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

The Court of Appeal considered the effect of sections 348 and 391 of the Financial Services and Markets Act 2000 on disclosure obligations under CPR 31. The court held that section 348 restricts disclosure of confidential information obtained from the Financial Services Authority, but a person does not "obtain" information from the FSA for the purposes of section 348 if he already had that information before the FSA provided it. Ordinary rules attributing knowledge to a corporation apply when deciding what a corporate recipient "knew" before receiving material from the FSA. The judge below did not err in ordering inspection subject to redaction and safeguards, and inspection of warning notices under court rules does not amount to "publication" under section 391.

The decision emphasises the statutory purpose of FSMA confidentiality protections (privacy and encouragement of candid regulatory disclosure), recognises the defence of due diligence under section 352, and allows redaction and court management to reconcile regulatory confidentiality with CPR 31 inspection where appropriate.

Background and parties:

• REO is a Jersey-incorporated split capital investment trust. Aberdeen Asset Managers Jersey Ltd and Aberdeen Asset Managers Ltd (collectively "Aberdeen") and UBS Ltd acted as advisers and managers for REO. REO sued the defendants alleging tortious duties and contractual breaches arising from the flotation and post-flotation conduct.
• The FSA investigated the split capital trusts market; investigations produced documents and transcripts, some of which were supplied by the FSA to the defendants and contained confidential information. The FSA and related settlements (including warning notices) were relevant background.

Procedural posture:

• The Court of Appeal heard appeals from David Richards J's order of 15 December 2006 (reported at [2006] EWHC 3249 (Ch)) requiring inspection of disclosed documents subject to redaction and protections. The defendants appealed against the inspection order.

Nature of the application / relief sought:

• REO sought inspection of documents disclosed by the defendants under CPR 31. The defendants resisted inspection of documents said to contain confidential information obtained from the FSA, invoking FSMA sections 348 and 391.

Issues framed by the court:

1. Whether a person "obtains" information from the FSA for s348 purposes if the FSA gives a document containing information the recipient already had.
2. Whether knowledge attributed to a corporate recipient (via ordinary attribution rules) prevents characterising information as obtained from the FSA.
3. Whether the judge below erred in exercising his discretion to order inspection under CPR 31 given the burdens, redaction difficulties and criminal sanctions (s352).
4. Whether inspection of warning notices would amount to "publication" contrary to s391 of FSMA.

Court’s reasoning and conclusions:

• On (i) the court interpreted "obtaining" purposively: section 348 protects information that has come into the FSA's hands and which third parties then obtain from it, but it does not apply to information a recipient already had before receiving it from the FSA. That interpretation accords with FSMA's purpose (privacy and encouraging regulatory candour) and avoids imposing unintended restraints on recipients.
• On (ii) ordinary attribution rules apply: a corporation is taken to know information known by employees, directors or agents which would be attributable to it under general law; special attribution rules were unnecessary here. The court noted the available defence under s352(6)(b) (due diligence) and accepted practical measures (reasonable enquiries, redaction) to manage uncertainty.
• On (iii) the judge did not err in exercising his discretion. He took into account the relevant factors (including Lightman J's factors from Galileo) and the practicalities of redaction, the mens rea/defence point and the fact that Aberdeen had been able to perform redaction; the CPR 31 context differs from section 236 insolvency jurisdiction but permits inspection with safeguards.
• On (iv) "publish" in s391 was construed to mean make known to the public or a section of the public; giving inspection to parties under court rules for litigation is not publication in that sense. The court accepted that use in open court could amount to publication, but that is manageable by case management (reporting restrictions, closed hearings).

Disposition: both appeals were dismissed. The court preserved practical safeguards (redaction, legal advice, trial judge management) and affirmed that FSMA confidentiality must be respected insofar as information was truly obtained from the FSA and remained confidential.

This was an appeal from David Richards J’s inspection order. The Court of Appeal dismissed both appeals. It held that (1) for s348 of the Financial Services and Markets Act 2000 a person does not "obtain" information from the FSA if he already had the information before the FSA gave it to him; (2) ordinary rules attributing knowledge to corporations apply in deciding what a corporate recipient knew prior to receipt; (3) the judge below did not err in ordering inspection subject to redaction and safeguards under CPR 31; and (4) inspection by parties under court rules does not of itself amount to "publication" for the purposes of s391, though use in open court may require case management to avoid publication.

Appeal to the Court of Appeal from an order of David Richards J, Chancery Division, reported as [2006] EWHC 3249 (Ch); appeal disposed of by the Court of Appeal in Real Estate Opportunities Ltd v Aberdeen Asset Managers Jersey Ltd & Ors [2007] EWCA Civ 197 (this judgment).