made each of the AIQ payments at G’s request for the agreed purpose of paying for advertising which G had ordered from AIQ. There was no reason to doubt that the payments had been, as they were said to be, donations made by Vote Leave to G to meet referendum expenses which he had incurred by purchasing advertising services from AIQ. However, it was also clear that, on the proper interpretation of the statutory provisions, Vote Leave had ‘incurred expenses’ by making the payments, that those expenses had been incurred ‘in respect of’ advertising and that the expenses had been incurred ‘for referendum purposes’, within the meaning of PPERA 2000 s 111(3). Therefore, they had been ‘referendum expenses’ as defined in PPERA 2000 s 111(2) irrespective of whether they had also been ‘common plan expenses’ within the meaning of para 22 of Sch 1 to the European Union Referendum Act 2015, as the Electoral Commission had since found (see [95] of the judgment). 

Trustees, Executors & Agency Co Ltd v Reilly [1941] VLR 110 considered; Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 considered.

Jessica Simor QC, Tom Cleaver and Eleanor Mitchell (instructed by Deighton Pierce Glynn Ltd) for the claimant.

Richard Gordon QC and Gerard Rothschild (instructed by the Government Legal Department) for the Electoral Commission.

Timothy Straker QC and James Tumbridge (instructed by Venner Shipley Legal Ltd) for the Vote Leave.

Karina Weller - Solicitor (NSW) (non-practising).

The phrase ‘expenses incurred’ in s 111(2) of the Political Parties, Elections and Referendums Act 2000 was most naturally understood, such that expenses might be incurred by voluntarily making a payment which diminished a person’s assets, as well as by assuming an obligation or liability to make such a payment. Accordingly, the Divisional Court held that the defendant Electoral Commission had misinterpreted the definition of ‘referendum expenses’ and that Vote Leave’s payments to an advertising firm at another’s request for the agreed purpose of paying for advertising which he had ordered for referendum purposes had been referendum expenses. 

Background 

The three applications were introduced following revelations by Edward Snowden relating to the electronic surveillance programmes operated by the intelligence services of the United States and the United Kingdom. The applicants all believed that, due to the nature of their activities, their electronic communications were likely to have either been intercepted by the UK intelligence services, obtained by the UK intelligence services after being intercepted by foreign governments and/or obtained by the UK authorities from communications service providers. 

The applicants complained about the compatibility of three discrete regimes with art 8 of the European Convention on Human Rights. The regimes were those: (i) for the bulk interception of communications under s 8(4) of the Regulation of Investigatory Powers Act 2000 (RIPA 2000); (ii) the intelligence sharing regime, namely, the UK’s receipt of material intercepted by the US National Security Agency (the NSA) under a programme through which the US obtained intelligence material (such as communications) from internet service providers, and a programme which allowed the collection of content and communications data from fibre-optic cables and infrastructure owned by US communications service providers; and (iii) the regime for the acquisition of communications data under RIPA 2000 Ch II. 

The applicants in the second of the joined cases, being a journalist and newsgathering organisation, complained under art 10 of the Convention about both the RIPA 2000 s 8(4) and Ch II regimes. 

Issues and decisions 

(1) Whether the RIPA 2000 s 8(4) regime for the bulk interception of communications was compatible with the applicants’ right to respect for their rights under art 8 of the Convention. 

The decision to operate a bulk interception regime had been one which had fallen within the wide margin of appreciation afforded to the UK. In view of the independent oversight provided by the Interception of Communications Commissioner and the Investigatory Powers Tribunal, and the extensive independent investigations which had followed the Edward Snowden revelations, the UK intelligence services took their Convention obligations seriously and were not abusing their powers under RIPA 2000 s 8(4). Nevertheless, an examination of those powers had identified two principal areas of concern: (i) the lack of oversight of the entire selection process, including the selection of bearers for interception, the selectors and search criteria for filtering intercepted communications, and the selection of material for examination by an analyst; and (ii) the absence of any real safeguards applicable to the selection of related communications data for examination (see [387] of the judgment). 

