The High Court judgement in R (Stewart Ford) v Financial Services Authority  EWHC 997 (Admin) has emphasised the importance of legal professional privilege and that it does work when properly implemented, but also demonstrated that winning the legal argument does not necessarily provide the desired outcome. The court ruled that privileged material should not have been used by the FSA in issuing a warning notice, but nonetheless refused to overturn the warning notice simply by virtue of the inclusion of that material.
Keydata Investment Services Limited was in the business of providing marketing and sales information and products to independent financial advisers. The Financial Services Authority (FSA) had reason to believe that certain FSA rules had been contravened by Keydata with regards to the way they were selling and marketing a particular product. As a result, the FSA carried out investigations on Keydata. Irwin Mitchell advised Keydata as a company and a number of their executives in a personal capacity throughout the investigation process. While the investigation was ongoing, Keydata was put into administration. Using their compulsory powers, the FSA obtained a substantial volume of data from Keydata’s administrators, including Irwin Mitchell legally privileged emails and attachments. The FSA obtained express confirmation from the administrators that Keydata waived its legal professional privilege in relation to such documentation. As a result of the investigations the FSA’s Regulatory Decisions Committee (RDC) issued a warning notice against the claimant in this case, who was one of the individual executives who had been advised by Irwin Mitchell in a personal capacity.
The claimant’s challenge was formed on the basis that the emails in question were subject to joint legal privilege shared between Keydata itself and the executives who had been personally advised by Irwin Mitchell, and so should not have been used by the FSA when drafting the warning notice. In the substantive judgement the court agreed that joint interest privilege did apply as Irwin Mitchell were acting for the executives personally as well as for Keydata, therefore the FSA had acted unlawfully in using material that was subject to legal professional privilege.
Despite the claimant’s victory, the result was bittersweet. The claimant, Mr Ford, argued that the warning notice to be quashed as it referred to privileged material; and that any FSA member of staff who had read the emails should have no further involvement in the investigation going forward. Both arguments failed.
In relation to the warning notice, the court considered that the use of emails was similar to the use of inadmissible evidence, and could be dealt with by simply removing the privileged material from the notice. The court did not accept that the warning notice would not have been issued if it did not refer to the privileged material; in fact the judge confirmed that the warning notice still worked as a “coherent, seamless and powerful document” even without reference to the privileged material. This was partly because the substance of some of the privileged material referred to in the warning notice could also be derived from other documents over which no privilege was enjoyed. Disregarding the privileged material was therefore unlikely to have a significant effect on the FSA’s decision to issue the notice. . The court held that it would be erroneous to equate what the FSA had done with the public law concept of “taking into account an irrelevant matter”. The judge did, however, agree with the claimant that the FSA should use its best endeavours to retrieve and destroy all hard and electronic copies of the privileged material and original warning notice from employees.
With regards to the continuing involvement of FSA staff who had read the privileged material, consideration was given to the private law approach – whether a lawyer in possession of privileged material should be restrained from acting. In this case the FSA investigation was at such a late stage that to exclude all of those who had been involved would significantly interrupt the finalisation of the process. Also, the court’s view was that memory of the privileged materials held no significant advantage to the FSA investigators. On that basis it would be “disproportionate and contrary to public interest” to do as the claimant desired in terms of bringing the investigation to a conclusion. It seems therefore that the court placed significant weight on the underlying public interest at the heart of what the regulatory body was seeking to achieve.
The decision underlines that legal privilege which is properly put in place will allow a party to withhold privileged material from a regulator carrying out an investigation, however unauthorised use of privileged material will not of itself invalidate action taken by a regulator if there are other good grounds for the decision it has reached.