The Financial Conduct Authority v Konstantinos Papadimitrakopoulos
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Joanna Smith |
| Judgment Date | 04 November 2022 |
| Neutral Citation | [2022] EWHC 2792 (Ch) |
| Docket Number | Case No: BL-2019-002023 |
| Court | Chancery Division |
[2022] EWHC 2792 (Ch)
Mrs Justice Joanna Smith DBE
Case No: BL-2019-002023
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr A George KC and Mr R Fakhoury (instructed by the FCA) for the Claimant
Mr G Brodie KC and Mr R Power (instructed by BCL Solicitors LLP) for the First Defendant
Mr A Hunter KC and Ms L Sagan (instructed by Boutique Law LLP) for the Second Defendant
Hearing date: 27 September 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment was handed down remotely at 10 am on 4 November 2022 by circulation to the parties or their representatives by email and by release to The National Archives.
These proceedings, commenced by the Claimant (“ the FCA”) in December 2019, concern allegations that, between 2011 and 2015, the First Defendant (“ D1”) and the Second Defendant (“ D2”), the CEO and CFO of Globo Plc respectively, engaged in market abuse under section 118 of the Financial Services and Markets Act 2000 (“ FSMA”) and/or were knowingly concerned in contraventions of section 397 of FSMA and section 89 of the Financial Services Act 2012 (“ the Proceedings”). D1 contends that the claim (which is brought pursuant to sections 382 and 383 of FSMA, requiring the Defendants to pay a just sum to the FCA for distribution to qualifying investors who have suffered a loss as a result of the Defendants' alleged conduct), is an abuse of process or is otherwise likely to obstruct the just disposal of the Proceedings and, by his application dated 15 November 2021 (“ the Application”), D1 applies to strike it out pursuant to CPR 3.4(2)(b).
The basis for the Application is that in investigating, building and formulating the civil claim against D1, the FCA has made use of material (“ the MLA Material”) obtained through mutual legal assistance requests (“ the MLA Requests”) without first obtaining the consent of the relevant overseas authorities. In doing so, D1 contends that the FCA has breached the absolute prohibition against collateral use of MLA Material contained in section 9(2) of the Crime (International Co-Operation) Act 2003 (“ the 2003 Act”).
It is common ground that the Application raises four key issues: (i) the proper construction of the word “use” in section 9 of the 2003 Act; (ii) whether the FCA's use of the MLA Material in relation to D1 falls within that definition and therefore that prohibition as a matter of fact; (iii) whether if the answer to (ii) is “yes”, the FCA has nevertheless obtained consent for collateral use as against D1 as required by section 9 of the 2003 Act; and (iv) the consequences, as a matter of law, if the FCA has breached section 9 of the 2003 Act and, in particular, whether it is appropriate for the court to strike out the claim as an abuse of process.
PROCEDURAL BACKGROUND
In October 2019, the FCA applied to the court for permission to serve the Proceedings on the Defendants outside the jurisdiction. In support of that application, the FCA relied upon the first witness statement of Mr Anthony Williams dated 31 October 2019 (“ Williams 1”) which, amongst other things, explained that:
i) the FCA had been conducting an investigation into the Defendants' conduct since October 2015 and that this had included the use of the FCA's information gathering powers, requests under regulatory information sharing agreements and requests for mutual legal assistance to obtain relevant information and documents from 13 different jurisdictions as well as from within the UK;
ii) the findings of the investigation led the FCA to conclude that the actions of the Defendants had resulted in the publication of false and/or misleading accounting information and other statements by Globo Plc and by the Defendants between at least 22 November 2010 and 26 October 2015;
iii) the decision had been made to bring criminal proceedings against both Defendants, but attempts to extradite them from Greece had proved unsuccessful;
iv) in the circumstances, it was in the public interest to bring a civil claim against the Defendants “so that at least some form of redress may be obtained for the investors who suffered from [their] actions” and “[t]he FCA will seek to deploy the material gathered during its investigation for the purposes of this claim”. Williams 1 did not expressly say whether, and if so how, any MLA Material had been used for the purposes of the preparation of Williams 1, or would be used for the purposes of the claim.