In view of those shortcomings and to that extent, the RIPA 2000 s 8(4) regime did not meet the ‘quality of law’ requirement and was incapable of keeping the ‘interference’ to what was necessary in a democratic society. Accordingly, there had been a violation of art 8 with respect to the RIPA 2000 s 8(4) regime (see [388] of the judgment). 

(2) Whether the UK’s receipt of material intercepted by the NSA or, more generally, receipt of information from foreign intelligence services had been in breach of the applicants’ rights under art 8 of the Convention. 

The domestic law, together with the clarifications brought by the amendment of the Interception of Communication Code of Practice (the IC Code), indicated with sufficient clarity the procedure for requesting either interception or the conveyance of intercept material from foreign intelligence agencies. In that regard, the high threshold recommended, namely, that the material transferred should only be able to be searched if all the material requirements of a national search were fulfilled and that was duly authorised in the same way as a search of bulk material obtained by the signals intelligence agency using its own techniques, was met by the UK’s regime. There was no evidence of any significant shortcomings in the application and operation of the regime. On the contrary, following an investigation, no evidence whatsoever had been found of abuse (see [447] of the judgment). 

Therefore, there had been no violation of art 8 of the Convention with respect to the intelligence sharing regime (see [448]  of the judgment). 

(3) Whether the regime for the acquisition of communications data under RIPA 2000 Ch II was compatible with the applicants’ rights under art 8 of the Convention. 

It was clear that domestic law, as interpreted by the domestic authorities in light of the recent judgments of the Court of Justice of the European Union, required that any regime permitting the authorities to access data retained by communications service providers limited access to the purpose of combating ‘serious crime’ and that access be subject to prior review by a court or independent administrative body. As the RIPA 2000 Ch II regime permitted access to retained data for the purpose of combating crime, rather than ‘serious crime’ and, save for where access was sought for the purpose of determining a journalist’s source, it was not subject to prior review by a court or independent administrative body, it could not be in accordance with the law within the meaning of art 8 of the Convention (see [467] of the judgment). 

Accordingly, the there had been a violation of art 8 of the Convention with respect to the RIPA 2000 Ch II regime (see [468] of the judgment).  

(4) Whether the RIPA 2000 s 8(4) regime was compatible with the rights under art 10 of the Convention of the applicants in the second case. 

For the reasons set out in respect of the art 8 complaint, save for the concerns about the oversight of the selection process and the safeguards applicable to the selection of related communications data, the RIPA 2000 s 8(4) regime had been in accordance with the law. Further, it pursued the legitimate aims of protecting interests of national security, territorial integrity and public safety, and preventing disorder and crime (see [491] of the judgment).  

The IC Code provisions requiring special consideration to be given to the interception of communications that involved confidential journalistic material and confidential personal information related solely to the decision to issue an interception warrant. Therefore, while they might provide adequate safeguards in respect of a targeted warrant under RIPA 2000 s 8(1), they did not appear to have any meaning in relation to a bulk interception regime. Furthermore, the lack of transparency and oversight of the criteria for searching and selecting communications for examination had already been criticised. In the art 10 context, it was of particular concern that there were no requirements, at least, no requirements that were not unpublished internal arrangements for processing data, either circumscribing the intelligence services’ power to search for confidential journalistic or other material, or requiring analysts, in selecting material for examination, to give any particular consideration to whether such material was or might be involved. Consequently, it would appear that analysts could search and examine without restriction both the content and the related communications data of those intercepted communications (see [493] of the judgment). 

Safeguards did exist in respect of the storing of confidential material once identified. Nevertheless, in view of the potential chilling effect that any perceived interference with the confidentiality of their communications and, in particular, their sources might have on the freedom of the press and, in the absence of any not unpublished internal arrangements for processing data arrangements limiting the intelligence services’ ability to search and examine such material other than where it was justified by an overriding requirement in the public interest, there had also been a violation of art 10 of the Convention (see [494], [495] of the judgment).   

