Lewin, R (On the Application Of) v The Financial Reporting Council Ltd & Ors, Court of Appeal - Administrative Court, March 19, 2018, [2018] EWHC 446 (Admin)

Resolution Date:March 19, 2018
Issuing Organization:Administrative Court
Actores:Lewin, R (On the Application Of) v The Financial Reporting Council Ltd & Ors

Neutral Citation Number: [2018] EWHC 446 (Admin)

Case No: CO/5977/2016




Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 19/03/2018



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Mark Vinall (instructed by Brown Rudnick LLP) for the Claimant

Rupert Allen (instructed by The Financial Reporting Council) for the Defendants

Jamie Smith QC (instructed by Clyde & Co LLP) for the Interested Parties

Hearing date: 21 February 2018

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Mrs Justice Nicola Davies:

  1. This is a claim for judicial review whereby the claimant challenges:

    i) The decision of the second defendant (``the Committee'') on behalf of the first defendant (``the FRC'') to publish a report of the third defendant (``the Tribunal'') setting out its findings in a disciplinary case brought by the FRC against the interested parties (an accountancy firm and a partner of the firm); and/or

    ii) The Tribunal's report itself (``the Report'').

  2. The FRC regulates the work of accountants pursuant to the Accountancy Scheme (``the Scheme''). The Executive Counsel to the FRC brought a Formal Complaint against the interested parties under the Scheme. The complaint alleged ``Misconduct'' by the interested parties in relation to their statutory audit of the financial statements of a public company of which the claimant was a director. The Tribunal, chaired by a QC, was appointed pursuant to paragraph 9(2) of the Scheme to hear and determine the complaint. The 20-day public hearing took place in May, June and October 2016. The Tribunal produced a 141 page Report setting out its detailed findings. The Tribunal found the interested parties guilty of misconduct, it imposed fines and costs orders. It is the claimant's case that in the course of the Report it made unqualified findings of serious wrongdoings on the part of the claimant who was not subject to the FRC's jurisdiction, had no involvement in the proceedings, was not asked to give evidence, nor to make representations or participate in any way.

  3. Paragraph 9(11)(i) of the Scheme provides ``The Disciplinary Tribunal shall make a report, which shall be signed by its Chairman, setting out its decision and reasons and any related orders made pursuant to paragraphs 9(7), 9(8) and 9(9) and send it to the Conduct Committee.'' The Tribunal delivered its Report to the Committee on 24 October 2016. The Committee's functions in relation to publication of a report are set out in paragraph 9(11)(ii) and 9(13) of the Scheme rules as follows:

    ``9(11)(ii). The Conduct Committee shall send a copy of the Disciplinary Tribunal's report to any Member or Member Firm concerned, the Executive Counsel and the relevant Participant ...

    9(13). The Conduct Committee shall publish the report or reports prepared by the Disciplinary Tribunal for the purposes of paragraph 9(11) as soon as practicable and in such manner as it thinks fit unless this would not, in the opinion of the Conduct Committee, be in the public interest.''

  4. The Committee decided on 27/28 October 2016 to publish the Report in full. On 3 November 2016 a lawyer at the FRC emailed the claimant in the following terms:

    ``Pursuant to paragraph 9(13) of the Accountancy Scheme, the FRC's Conduct Committee has decided to publish [the Report]. As a matter of courtesy, you are being provided with a copy of the report in advance of publication on a strictly confidential basis. The report is due to be published on Tuesday 8 November 2016.''

  5. On 4 November 2016 solicitors acting on behalf of the claimant wrote to the FRC stating that the publication of the Report in its current form would be ``improper, contrary to the interests of natural justice, infringe our client's rights protected by Articles 6 and 8 of the ECHR, including the right to a fair hearing and the right to protect his reputation, and defamatory''. The letter asked that the FRC delay publication and excise all passages in the Report which contained allegations of wrongdoing. The FRC agreed to delay publication of the Report in order to consider the representations of the claimant. On 9 November 2016 the FRC wrote to the claimant's solicitors stating that the outcome of the Tribunal hearing would be announced the next day and stated:

    ``...The Tribunal report will NOT be published and no reference will be made in the press notice to your client at all. Those who have a copy of the Report have been forewarned that although the outcome will be published the detailed content of the Report remains confidential...''

