Taveta Investments Ltd v The Financial Reporting Council

JurisdictionEngland & Wales
JudgeMr Justice Nicklin
Judgment Date29 June 2018
Neutral Citation[2018] EWHC 1662 (Admin)
CourtQueen's Bench Division (Administrative Court)
Docket NumberCase No: CO/2328/2018
Date29 June 2018

[2018] EWHC 1662 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

THE HONOURABLE Mr Justice Nicklin

Case No: CO/2328/2018

Between:
Taveta Investments Limited
Claimant
and
(1) The Financial Reporting Council
(2) The Conduct Committee of the Financial Reporting Council
(3) The Executive Counsel of the Financial Reporting Council
Defendants

and

(1) Pricewaterhousecoopers LLP
(2) Stephen John Denison
Interested Parties

Andrew Green QC and Iain Steele (instructed by Freshfields Bruckhaus Deringer LLP) for the Claimant

Charles Béar QC and James McClelland (instructed by Financial Reporting Council General Counsel) for the Defendants

Julian Randall of Taylor Wessing LLP for the First Interested Party

The Second Interested Party did not attend and was not represented

Hearing date: 21 June 2018

Judgment Approved

Mr Justice Nicklin
1

These are proceedings for judicial review brought by the Claimant against the Defendants. Permission to bring a judicial review claim has not yet been granted. This judgment deals with a discrete, but important, issue regarding interim relief pending the determination of the application for permission (and, if granted, the claim itself).

The parties

The Financial Reporting Council

2

The Financial Reporting Council (“FRC”) is an independent regulator with a range of responsibilities. It is responsible for setting the UK Governance and Stewardship Codes and UK standards for accounting and actuarial work and is the UK competent authority for statutory audit, setting audit and ethical standards, and monitoring and enforcing the quality of audit. The FRC is the investigative and disciplinary body for accountants and actuaries in the UK. It carries out these functions under its Accountancy Scheme (“the Scheme”).

3

The FRC's responsibilities derive from a number of sources. Some are designated by statutory instrument, some delegated by statutory instrument to the FRC or its Conduct Committee by the Secretary of State, some are voluntarily undertaken, and some are based on contractual arrangements. Some of the latter contractual arrangements are underpinned by statutory requirements on other bodies or institutions, such as with the accountancy bodies.

4

The FRC is overseen by a board comprising non-executive and executive directors. The FRC board is supported by various committees including the Conduct Committee.

Taveta Investments Limited

5

The Claimant (“Taveta”) together with its subsidiary companies, including Arcadia Group Limited (“Arcadia”), comprise the Taveta Group. Arcadia owns UK high-street brands including Topshop, Topman and Miss Selfridge. A further subsidiary of Taveta, Taveta Investments (No.2) Limited (“Taveta 2”), used to own the BHS group until its sale in 2015.

The FRC Investigation

6

On 27 June 2016, the FRC announced that it had begun an investigation under the Scheme into alleged misconduct by PricewaterhouseCoopers (“PwC”) and one of its accountants, Stephen Denison, the Interested Parties, in relation to the audit and financial statements of BHS Limited for the year ending 30 August 2014. At that time, BHS Limited was part of the Taveta group.

7

Following completion of that investigation, and as was widely reported from 12 June 2018, the FRC has imposed sanctions on the Interested Parties. PwC and Mr Denison had admitted misconduct in multiple areas of the BHS audit and accepted the imposition of fines and other sanctions, as follows:

i) PwC was fined £10m, severely reprimanded and was made subject to certain conditions regarding its practice for the next three years;

ii) Mr Denison was fined £500,000, severely reprimanded, banned from performing any audit work for 15 years and undertook to remove his name from the register of statutory auditors for 15 years.

8

The fines were reduced by 35% (to £6.5m and £325,000 respectively) as a result of ‘early settlement’ (i.e. a discount for an acceptance of responsibility for the misconduct alleged).

The Settlement Agreement and the Particulars of fact and acts of misconduct

9

To effect this resolution, the FRC and the Interested Parties entered a settlement agreement dated 31 May 2018 (“the Settlement Agreement”). As part of this, particulars of fact and acts of misconduct were agreed by the parties (“the Particulars”). The Particulars were set out in a 38-page document annexed to the Settlement Agreement. They contain the “facts” as agreed between the FRC and the Interested Parties in relation to the investigation. The Settlement Agreement also sets out the nature and seriousness of the misconduct and the basis on which the sanctions had been determined.