Accordingly, in respect of the complaints under art 10 of the Convention, there was a violation in respect of the RIPA 2000 s 8(4) regime (see [500] of the judgment).  

(5) Whether the RIPA 2000 Ch II regime was compatible with the  rights under art 10 of the Convention of the applicants in the second case. 

The RIPA 2000 Ch II regime afforded enhanced protection where data was sought for the purpose of identifying a journalist’s source. Nevertheless, the provisions only applied where the purpose of the application was to determine a source. Therefore, they did not apply in every case where there was a request for the communications data of a journalist or where such collateral intrusion was likely. Furthermore, in cases concerning access to a journalist’s communications data, there were no special provisions restricting access to the purpose of combating ‘serious crime’. Consequently, the RIPA 2000 Ch II regime could not be in accordance with the law for the purpose of the art 10 complaint (see [498], [499] of the judgment). 

Accordingly, in respect of the complaints under art 10 of the Convention, there was a violation in respect of the RIPA 2000 Ch II regime (see [500] of the judgment). 

It was reasonable to award the applicants in the first of the joined cases the sum of €150,000 and the applicants in the second of the joined cases the sum of €35,000 (see [524] of the judgment). 

Karina Weller - Solicitor (NSW) (non-practising).

The regimes for the bulk interception of communications under s 8(4) of the Regulation of Investigatory Powers Act 2000 and for the acquisition of communications data under Ch II violated art 8 of the European Convention on Human Rights. The European Court of Human Rights further held that those regimes violated the art 10 rights of the journalist and newsgathering organisation applicants in the second of the joined cases. 

Background

The applicant, the Financial Reporting Council Ltd (the FRC), was a regulatory body with certain responsibilities for, among other things, the regulation of statutory auditors and audit work. Its functions included carrying out investigations into statutory auditors and audit work, and imposing and enforcing sanctions. Its powers in that regard were derived from the Statutory Auditors and Third Country Auditors Regulations 2016, SI 2016/649 (SATCAR ) and the Audit Enforcement Procedure (the AEP). 

Sch 2 to SATCAR provided the FRC with statutory powers of investigation, the obstruction or failure to comply with which might be remedied in the civil courts and/or constitute a criminal offence. 

The FRC was currently conducting an investigation (the investigation) into the conduct of Grant Thornton UK LLP (GT) and an individual at GT (Subject A) in relation to the audit of the 2016 financial statements of the respondent, Sports Direct International plc (SDI). The investigation arose out of reports about SDI’s subsidiary, Sportsdirect.com Retail Ltd (SDR), engaging a company (Barlin) to provide delivery services to SDR’s customers. The FRC was considering, among other things, the conduct of GT and Subject A in relation to the non-disclosure of the relationship between SDR and Barlin as one between related parties in the 2016 financial statements. To that end, the FRC issued notices (the r 10 notices) to SDI, requiring the provision of certain documents (see [5] of the judgment), to shed light on what GT understood SDI to have been advised in relation to the introduction of Barlin as part of what was referred to as ‘the enhanced structure’ (see [3] of the judgment).

The FRC contended that SDI had failed to comply with the r 10 notices in certain respects. Accordingly, it applied for an order of the court compelling compliance by SDI, under reg 10 of, and Sch 2(2) to, SATCAR, and para 10(b) of the AEP.

SDI disputed that it had failed to comply with the r 10 notices. It belatedly complied with certain  notices to produce additional documents, save for 40 documents in respect of which it claimed legal advice privilege. 

Application allowed.

Issues and decisions

(1) Whether the court had jurisdiction to make the order sought in respect of the alleged failure to comply with a r 10 notice concerning documents which SDI had disclosed to GT in 2015, which recorded advice ‘Deloitte’ had provided to SDI. 

