There was a flurry of excitement in October last year when Administrative Court held that the FSA had unlawfully relied on legally privileged emails during its investigation of the affairs of Keydata and its executives. It was the first time the FSA had lost a judicial review concerning its own investigations. However a recent ruling by the Administrative Court on the remedies to be granted means that the FSA’s enforcement action based on the Keydata investigation will be barely, if at all, affected. 

Keydata sourced and distributed structured investment products, via IFAs, to retail customers. It was investigated by the FSA and during the course of the investigation was put into administration. The FSA, using its compulsory powers, obtained a large number of documents from Keydata’s administrators and also obtained express confirmation from the administrators that Keydata waived its legal professional privilege in the documents. Subsequently, after the FSA’s Regulatory Decisions Committee had issued Warning Notices (these Notices set out action that the FSA is minded to take, including details of proposed sanctions – recipients are entitled to make written and oral representations before the FSA takes its next step, a Decision Notice), Stewart Ford challenged the FSA’s use of a number of emails obtained from Keydata’s administrators. The challenge was on the basis that the emails were subject to joint legal privilege, shared between a number of the executives of Keydata as well as the company itself. That claim was made because Mr Ford considered that in addition to advising Keydata, its solicitors were also advising Mr Ford, and other executives, in their personal capacities.

That claim to joint privilege was eventually upheld by Mr Justice Burnett in relation to two emails, but in his recent remedies decision the bitterness of that pill has been very much sweetened – at least for the FSA. In the remedies hearing Stewart Ford argued that the FSA’s original Warning Notice, because it relied on information from the privileged emails should be quashed; and, that any FSA member of staff (investigator or lawyer) who had read the emails should have no further involvement in the Keydata investigation. Both arguments failed. In relation to the Warning Notice the judge decided that the FSA’s use of the emails was akin to relying on inadmissible evidence and could be dealt with simply by, as the FSA suggested, redacting the privileged material from the document. That still left the Warning Notice as, in the judge’s words, a “coherent, seamless and powerful document”. In relation to the continued involvement of FSA staff who read the emails, the judge held that there would be no real prejudice to Mr Ford if they continued to be involved (because any “lingering memory” of the information would not in fact give any real advantage to the FSA) but that by contrast stopping that involvement “would be disproportionate and contrary to the public interest in the just and expeditious conclusion of the regulatory proceedings”.

The case provides a stark illustration of the fact that in judicial review remedies are always discretionary – “winning” the legal argument does not automatically lead to the desired outcome. It also shows that in judicial review cases involving regulators, the courts will, in the exercise of that discretion, place weight on the underlying public interest served by the regulatory activity in question.

R oao Stewart Ford v Financial Services Authority [2012] EWHC 997 (Admin) and R oao Stewart Ford v Financial Services Authority [2011] EWHC 2583 (Admin)