Civil evidence – Human rights – Disclosure – Documents

(1) Financial Services Authority (2) Elisabeth Connell (3) Patricia Senra (appellants) v (1) AMRO International SA (2) Creon Management SA (respondents) and Goodman Jones LLP (interested party): CA (Civ Div) (Sir Anthony May (President QB), Lords Justice Stanley Burnton, Jackson): 24 February 2010

The appellant Financial Services Authority appealed against a decision ([2009] EWHC 2242 (Admin)) quashing the appointment of investigators and the issue of notices to compel the production of documents.

The US Securities and Exchange Commission had instituted proceedings in the US district court for the southern district of New York alleging fraudulent and manipulative trading in the shares of a US company. The evidence in those proceedings identified the respondent companies (X and C) as having been engaged in concealed dealing in the company’s shares during the relevant period. Pursuant to a multilateral memorandum of understanding concerning the exchange of information, the commission sent a letter of request to the FSA seeking the FSA’s assistance in obtaining the production of documents from a London-based accounting firm (G) which acted for X and C. The FSA appointed investigators under section 169 of the Financial Services and Markets Act 2000 and the investigators issued notices to G pursuant to section 171 and/or 172 to produce the documents and information described in the commission’s request. The documents sought related to, among other things, the ownership of X and C and the source of their funds, and included correspondence and banking records. On the respondents’ application for judicial review, the judge quashed the decision of the FSA to appoint the investigators, and quashed the notices on X’s undertaking to instruct G to produce certain classes of documents to the FSA, far narrower in extent than those sought by the investigators. The FSA submitted that the judge had erred in imposing on the FSA a duty in effect to verify the information provided by the commission and the commission’s need for the documents it sought; he had wrongly considered that the production of the documents sought had to be ‘necessary or expedient’ for the purposes of the investigation; he had wrongly limited the scope of any lawful requirement to documents relating to the facts pleaded in the New York proceedings. The respondents contended that the FSA had wrongly acceded to the commission’s request when the latter had failed to comply with the relevant memorandums of understanding; the investigators’ request was too vague and wide to satisfy the statutory requirement for ‘documents of a specified description’.

Held: (1) There was nothing in the statute that required the FSA to second-guess a foreign regulator as to its own laws and procedures, or as to the genuineness or validity of its requirement for information or documents. The FSA was not bound to comply with the commission’s request. The FSA had to, and did, consider the request when deciding whether to exercise its discretion under section 169 by the exercise of its investigative powers. It was clear that the FSA decided to exercise its investigative power having considered the matters listed in section 169(4). The FSA was not required to satisfy itself of the correctness of what it was being asked to investigate or the basis upon which the investigation was asked for. There was no error of law or principle in the FSA’s decision to appoint the investigators. The appeal against the order quashing their appointment was allowed.

(2) The requirements to be satisfied by the FSA and its investigators when deciding whether to act in support of an overseas regulator were those contained in the statute, and not elsewhere. It followed that it was immaterial whether the commission’s request complied with the memorandums of understanding.

(3) When investigators were appointed under section 169, the FSA was not subject to the requirement to give notice in section 170(2).

(4) The investigators were appointed not to obtain documents admissible in the New York proceedings, or relevant to issues already pleaded in those proceedings, but to assist the commission with its ongoing civil action. The commission stated that the documents it sought would be helpful to it in that action, and gave sensible reasons for that statement. That was sufficient for the FSA. The judge wrongly approached the case as if the FSA had sought disclosure of documents in domestic litigation. The FSA was exercising an investigatory power, not a power of discovery, and it was not limited to requiring documents relating to the allegations then pleaded in the New York proceedings.

(5) The judge erred in applying the ‘necessary or expedient’ test. That was the test to be applied under section 172(2). The test to be applied in respect of the production of documents under section 171(2) was whether the investigator reasonably considered production to be relevant to the purposes of the investigation. That was a relatively low hurdle and that requirement was satisfied in the instant case. The consideration that the documents sought were confidential could not justify departing from the words of the statute. Proportionality was relevant because article 8 of the European Convention on Human Rights 1950 might be engaged. The requirement of proportionality was satisfied in the instant case.

(6) The investigators did require production of documents of a specified description, Tajik Aluminium Plant v Hydro Aluminium AS [2005] EWCA Civ 1218, [2006] 1 WLR 767 considered.

Appeal allowed.

Dinah Rose QC, Andrew George (instructed by in-house solicitor) for the appellants; Charles Flint QC (instructed by Mishcon de Reya) for the respondents; no appearance or representation for the interested party.