SDI disputed that it had failed to comply with that r 10 notice and, accordingly, contended that the court had no jurisdiction to make the order sought. The relevant r 10 notice had required the production of any document(s) ‘SDI disclosed to [GT] in 2015, which record the advice Deloitte provided to SDI in or around 2015…’. In June 2018, SDI had informed the FRC that it had identified and collated ‘a pool of potentially responsive documents’ (the pool), but that it had been unable to identify any of those documents as having been shown to Mr M of GT. In July, the FRC had asked SDI to produce any documents in the pool which fitted the description given by Mr M. However, SDI had declined to produce those documents. 

On the facts, SDI had failed to comply with the r 10 notice, because it had not produced any documents in response to the request. It was reasonable for SDI to produce any of the documents in the pool which were capable of fitting Mr M’s description (see [19] of the judgment).

R (on the application of Prudential plc) v Special Commissioner of Income Tax [2013] 2 All ER 247 considered.

(2) Whether certain email attachments were subject to legal advice privilege. The FRC contended that were not. SDI contended that they were. SDI’s solicitors (RPC) had stated in a letter that certain of the 21 attachments were not privileged in and of themselves, but were withheld on the grounds that they formed part of a lawyer-client communication. The question was whether legal advice privilege applied to documents purely by virtue of those documents having been attached to emails passing between SDI or its subsidiaries and RPC. 

The orthodox view was that privilege did not extend to pre-existing documents or to documents which had been created independently of the relevant lawyer-client communications. It was settled law that the intention to communicate with the lawyer or the client for the purposes of obtaining legal advice had to account for the existence of the document (see [32] of the judgment).

Applying settled law to the facts, SDI was not entitled to legal advice privilege in respect of certain of the 21 attachments (see [42] of the judgment).

Ventouris v Mountain, The Italia Express [1991] 3 All ER 472 applied; Imerman v Tchenguiz [2009] All ER (D) 167 (Nov) applied; Balabel v Air India [1988] 2 All ER 246 considered; Three Rivers District Council v Governor and Company of the Bank of England [2004] All ER (D) 176 (Nov) considered; Property Alliance Group Ltd v Royal Bank of Scotland plc [2015] All ER (D) 67 (Nov) distinguished.

(3) Whether SDI’s waiver of privilege by sending copies of documents to GT, for the purposes of audit, extended to the FRC. The fax in question had been a communication from SDI to GT and it could be seen from the third page of the fax that it was headed ‘PRIVILEGED AND FOR GRANT THORNTON AUDIT USE ONLY’.

SDI submitted that it had not waived privilege against the FRC and that the present case was analogous to British Coal Corpn v Dennis Rye Ltd(No 2) [1988] 3 All ER 816 and Belhaj and another v Director Of Public Prosecutions[2018] All ER (D) 120 (Mar), because the regulatory process was entirely distinct from the process of audit; they were not, in any sense, part of a single process, but reflected ‘a fundamental separation of function and responsibility’. SDI further contended that GT’s terms of engagement took the FRC no further forward, because they said nothing about privileged documents. 

SDI was correct on the waiver issue. By sending privileged documents to GT for the purposes of audit, SDI had not waived privilege against the FRC. The FRC did not stand in any better position with respect to privileged documents which had been sent to GT for other purposes (see [56] of the judgment).

British Coal Corpn v Dennis Rye Ltd (No 2) [1988] 3 All ER 816 considered; Scottish Lion Insurance Co Ltd v Goodrich Corporation  (2011) Times, 30 March considered; Belhaj and another v Director Of Public Prosecutions [2018] All ER (D) 120 (Mar) considered.

(4) Whether, as the FRC contended, even if all of the 40 documents in question were covered by legal advice privilege, and even if SDI had not waived privilege in any of those documents by sending them to GT, production of the documents to the FRC for the purposes of the investigation would not infringe SDI’s privilege (the infringement issue). 