  6. On 10 November 2016 the findings of misconduct and the sanctions imposed were reported. A statement was made by Executive Counsel that the fine imposed upon the accountancy firm was the highest recorded by the FRC for misconduct on a firm. It was said to be a clear indication of the importance of higher standards being maintained in all audits and the seriousness of the failure to perform an adequate audit of these financial statements which led to misleading information about the profits and turnover at the company being made to the market.

  7. On 17 November 2016 the FRC wrote to the claimant's solicitors stating that the Committee had decided to invite the Tribunal to consider the representations made on behalf of the claimant and one of the interested parties. To address the representations, the Chair of the Tribunal had made redactions to the Report. The letter, and a similar one to the interested parties, stated that the Report would be published in the redacted form on 21 November. The letter resulted in more representations being made by the claimant and the interested parties.

  8. In a letter dated 22 November 2016 to the claimant's solicitors, the FRC addressed the matters which had been raised and stated, inter alia:

    ``...it is in the public interest to publish the Report because the Report sets out the findings of a Tribunal in respect of a public interest matter under the Scheme following a public hearing of evidence with Adverse Findings being reached in respect of a major audit and accountancy firm and an audit engagement partner at that firm. The Committee must carry out its functions in a way that supports those regulated by the FRC to comply and grow and publishing the Report will serve as a deterrent to others to commit wrongdoing. The Committee is also required to ensure that its approach to its regulatory activities is transparent...

    Although the Tribunal Chairman has prepared a proposed redacted version of the Report, the Committee is not precluded from deciding that further or different redactions should be applied to those proposed by the Tribunal Chairman. Therefore, the Committee has considered whether any redacted version of the Report should be published, and if so, what form that might take, or whether the Report should be published in unredacted form. In reaching a decision in respect of the form the published Report should take, the Committee has had to weigh up a number of competing considerations and representations made by interested parties.

    The Committee has considered matters of fairness to those who did not give evidence before the Tribunal, and were not invited to comment on the Report prior to its finalisation and delivery to the Committee. These considerations have to be balanced against fairness to the respondents, who can reasonably expect that the Tribunal's decision be presented in full so that readers of the Report, including other members and member firms of the accountancy profession, can fully appreciate that Tribunal's findings, and its assessment of all the evidence including all relevant mitigating factors.

    The Committee notes that some of the redactions in the proposed redacted Report prepared by the Tribunal Chairman concern evidence or submissions heard at a public hearing. For example, certain matters stated by witnesses in evidence have been redacted. The Committee does not consider that such redactions are justified because the evidence and submissions were heard in public without restriction or closed proceedings. Moreover, the issues raised in certain of the representations go to the findings of the Tribunal, not the assertions put forward in evidence or submissions.

    On the other hand, there are certain aspects of the redactions that do not appear to go far enough if they had been solely designed to address the representations made; for example the last sentence of paragraph 45 would need to be redacted.

    Moreover, there are certain paragraphs, in particular paragraph 417 and 450 that are very difficult to deal with in terms of redaction. The sense of these paragraphs is not clear with the redactions that have been suggested and it is hard to see how these paragraphs could otherwise be appropriately redacted to satisfy the objections that have been made regarding the content of the Report given that these paragraphs are central to explaining why the Tribunal found that the Respondents' Misconduct attracted less serious sanction that might otherwise have been the case.

    The Committee has taken the view that the findings of the Tribunal should be published in full if the matters set out in the Report are to be presented in a fair and balanced way which accurately reflects the Tribunal's reasoning and findings. However, and bearing in mind that it has a discretion to determine the manner of publication, it thinks that measures can also be taken to make it clear that the Tribunal was appointed for a specific purpose, did not hear or invite evidence from directors/managers of Aero and did not invite comment from them on the content of the Report prior to providing it to the Committee.

    The Committee's decision

    The Committee has decided to publish the Report in full, unredacted...

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