The court granted permission to the FCA to serve the Proceedings out of the jurisdiction by an order dated 29 November 2019 and on 2 December 2019, the FCA commenced the Proceedings. The combined effect of the Covid 19 pandemic and challenges encountered by the FCA in effecting foreign service subsequently delayed matters, but the claim form was ultimately served on D1 on 4 March 2021 and on D2 on 23 June 2021. D2 served his Defence on 15 November 2021.
On the same day, and instead of serving a Defence, D1 made the Application to strike out the claim supported by the first witness statement of Hannah Raphael (“ Raphael 1”). In a nutshell, Raphael 1 contends that, by its own admission in Williams 1, the FCA has used MLA Material obtained in the context of a criminal investigation for the purposes of commencing these Proceedings and that it has done so without consent from the relevant overseas authorities. At paragraph 30, Raphael 1 identifies various categories of document referred to in Williams 1 which (it is said) were likely obtained through the mutual legal assistance process from a foreign jurisdiction (“ the Challenged Documents”).
The FCA responded to the Application in a third witness statement from Mr Williams dated 24 May 2022 (“ Williams 3”). This statement explains the “standard FCA practice” in potential market abuse cases of running “dual track” investigations; i.e. investigations which recognise the potential for both criminal offences and civil/regulatory contraventions to have been perpetrated. Williams 3 acknowledges that this investigation (referred to as “Operation Newhaven”) has involved (amongst other things) requests for Mutual Legal Assistance from foreign jurisdictions, but asserts that the FCA is “fully aware of its legal obligations”, that care was taken in Williams 1 to ensure that evidence obtained pursuant to MLA Requests was not included or relied upon and that the Challenged Documents were all obtained via non-MLA channels, or were not relied upon for the purposes of these Proceedings. Williams 3 therefore maintains that, with the exception of two sentences included in paragraph 90 of Williams 1 in error (to which I shall return), nothing in Williams 1 was founded on MLA Material and further that, in so far as MLA Material has been obtained from the Swiss and Greek authorities, the FCA has had the necessary consent for its collateral use from the outset.
Service of Williams 3 prompted an application by D1 for disclosure of six categories of documents referred to in Williams 3 (“ the Disclosure Application”), which I heard on 21 July 2022. As is set out in my judgment ( [2022] EWHC 2061 (Ch)), I ordered disclosure of some, but not all, of the documents sought, including disclosure of “requests for assistance” made by the FCA from international authorities. Although I considered that some documents (expressly said to have been obtained via the Mutual Legal Assistance process) satisfied the test for disclosure under paragraph 21 of CPR PD51U (now PD 57AD), I nevertheless refused disclosure in circumstances where the issue of consent from the relevant overseas authorities remained to be determined.
On 19 August 2022, Mr Williams filed a fourth witness statement (“ Williams 4”) in which he provided more detail as to the basis of the investigation which gave rise to the current Proceedings, focusing specifically on the occasions on which the FCA formally sought evidence from other entities and authorities, including by way of (i) requests for assistance under the International Organisation of Securities Commissions (“ IOSCO”) Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and Exchange of Information; (ii) information requirements to domestic entities and organisations using the FCA's compelled powers under sections 171 to 173 and 175 of FSMA; and (iii) MLA Requests made to (amongst others) the authorities in Greece, Saint Vincent and the Grenadines and Switzerland under the 2003 Act. Williams 4 states that the vast majority of the evidence in the investigation came through non-MLA routes and that it is this vast body of evidence that supports the allegations in the Particulars of Claim. However, Williams 4 acknowledges that, in so far as MLA Material was obtained by the FCA, such material was used to inform the continuing investigations. Williams 4 exhibits the “requests for assistance” that the FCA was ordered to disclose, together with various other communications with foreign authorities to which I shall return. Two typographical errors in Williams 4 were corrected by service of a fifth witness statement from Mr Williams (“ Williams 5”) on 7 September 2022.
D2 is not a party to the Application, but on 5 May 2022, he served a Request for Further Information asking detailed questions of the FCA about its use of MLA Material in the Proceedings. By a response dated 14 June 2022, the FCA maintained that none of the MLA Material identified by D2 had been “used for the purposes of...
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