The FSA seems to be having a sticky patch with judicial reviews at the moment. Late last year it was subject to judicial review for failure to deal properly with privileged material though subsequently successfully resisted the consequence of quashing the notice concerned, and most recently it had a decision notice quashed for failure to give reasons.
The first two decisions related to the FSA's investigations into the failure of Keydata. The FSA had issued a warning notice (setting out proposed enforcement penalties) against Stewart Ford, one of Keydata's directors, which made use of communications containing legal advice. The liquidators of Keydata purported to waive privilege, but Ford asserted that this did not enable the FSA to rely on the communications concerned because the privilege was a joint one in favour of Keydata and its directors. The court agreed in relation to two of the communications, highlighting the desirability for a legal adviser to be clear as to who is the client or clients. The court told the FSA that it could not rely on the communications with joint privilege, and in a later judgment considered the consequences. While the FSA was required to take some steps to destroy copies of the privileged communications, the court considered it disproportionate to quash the warning notice, or to require FSA staff to recuse themselves from continued involvement in the case. The tone of the judgment suggests that the court thought Ford was trying to overplay the impact of his limited success on the privilege point – but there is nothing in the judgment that would suggest that the court was not prepared ever to quash a warning notice that extensively relied, wrongly, on privileged material.
That the court is prepared to quash a notice has been confirmed very recently in R(C) v FSA, on 25 May. In that case an individual had made extensive representations in response to a warning notice, without changing the FSA's mind. However, the FSA had not dealt with the representations in any substantive way. Indeed the decision notice following representations contained only one extra, and short, paragraph different to the warning notice in setting out the FSA's analysis of the matter. The court considered the notice to be wholly inadequate to meet the FSA's statutory obligation to give reasons for its decision to take action. The FSA was told that it had to explain why representations had been rejected – which is, after all, what the FSA says it will do in its own Handbook (see DEPP 3.2.24 G (1)). The failure to give reasons in this case meant that the individual was not able to assess whether or not to take the matter to the Tribunal for a re-hearing, and the Tribunal would not have been in a position to address the failure to give reasons, so there was no available alternative remedy.
Although the FSA is clearly at risk of judicial review if it gets things badly wrong (as it always has been), the regulated community should not get carried away. The court in C (and the tone of the judgment in Ford) suggests that the traditional deference to regulatory decisions by regulators and to the availability of the Tribunal will continue to limit the success of judicial reviews - nothing in the recent judgments undermines the deference to regulatory judgments and to the tribunal process being the ordinary course (per R(Davies) v FSA and R(Griggs) v FSA).