10

The Settlement Agreement was concluded in accordance with provisions in the Scheme governing settlement of proceedings. In summary, where terms of settlement are agreed between parties, the FRC's Executive Counsel (the Third Defendant) is required to deliver the proposed settlement to the FRC's Conduct Committee (the Second Defendant) and the Committee is required to appoint an independent panel member to approve the proposed settlement. Once approved, the Conduct Committee is required, by paragraph 8(6) of the Scheme, to publish the Settlement Agreement “ as soon as practicable” and in such manner as it thinks fit “ unless this would not, in the opinion of the Conduct Committee, be in the public interest”.

11

The FRC has a Publication Policy (last published in February 2018) (“the Publication Policy”). In summary, the FRC will publish decisions made pursuant to the Scheme in accordance with the relevant publication requirements. The Conduct Committee of the FRC is required to consider whether to publish, amongst other things, settlement agreements. The decision to publish is to be taken on its own merits and on a case-by-case basis. In relation to publication of settlement agreements, the Committee can defer or delay publication if it considers that, at the relevant point in time, other public interest factors outweigh the presumption that publication is in the public interest. Under the heading, “ Timing and Manner of Publication” the Publication Policy provides as follows:

27 The identity of third parties will usually be anonymised in any announcements and/or related documents published under this Publication policy, unless or to the extent that publication of that individual's identity is considered fair and necessary in all the circumstances and is in compliance with any applicable data protection laws.

28 Decisions will normally be published promptly but the Committee retains discretion to delay publishing them, or parts of them, if it considers there are public interest reasons for doing so.

29 Save where urgent publication is desirable to safeguard the public interest, any Member or Member Firm and any other party named in an announcement will be given a copy of its terms a minimum of 3 days before the making of the announcement. Advance notification will also be given to the relevant Scheme Participants and any regulatory body or prosecuting authority with a known interest in the matter in question. Amendments to the wording of press announcements will not generally be accepted, except in relation to matters of factual inaccuracy…

31 Save as otherwise set out in this Publication policy or required by law, publication will usually take the form of:

• a short statement on the FRC's website setting out the brief factual details of the decision or action in question; and

• where considered appropriate in all the circumstances, a link to any related detailed decision(s).

32 In addition, press announcements will usually be published and circulated in a manner determined by the FRC Executive. The press announcement may contain a link to the website statement and any accompanying report or document.

33 In certain circumstances and where not contravening any publication requirements under the Schemes, the FRC may decide to vary the form or procedure in which it publishes an announcement made under this policy.

12

I would note here that the 3-day notice period stipulated under paragraph 29 is a minimum period.

13

In accordance with its Publication Policy, the FRC intended to publish a press release announcing the Settlement Agreement and the imposition of sanctions. The Settlement Agreement and the Particulars would then be published and made freely available on the FRC's website.

14

On Friday 8 June 2018, at 10.28, Kate Davies, Deputy General Counsel emailed Deborah Cooper at Taveta:

“I write to you as representative of the Taveta Group, Arcadia and Sir Philip Green.

Please note, on a strictly confidential basis, that the FRC has settled regulatory action taken against PwC and [Mr Denison] in relation to the statutory audit of the financial statements of BHS. Publication of this outcome by the FRC is intended to take place on Wednesday 13 June at 7am.

In line with our Publication Policy, as the above corporate entities and Sir Philip are identified in the documents intended to be published, I attach an advance copy of our proposed press release which will link to the attached settlement agreement and statement of facts.

Amendments to the wording of the press notice and documents will not generally be accepted, except in relation to matters of factual inaccuracy. Please inform us by 2pm on Tuesday 12 June if there are any accuracy concerns you would like us to take into consideration…” (emphasis in original)

15

This was the first warning that Taveta got of the impending publication of the press release, Settlement Agreement and the Particulars (collectively “the Sanction Documents”). In terms of the Publication Policy, Taveta was given barely the minimum period of notice allowed under paragraph 29 (see [11] above).

16

At 15.15 on Saturday 9 June 2018, the...

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