In R (on the application of Land & Ors) v Executive Council of the Joint Disciplinary Scheme [2002] EWHC 2086 the Administrative Court considered whether the existence of concurrent proceedings gives rise to an inherent unfairness that the court should take into account when determining an application for a stay of disciplinary proceedings.
An application was made by Ernst & Young (E&Y) seeking an order staying the investigation by the Executive Council of the Joint Disciplinary Scheme (JDS) into E&Y’s role as auditor of Equitable Life Assurance Society and subsidiaries (Equitable) until after the completion of civil proceedings brought by Equitable against E&Y. The application was made on the ground that the continuation of the investigation would give rise to a serious risk of prejudice to E&Y. The prejudice alleged was in relation to the litigation, the JDS investigation and any subsequent disciplinary tribunal proceedings, and the private and professional lives of the E&Y partners and personnel who were involved in the firm’s audits and regulatory work for Equitable.
Mr Justice Stanley Burton referred to the general principles applicable to an application for a stay of regulatory proceedings, which were set out by Dyson J in R v Executive Council of the JDS, ex parte Hipps (1996 New Law Transcript 296069202). He noted that one of the factors to be considered by the court was that unless a party seeking a stay can show that there is a real risk of serious prejudice which may lead to injustice in one or both sets of proceedings, a stay must be refused. E&Y sought to argue that one of the factors relevant to the issue of prejudice was that there was an inherent unfairness in two tribunals concurrently considering the same issue.
This issue was the subject of conflicting opinion. In R v ICAEW, ex parte Brindle [1994] BCC 297, the Court of Appeal held that concurrent proceedings should be regarded as inherently unfair. By contrast, the Divisional Court in R v Chance, ex parte Smith [1995] BCC 1,095 did not consider that Brindle had laid down a general proposition and considered that it had been determined on its facts.
Stanley Burton J said that, looking at the issue at a general level, he preferred the approach of the Divisional Court in Smith. He observed that "[r]egulatory investigations and disciplinary proceedings perform important functions in our society" and that the proceedings of disciplinary tribunals should no longer be regarded as providing second class justice. He also said that it would be "highly regrettable if the bringing of civil proceedings were to be regarded as necessarily supporting a stay of a regulatory investigation or of disciplinary proceedings conducted in and for the public interest".
In considering the issue as to whether there is an inherent unfairness in concurrent proceedings, the judge said there were essentially two issues before him. The first was the added pressure on the resources of the defendants/respondents in the civil and disciplinary proceedings. He said that whether an injustice would arise from increased pressure on resources depended on the facts of the case.
The second issue was whether, as E&Y argued, concurrent proceedings gave rise to a risk of inconsistent decisions. The judge accepted that, at least in theory, as neither the court nor the disciplinary tribunal is bound by the decision of the other on a finding of fact, there is an inherent risk that inconsistent decisions may arise. However, he did not consider that such a risk is inherently a cause of unfairness. As he considered that it was not obvious that the Court of Appeal in Brindle had laid down a general statement of law on this issue, he accepted the Divisional Court’s judgment in Smith and concluded that concurrent proceedings are not inherently unfair or productive of injustice.
The Judge also observed that the proposition that the existence of parallel regulatory and civil proceedings is inherently unjust is inconsistent with the Court of Appeal decision in R v Panel on Takeovers and Mergers, ex parte Fayed [1992] BCC 524. He also noted, as a general point, that the court will give great weight to the evaluation of those responsible under a regulatory scheme of the public interest in the continuation of its proceedings.
On the evidence before him, the judge did not consider that E&Y had established that there was a real risk of serious prejudice and therefore refused the stay. However, he did say that the position may be different in the future based on different factual considerations then arising.
Comment
This case adopts the Divisional Court’s approach in Smith that concurrent proceedings are not inherently unfair and that each case should be considered on its own facts. Much will therefore depend on the prejudice alleged to be suffered in the circumstances of each case.
Article by Christa Band
© Herbert Smith 2003
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