The High Court has granted permission for a high-profile judicial review against the FRC.
Following an investigation
in relation to an audit of BHS, the FRC reached a settlement with the
auditors whereby they
admitted misconduct and accepted the imposition of fines and other sanctions.
The FRC and the auditors entered into a settlement agreement which included a
38-page “Particulars of Fact and Acts of Misconduct” setting out the “facts” as
agreed between these parties.
The FRC sent these documents together with a draft press release (“the Sanctions Documents”) to Taveta Investments Limited, a subsidiary of which had owned the BHS group at the time of the audit, notifying Taveta of the FRC’s intention to publish them a few days later. Taveta responded by identifying in the documents numerous factual inaccuracies and serious criticisms of Taveta’s “management”, to which they had never had any opportunity to respond. However, the FRC declined to withhold publication or make amendments to the documents.
Taveta therefore issued a claim for judicial review and sought urgent interim relief to restrain publication of any part of the Sanctions Documents that contained or referred to any express or implied criticisms of Taveta and/or its directors and/or employees (“the Taveta Personnel”). The basis of the claim is that the FRC’s decision to publish the documents without first giving Taveta a fair opportunity to answer any criticisms contained therein was a breach of the duty of fairness.
Nicklin J granted an initial interim injunction on the papers, which was then extended by an undertaking from the FRC not to publish prior to an inter partes hearing.
In a reserved judgment following that hearing, the Judge carefully considered and rejected all of the FRC’s arguments as to why Taveta’s judicial review claim is not well-founded. In particular, the Judge held:
1. The Particulars and Settlement Agreement in their current form make implied criticisms of the Taveta Personnel. Were they to be published in that form, there is a serious issue to be tried as to whether they would defame the Taveta Personnel. Further, it is well arguable that a disclaimer proposed by the FRC is ineffective to remove the defamatory character of the Particulars when taken as a whole (§61).
2. The duty of fairness is not limited to the subject of an investigation and it is arguable that the FRC owed a duty of fairness to Taveta and the Taveta Personnel (§§68-69). In particular:
(a) Lewin v FRC  1 WLR 2867 does not support the FRC’s position as to the existence of a duty of fairness or as to whether a disclaimer can satisfy that duty, and if it did, the Court would prefer the authorities cited by Taveta. Further, unlike in Lewin, the FRC did not contend that it was essential to include any criticism of Taveta Personnel to understand the allegations made against the auditors (§75).
(b) It is strongly arguable that the remedies that a trial would afford to a third party who has his reputation seriously damaged by the publication of defamatory imputations contained in an FRC report are inadequate (§76).
(c) It is plainly not in the public interest for bodies like the FRC to publish defamatory allegations against third parties (that can thereafter be freely and widely reported in the media under the protection of privilege) that are false (§78).
3. There is a serious issue to be tried as to whether the FRC’s consideration of Taveta’s representations during the litigation satisfies the duty of fairness, given the clear indication that the FRC is currently operating with a closed mind and the fact that the FRC has not submitted any evidence that the points raised by Taveta have been considered by the original authors of the Particulars (§89).
4. If the test for interim relief is that under s.12(3) of the Human Rights Act 1998, Taveta has shown that it is likely to succeed in showing that publication of the implied criticisms is not allowed; alternatively, Taveta’s prospects are sufficiently favourable to justify the order it seeks in the particular circumstances of this case (§94).
The Judge therefore granted Taveta permission to apply for judicial review.
However, the Judge felt constrained to dismiss Taveta’s application for interim relief by reason of the “exceptional circumstances” test that has been identified in certain first instance cases dealing with the situation where a regulated person seeks to restrain publication of the report produced by its regulator. The Judge expressed “serious reservations as to whether setting the bar so high is still correct or can be justified” (§97) but did not feel able to depart from this line of authority (§98). Notwithstanding the strength of Taveta’s judicial review claim, and “not without hesitation”, he held that Taveta had “not demonstrated that this is the sort of exceptional case that permits the grant of an interim injunction on publication” (§99).
The Judge concluded by observing that if the FRC publishes the Sanctions Documents unamended, it might not be able to rely on a defence of qualified privilege in answer to a claim for defamation, on the basis that it would arguably be malicious (in the legal sense) to publish in circumstances where the FRC could not believe that the defamatory meaning is true (§102).
The Judge ordered that costs be in the case, in light of the fact that although the FRC succeeded in resisting interim relief, it did so on a very narrow basis.
The full judgment can be found here.
Andrew Green QC and Iain Steele acted for Taveta, instructed by Freshfields Bruckhaus Deringer LLP.