Real Estate Opportunities Ltd v Aberdeen Asset Managers Jersey Ltd & Ors

The court considered the effect of section 348 of the Financial Services and Markets Act 2000 on the inspection of documents (principally interview transcripts) supplied by the Financial Services Authority and the Jersey Financial Services Commission to the defendants. It held that section 348 prohibits disclosure of "confidential information" received by the FSA but does not prevent a secondary recipient from disclosing documents to the extent they record information which the recipient already and independently knew. The ordinary rules of attribution apply to identify what knowledge is to be treated as that of a corporate recipient. Where transcripts contain information not previously known to the recipient (for example material originating from third parties), that material must be redacted. The court refused to decline inspection under CPR 31.12 on grounds of disproportionate redaction and ordered inspection subject to redaction and suitable procedural safeguards (including prior notice to interviewees).

Background and parties:

• REO brought proceedings alleging negligent or otherwise wrongful conduct in the flotation and subsequent management of its income portfolio; Aberdeen (first and second defendants) acted as fund manager and UBS (third defendant) acted as sponsor and adviser.
• The FSA and the JFSC investigated the splits market; transcripts of interviews with employees and former employees of the defendants were supplied by those authorities to the defendants.

Nature of application: The claimant applied under CPR 31.19(5) for inspection of documents which the defendants withheld under a claim that inspection was prohibited by section 348 of the Financial Services and Markets Act 2000 (and equivalent Jersey provisions).

Issues framed:

1. Whether section 348 prevents disclosure of documents supplied by the FSA to secondary recipients where the documents record information which the recipient already knew prior to receipt;
2. How the knowledge of employees or former employees is to be attributed to their corporate employer for this purpose;
3. Whether the practical burden and risks of redaction justified refusing inspection under CPR 31.12.

Reasoning and authorities: The court construed "obtained" in section 348 in the light of authorities including Arbuthnott v Fagan and In re Galileo Ltd and concluded that the statutory prohibition applies to information obtained by the FSA and subsequently received from the FSA, but does not bar disclosure of material already known to the recipient. Ordinary attribution principles apply to corporate knowledge; knowledge acquired by employees in the course and for the purposes of their employment will ordinarily be attributed to the employer. Where transcripts contain third-party material or supplements to the recipient's prior knowledge, that exceptional material is confidential and must be redacted. The court considered and rejected arguments that redaction would be impracticable or that inspection would undermine the public interest protections of section 348; it took account of the risk of criminal liability but found that reasonable care and legal advice would provide a defence and that the balancing under CPR 31.12 favoured inspection. The court ordered inspection subject to redaction and appropriate notice to interviewees.

Procedural note: The application was made at first instance to the Chancery Division and the FSA was notified but did not seek to be heard.

The court ordered the defendants to permit inspection of the documents in issue subject to redaction. The court held that s.348 FSMA does not bar disclosure by secondary recipients of transcripts or other documents to the extent they record information already and independently known to them; ordinary attribution rules identify the company’s prior knowledge. Exceptional material not previously known to the recipient must be redacted. The defendants’ contention that redaction was disproportionate and thus inspection should be refused under CPR 31.12 was rejected in the exercise of the court’s discretion.