Re an Inquiry under the Company Securities (Insider Dealing) Act 1985

JurisdictionEngland & Wales
JudgeLord Keith of Kinkel,Lord Roskill,Lord Griffiths,Lord Oliver of Aylmerton,Lord Goff of Chieveley
Judgment Date10 December 1987
Judgment citation (vLex)[1987] UKHL J1210-1
Date10 December 1987
CourtHouse of Lords

[1987] UKHL J1210-1

House of Lords

Lord Keith of Kinkel

Lord Roskill

Lord Griffiths

Lord Oliver of Aylmerton

Lord Goff of Chieveley

Lord Keith of Kinkel

My Lords,

1

I have had the opportunity of considering in draft the speech to be delivered by my noble and learned friend Lord Griffiths. I agree with it, and for the reasons he gives would dismiss the appeal.

Lord Roskill

My Lords,

2

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Griffiths. For the reasons he gives I too would dismiss this appeal.

Lord Griffiths

My Lords,

3

On 12 December 1986 the respondents were appointed as inspectors by the Secretary of State under section 177 of the Financial Services Act 1986 to hold an inquiry into suspected leaks of price-sensitive information about take-over bids from the Office of Fair Trading, the Department of Trade and Industry or the Monopolies and Mergers Commission. The information concerned in some cases the advice of the Director General of Fair Trading to the Secretary of State as to whether to refer a bid to the commission, and in the others, the contents of unpublished reports by the commission. Such information is price-sensitive because the usual effect of the reference of a take-over bid to the Monopolies and Mergers Commission is to depress the price of the target company, and in cases where the market is uncertain as to whether or not there will be a reference, the announcement that there will be no reference is likely to increase the price of the target company. The conditions upon which a bid is approved are also likely to affect the price of the shares of the companies involved. It appeared that this price-sensitive information was being leaked to people who were using it to speculate on the Stock Exchange: a form of insider dealing which constitutes a criminal offence prohibited by section 2 of the Company Securities (Insider Dealing) Act 1985.

4

The appellant, Mr. Warner, is a financial journalist who had written two articles from which it appeared that he was in possession of leaked information. The first was an article in "The Times," published on 8 November 1985, in which he referred to the "unconditional clearance by the Monopolies and Mergers Commission of a bid for Matthew Brown, the Blackburn brewer, by Scottish & Newcastle Breweries." "The commission," he wrote,

"has concluded, after a six-month inquiry, that a take-over by S. & N. would not operate against the public interest. Contrary to stock market speculation, there are no conditions attached to the findings which are due to be published next week."

5

When the report was published Mr. Warner was proved correct.

6

The second article was published after Mr. Warner had become business correspondent of "The Independent." On 26 October 1986, "The Independent" published an article by Mr. Warner in which he wrote:

"Strong & Fisher's £20m. bid for fellow tanner and manufacturer, Garnar Booth, looks destined to go before the Monopolies and Mergers Commission. Sir Gordon Borrie, Director General of Fair Trading, has not yet passed his advice to the Department of Trade and Industry, but is understood to have been impressed by the barrage of arguments in favour of a reference put up by Garnar and its merchant bank adviser, Henry Ansbacher. When Paul Channon, the Trade and Industry Secretary, eventually gives judgment he looks certain to put the bid before the commission for six months."

7

Again, events proved Mr. Warner to be right.

8

The inspectors naturally wished to question Mr. Warner about the sources from which he obtained the information on which he based these articles. It should be said at once that no one suggests that Mr. Warner has used his information for insider dealing or that he has ever been guilty of such an offence. Nevertheless, the contents of the articles suggest that either Mr. Warner had a source inside one of the government departments who was prepared to leak confidential price-sensitive information in breach of section 2 of the Act of 1985 or, as the inspectors believe, he had a source fairly close to the leak which would or might enable the inspectors to trace back the leak to the culprit in the government service. Identifying the Crown servant who was leaking the information was clearly a vital aspect of the inspector's inquiry.

