Financial Services Authority v Anderson

The court considered applications by the defendants for an adjournment of a forthcoming summary judgment hearing brought by the Financial Services Authority under the Financial Services and Markets Act 2000. The judge applied the principle that a stay or adjournment on the grounds of concurrent criminal proceedings requires a real risk of serious prejudice which may lead to injustice, and concluded that such a risk from the City of London Police investigation had not been shown. The judge did find, however, real prejudice arising from the effect of a restraint order under the Proceeds of Crime Act 1974 and from the defendants' lack of access to their former solicitors' files which impeded their ability to obtain or prepare professional representation. Balancing those competing prejudices, the court granted a modest adjournment of the summary judgment hearing to allow the defendants time to recover files and pursue representation, while preserving the prospect of a summary determination of the substantive issues (notably the Article 2 defence under the Business Order and alleged breaches of sections 19 and 21 of the Financial Services and Markets Act 2000).

This is a first-instance hearing of applications by three defendants for an adjournment of a summary judgment application brought by the Financial Services Authority (the FSA). The FSA seeks a declaration that the defendants carried on regulated activities while unauthorised (contrary to sections 19 and 21 of the Financial Services and Markets Act 2000), a prohibition order under section 380(1), a repayment order under section 380(2) and compensation or an account of profits under section 382(2). The factual dispute central to the summary judgment application was whether the defendants' dealings fell within the exemption in Article 2 of the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001 (the "Business Order").

The procedural background includes freezing orders obtained in December 2008, particulars served January 2009, professionally prepared defences filed in March 2009, a criminal investigation by the City of London Police leading to arrests on 21 May 2009, and a restraint order under section 41 of the Proceeds of Crime Act 1974 on 21 October 2009. The summary judgment application was listed for the week beginning 8 February 2010 and the trial was listed for three weeks from 14 June 2010.

The court framed the principal issues as: (i) whether the summary judgment hearing risked serious prejudice to any potential criminal proceedings; and (ii) whether the defendants' lack of legal representation and preparation (attributable to the restraint order and the Law Society intervention on former solicitors) justified an adjournment. On the first issue the judge held that a real risk of serious prejudice had not been demonstrated: proof in the civil proceedings of breaches of the Act (which do not necessarily allege dishonesty) would have little relevance to potential criminal charges of fraud, conspiracy or money laundering; the summary judgment process relied on documentary material and statements of case rather than oral evidence likely to generate incriminating admissions; and any remote prejudice could be addressed at a criminal trial by appropriate judicial directions on admissibility and fairness.

On the second issue the judge found real prejudice. The restraint order prevented the third defendant using his assets to fund representation and appeared to preclude private funding without corresponding public funding; the first and second defendants had been affected by a Law Society intervention and did not have timely access to their former solicitors' files which could contain professionally settled advice relevant to their Article 2 defence. The judge acknowledged the public interest in the FSA pursuing a summary determination but held that a modest adjournment would minimise overall injustice and preserve the advantages of summary disposal if the FSA's case were strong. The court therefore confirmed an order for a modest adjournment (an order that the hearing should not commence before 1 March, and the matter was provisionally re-listed for 17 March), balancing the risk of wasted costs to the FSA against the real prejudice to the defendants if the hearing were held immediately without representation or access to files.

The defendants' applications for adjournment were allowed in part. The court held there was no demonstrated real risk of serious prejudice to any potential criminal proceedings from a summary judgment hearing, but did find real prejudice arising from the effect of the restraint order and the defendants' lack of access to their former solicitors' files and to professional representation. For that reason the court granted a modest adjournment of the summary judgment hearing to permit retrieval of files and to pursue representation, while preserving the prospect of summary determination of the FSA's claim.