The FRC submitted that Parry-Jones v Law Society[1968] 1 All ER 177, as interpreted in R (on the application of Morgan Grenfell & Co Ltd) v Special Comr of Income Tax[2002] 3 All ER 1, was binding on the present court. SDI submitted that Parry-Jones was not binding, because Lord Hoffmann’s primary reason for supporting the decision had been obiter and contrary to principle and that Lord Hoffman’s alternative reason was inapplicable to the present case. 

The starting point for considering the infringement issue was that privilege was a fundamental human right. It followed that privilege could only be abrogated or overridden by primary legislation which so provided, either expressly, or by necessary implication (see [58] of the judgment). 

Nevertheless, there was a line of cases in which it had been held that privilege could not be relied on as an objection to the production of documents to the regulatory body for solicitors (formerly the Law Society, currently the Solicitors’ Regulatory Authority) by solicitors or to the tax authority (formerly the Inland Revenue, currently the Revenue and Customs Commissioners) by taxpayers or regulators of advocacy services by advocates (see [59] of the judgment). 

While Lord Hoffmann’s primary reason in Morgan Grenfell for supporting the decision in Parry-Jones had been strictly obiter, it had been an important step in his reasoning in that case, and it had the persuasive force of a unanimous House of Lords. Moreover, it received support from the subsequent case law. Notwithstanding the criticisms of it, there was no authority to the contrary. Accordingly, it had to be taken to represent the current state of the law. Thus the production of documents to a regulator by a regulated person, solely for the purposes of a confidential investigation by the regulator into the conduct of the regulated person, was not an infringement of any legal professional privilege of clients of the regulated person in respect of those documents. That being so, the same had to be true of the production of documents to the regulator by a client (see [84] of the judgment). 

Applying that principle to the present case, it followed that the production of the 40 additional documents to the FRC for the purposes of the investigation would not infringe any legal advice privilege of SDI in respect of those documents (see [85] of the judgment). 

SDI would be ordered to produce (i) any of the documents in the pool of potentially responsive documents which were capable of fitting Mr M’s description; and (ii) the 40 additional documents it had withheld on the ground of privilege (see [93] of the judgment).

Parry-Jones v Law Society [1968] 1 All ER 177 applied; R (on the application of Morgan Grenfell & Co Ltd) v Special Comr of Income Tax [2002] 3 All ER 1 applied; R v IRC, ex p Taylor (No 2) [1990] 2 All ER 409 considered; R v Derby Magistrates’ Court, ex p B [1995] 4 All ER 526 considered; Simms v Law Society [2005] All ER (D) 281 (Mar) considered; Simms v Law Society [2005] All ER (D) 131 (Jul) considered; McE, Re; Re M; Re C (AP) [2009] All ER (D) 118 (Mar) considered; R (on the application of Lumsdon) v Legal Services Board [2014] All ER (D) 123 (Jan) considered; R (on the application of Lumsdon) v Legal Services Board [2014] All ER (D) 71 (Oct) considered.

Mark Simpson QC and Rebecca Loveridge (instructed by David Salcedo) for the FRC.

Richard Lissack QC and Adam Sher (instructed by Reynolds Porter Chamberlain LLP) for SDI. 

Carla Dougan-Bacchus   Barrister.

The production of documents to a regulator by a regulated person, solely for the purposes of a confidential investigation by the regulator into the conduct of the regulated person, was not an infringement of any legal professional privilege of clients of the regulated person in respect of those documents. The same was true of the production of documents to the regulator by a client. The Chancery Division so ruled, in allowing the first application to the court of its kind by the Financial Reporting Council Ltd (the FRC), to compel the respondent, Sports Direct International plc (SDI), to produce certain documents, which included some withheld on the ground of privilege. The application had been made under reg 10 of, and Sch 2(2) to, the Statutory Auditors and Third Country Auditors Regulations 2016, SI 2016/649; and para 10(b) of the FRC’s Audit Enforcement Procedure. The documents were required in the context of the FRC’s investigation into the conduct of an accounting firm and an individual at that firm, concerning an audit of  SDI’s 2016 financial statements.