9

The inspectors invited Mr. Warner to give evidence before them on 25 February 1987. After establishing with Mr. Warner that he realised that the information in his articles was price-sensitive information, the inspectors then asked him from whom he had obtained the information. Mr. Warner did not suggest that his articles were the result of inspired guesswork. He agreed that he had written them after consulting sources but refused to identify his sources or to answer any questions which he thought might indirectly identify them. Mr. Warner took his stance upon the principle that a journalist cannot disclose his sources, best illustrated by the following two answers he gave to the inspectors:

"Clearly I wish to be as helpful as I possibly can on all this, but it must remain a principle that a journalist cannot disclose with whom he discusses his stories …. I cannot give you any information which might give you any help in identifying where and whom. I speak to on these stories. That must be my position."

10

The inspectors warned Mr. Warner that if he persisted in his refusal to answer their questions about his sources they would certify his refusal to do so to the High Court. In order to give Mr. Warner an opportunity to reflect upon the matter and to seek the advice of his editor, the inspectors agreed to submit further questions in writing. These questions were submitted under cover of a letter dated 2 March and Mr. Warner's answers were contained in a letter from his solicitor dated 12 March. Although Mr. Warner answered some of the questions he refused to answer questions about his sources and concluded his reply by writing:

"I would like to conclude by saying that I am fully aware that you are engaged in an investigation of a criminal nature and in answering these questions I have sought to show my desire to be as helpful as I properly can. It is, however, of paramount importance to me as a journalist that I do not breach the confidential nature of my sources, which would destroy the trust on which all such journalistic work is based."

11

Following this further refusal to answer their questions, the inspectors referred the matter to the High Court pursuant to section 178 of the Act of 1986, the relevant parts of which provide:

"(1) If any person - (a) refuses to comply with any request under subsection (3) of section 177 above; or (b) refuses to answer any question put to him by the inspectors appointed under that section with respect to any matter relevant for establishing whether or not any suspected contravention has occurred, the inspectors may certify that fact in writing to the court and the court may inquire into the case. (2) If, after hearing any witness who may be produced against or on behalf of the alleged offender and any statement which may be offered in defence, the court is satisfied that he did without reasonable excuse refuse to comply with such a request or answer any such question, the court may - (a) punish him in like manner as if he had been guilty of contempt of the court; …"

12

Hoffman J. inquired into the case and concluded that Mr. Warner had a reasonable excuse for refusing to answer questions about his sources and made no order. The Court of Appeal unanimously allowed an appeal by the inspectors. They held that Mr. Warner had without reasonable excuse refused to answer the inspectors' questions and adjourned the matter to a date to be fixed to consider what punishment (if any) should be imposed on Mr. Warner. The purpose of the adjournment was twofold. First, to give Mr. Warner an opportunity to appeal to this House, and secondly, to give him a further opportunity to answer the inspectors' questions and thus avoid or mitigate any penalty for contempt of court, in effect to put pressure upon Mr. Warner to identify his sources.

13

Whether or not Mr. Warner had a reasonable excuse for refusing to answer the inspectors' questions depends upon the true construction of section 10 of the Contempt of Court Act 1981 and a consideration of the evidence before the High Court.

14

Section 10 provides:

"No court may require a person to disclose, nor is any person guilty of contempt of court for refusing to disclose, the source of information contained in a publication for which he is responsible, unless it be established to the satisfaction of the court that disclosure is necessary in the interests of justice or national security or for the prevention of disorder or crime."

15

The genesis and purpose of this section have recently been discussed in the speeches in Secretary of State for Defence v. Guardian Newspapers Ltd. [1985] A.C. 339, and in the judgment of Slade L.J. in his judgment in the Court of Appeal in the present case. The effect of the section is to recognise and establish that in the interests of a free and effective press it is in the public interest that a journalist should be entitled to protect his sources unless some other overriding public interest requires him to reveal them. The section is so cast that a journalist is prima facie entitled to refuse to reveal his source and a court may make no order that has the effect of compelling him to do so unless the party seeking disclosure has established that it is necessary under one of the other four heads of public interest identified in the section.

16

The parties to this appeal are rightly agreed that whether or not Mr. Warner has a "reasonable excuse" to refuse to answer the inspectors' questions...

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