Attorney General's Reference (No. 1 of 1988)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith of Kinkel,Lord Templeman,Lord Ackner,Lord Oliver of Aylmerton,Lord Lowry |
| Judgment Date | 13 April 1989 |
| Judgment citation (vLex) | [1989] UKHL J0413-1 |
| Date | 13 April 1989 |
| Court | House of Lords |
[1989] UKHL J0413-1
House of Lords
Lord Keith of Kinkel
Lord Templeman
Lord Ackner
Lord Oliver of Aylmerton
Lord Lowry
My Lords,
I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Lowry. I agree with it, and for the reasons he gives would affirm the decision of the Court of Appeal.
My Lords,
By sections 1(3), (4) and 8 of the Company Securities (Insider Dealing) Act 1985, a criminal offence is committed, subject to exceptions and conditions not here material, where "an individual has information which he knowingly obtained (directly or indirectly) from" a person connected with a company and then deals on the Stock Exchange with shares in that company knowing that the information is confidential unpublished price sensitive information in relation to those shares.
The appellant was informed by a merchant bank connected with a company that a take-over bid had been agreed and that this information was confidential. The appellant promptly purchased 6,000 shares in the company on the Stock Exchange and, following the announcement of the take-over, made a profit of £3,000. If a member of the police force, after studying the Act of 1985, had asked the appellant whether he had obtained information and, if so, from whom, a truthful appellant would have answered that he obtained information from the merchant bank. Yet when the appellant was tried for an offence under the Act, the trial judge held that the appellant had not obtained any information.
The argument is that, according to the dictionary, information is not "obtained" if the information is volunteered. The object of the Act was to prevent insider dealing. The appellant became an insider when he learned of the take-over agreement and he became an insider dealer when he bought 6,000 shares. Parliament cannot have intended that a man who asks for information which he then misuses should be convicted of an offence while a man who, without asking, learns the same information which he also misuses should be acquitted.
In Customs and Excise Commissioners v. Top Ten Promotions Ltd. [1969] 1 W.L.R. 1163 this House construed a taxing statute and reached a conclusion adverse to the taxpayer. Lord Upjohn said, at p. 1171:
"It is highly dangerous, if not impossible, to attempt to place an accurate definition upon a word in common use; you can look up examples of its many uses if you want to in the Oxford Dictionary but that does not help on definition; in fact it probably only shows that the word normally defies definition. The task of the court in construing statutory language such as that which is before your Lordships is to look at the mischief at which the Act is directed and then, in that light, to consider whether as a matter of common sense and everyday usage the known, proved or admitted or properly inferred facts of the particular case bring the case within the ordinary meaning of the words used by Parliament."
My Lords, without troubling any dictionary, I am satisfied that the appellant obtained information which he made no effort to obtain and that his subsequent misuse of that information was in breach of the Act of 1985.
My Lords,
I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Lowry. For the reasons which he has given, I too would answer the questions posed by the reference in the same way as the Court of Appeal.
My Lords,
I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Lowry. For the reasons which he has given, I too would answer the questions posed by the reference in the same way as the Court of Appeal.
My Lords,
This appeal is concerned with the meaning of the word "obtained" in section 1(3) of the Company Securities (Insider Dealing) Act 1985 which, with section 1(4)( a), provides:-
"(3) The next subsection applies where — ( a) an individual has information which he knowingly obtained (directly or indirectly) from another individual who — ( i) is connected with a particular company, or was at any time in the six months preceding the obtaining of the information so connected, and (ii) the former individual knows or has reasonable cause to believe held the information by virtue of being so connected, and (b) the former individual knows or has reasonable cause to believe that, because of the latter's connection and position, it would be reasonable to expect him not to disclose the information except for the proper performance of the functions attaching to that position. (4) Subject to section 3, the former individual in that case — ( a) shall not himself deal on a recognised stock exchange in securities of that company if he knows that the information is unpublished price sensitive information in relation to those securities …"
On 11 April 1988 at Southwark Crown Court an accused person, whom for the purpose of these proceedings I shall call "the appellant", pleaded not guilty to two charges laid against him as a prohibited person dealing in the securities of a company contrary to the above provisions and to section 8(1) of the Act of 1985, which alleged that on or about 5 December 1985, (1) having information which he knowingly obtained from an employee of the company's merchant bankers who was connected with the company and whom he knew or had reasonable cause to believe held the information by virtue of being so connected, (2) knowing or having reasonable cause to believe that because of the said employee's connection and position it would be reasonable to expect her not to disclose that information except for the proper performance of the functions attaching to that position and (3) knowing that that information was unpublished price sensitive information in relation to the securities of the company, he purchased in one instance 5,000 and, in another, 1,000 ordinary shares in the company on a recognised stock exchange, namely the Stock Exchange.
The prosecution conceded that the appellant had taken no step directly or indirectly to secure, procure or acquire the information (which had been given to him quite properly) and at the conclusion of the prosecution case his counsel submitted inter alia that there was no evidence that the appellant obtained information, that he merely received it and that the prohibition in section 1(4) did not operate against him, since the proper construction of the word "obtained" in section 1(3) connoted active conduct. The trial judge upheld this submission and directed the jury to acquit the appellant on both counts in the indictment.
The Attorney-General then referred the following points of law to the Court of Appeal under section 36(1) of the Criminal Justice Act 1972:-
"(a) Whether or not the word 'obtained' in section 1(3) of the Company Securities (Insider Dealing) Act 1985 has the restricted meaning of 'acquired by purpose and effort' or whether it has a wider meaning, (b) Whether or not any individual who has, from another, information within the scope of the Act and is otherwise within the scope of the prohibitions contained in sections 1(4), 1(6) and 2 of the Act, may be an individual who has 'obtained' within the terms of sections 1(3), 1(6) and 2 of the Act".
The Court of Appeal (Lord Lane C.J., Hutchison and Tucker JJ) [1989] 2 W.L.R. 195 gave their opinion on the points of law referred to them by saying that (a) the word "obtained" in section 1(3) has a wider meaning than "acquired by purpose and effort" and (b) an individual who has, from another, information within the scope of the Act may be an individual who has "obtained" within the meaning of sections 1(4), 1(6) and 2. Then, in pursuance of an application by the appellant under section 36(3) of the Act of 1972, they referred the points to your Lordships' House. A full statement of the facts and also the Attorney-General's reference may be found in the report at [1989] 2 W.L.R. 195, 196-200.
It would, I believe, suffice to say that I agree with the reasoning and conclusions contained in the judgment of the court delivered by the Lord Chief Justice, which I would be more than content to adopt as my own. But I feel that the persuasive and helpful arguments of Mr. Buckley, who appeared with Mr. White for the appellant before your Lordships, deserve and require a positive response. Accordingly, I venture to express my own view of the matter.
The immediately relevant provisions set out above apply to what is conveniently termed a secondary insider (because his information is derived from another individual.) They are logically preceded by subsections 1(1) and 1(2), which apply to a primary insider, being "an individual who is, or at any time in the preceding six months has been, knowingly connected with a company". Section 1(5) inhibits dealing by an individual who is contemplating or has contemplated making a take-over offer for a company and section 1(6) applies to an individual who has knowingly obtained information from an individual to whom subsection (5) applies. Section 2 deals with abuse of information held by or knowingly obtained from a Crown servant...
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