PwC v Attorney General

CourtRoyal Court
JudgeBirt, Deputy Bailiff and Jurats Le Ruez and Georgelin
Judgment Date28 March 2002
Date28 March 2002
Birt, Deputy Bailiff and Jurats Le Ruez and Georgelin

Miss B.H. Lacey for the representors;

A.J. Belhomme for the respondent.

Cases cited:

(1) Acturus Properties Ltd. v. Att. Gen., 2001 JLR 43, followed.

(2) Arrows Ltd., Re, [1992] BCLC 126; [1992] Ch. 545, considered.

(3) Arrows Ltd., Re (No. 4), [1994] 3 All E.R. 814, considered.

(4) Rumasa S.A. v. W. & H. Trademarks (Jersey) Ltd., 1985-86 JLR 308, considered.

Legislation construed:

Financial Services (Jersey) Law 1998 (originally entitled Investment Business (Jersey) Law 1998; renamed by Financial Services (Extension) (Jersey) Law 2000, First Schedule), art. 10A(3), as added by Financial Services (Extension) (Jersey) Law 2000:

"(3) The Court may, on an application made to it by the Commission in circumstances prescribed in an Order made under paragraph (1), appoint, on such terms as it considers to be appropriate, a person to manage the affairs of a person in so far as those affairs relate to the carrying on of financial service business."

Financial Services (Appointment of a Manager) (Jersey) Order 2000, art. 2:

"Where the Commission is satisfied that there is sufficient evidence to show the existence of any of the cases set out in the Schedule in respect of a financial service business carried on by a person the Commission may apply to the Court for the appointment by the Court of a person to manage the affairs of the person carrying on the financial service business in so far as those affairs relate to that business."

Criminal Lawfraudinvestigation by Attorney Generalauthorized by Investigation of Fraud (Jersey) Law 1991, art. 2 to obtain compulsorily information in investigation of fraudmay compel manager appointed by court to provide confidential information obtained from trust company's clients

Truststrust companiesduty of confidentialitytrust company owes duty to clients in respect of their affairspublic interest in free flow of information to be considered by Attorney General before deciding to require disclosure of information from company or managers under Investigation of Fraud (Jersey) Law 1991, art. 2

The representors sought judicial review of the Attorney General's decision to issue notices under the Investigation of Fraud (Jersey) Law 1991.

The Attorney General was conducting a criminal investigation into the affairs of the proprietor of Chimel Trustee Co. (Jersey) Ltd. and two associated companies. On the application of the Jersey Financial Services Commission ("the JFSC"), the court appointed two partners of the second representor as managers of Chimel, pursuant to the Financial Services (Appointment of a Manager) (Jersey) Order 2000. The managers, on discovering that Chimel had not complied with the JFSC guidelines and legislation in relation to money-laundering, began to obtain the required information from its clients. Chimel and its two associated companies were later declared en dsastre on the application of the managers. The Viscount employed the second representor to assist with the administration of the dsastres and the second representor continued to correspond with Chimel's clients.

The Attorney General issued notices to the representors under art. 2 of the 1991 Law, requiring the delivery up of all material which they held concerning the proprietor's businesses, for the purposes of an investigation into money-laundering offences. These notices were amended during the trial to require only the disclosure of information supplied to the second respondents by the clients of Chimel.

The representors applied for judicial review of the decision of the respondent to issue the notice, submitting that (a) there was a public interest in preserving confidentiality between the clients of a trust company and the Viscount or managers appointed by the court, to encourage clients to disclose information voluntarily; and (b) there was no evidence that the Attorney General had considered the public interest in preserving confidentiality before issuing the notice.

The Attorney General submitted in reply that (a) the object of the amended notice was to obtain the information supplied by the clients of the trust company to the representors; (b) the clients gave the required information out of self-interest, so that the transfer of the administration of their assets to a new company could take place; (c) the communications were therefore confidential only to the same extent as normal communications between a company's officers and its clients; (d) he was authorized by the 1991 Law to obtain compulsorily information from the officers of trust companies when serious fraud was being investigated; and (e) no evidence of illegality, irrationality or procedural impropriety had been produced.

Held, dismissing the application:

(1) The notice issued to the second representors was equivalent to a notice issued against Chimel at a time when it was under the control of its directors. The information requested had been obtained by the second representor only because it had not earlier been obtained by Chimel from its clients, as it had failed to carry out its obligations of due diligence. Moreover, the information ultimately provided by the clients was given out of self-interest, as the administration of their assets could not be transferred to other service providers until the required information was given. Just as Chimel owed a duty of confidentiality to its clients in respect of their affairs, likewise there was confidentiality between those clients and the Viscount or managers appointed under the 2000 Orderbut it was no greater than that previously existing prior to the company's being placed en dsastre or under management ( paras. 21-25).

(2) Nevertheless, the Attorney General was authorized by the 1991 Law to obtain information compulsorily when serious fraud was being investigated, though he had to consider the issue of confidentiality before issuing his notice. There was no evidence which was irreconcilable with the Attorney General's belief that he should issue the notice in this case. A lack of positive evidence that he had considered the confidential nature of the documents and information in question was insufficient to overturn the presumption that he had acted correctly and the second representor was therefore obliged to comply with the amended notice ( paras. 26-28).

(3) Moreover, although the amendment to the respondent's request made it unnecessary to decide the matter, there was a public interest in ensuring the free flow of informally-obtained information from those who had managed a company to the Viscount in the case of a dsastre and to the managers appointed by the court under the 2000 Order. It was relevant for the Attorney General to consider the public interest when deciding whether to issue a notice under the 1991 Law and, if so, whether to serve such a notice on the Viscount or court-appointed managers, or directly on those formerly responsible for the management of the company. The duty of the directors of Chimel and its associated companies to assist the court-appointed managers under art. 10A(3) of the Financial Services (Jersey) Law 1998 was broadly the same as that imposed by art. 18(1) of the Bankruptcy (Dsastre) Jersey Law 1990 in the case of a dsastre ( paras. 13-14; para. 19).

1 BIRT, DEPUTY BAILIFF: This is an application by the Viscount and PricewaterhouseCoopers ("PwC") for judicial review of a decision by the Attorney General to issue notices under art. 2 of the Investigation of Fraud (Jersey) Law 1991 ("1991 Law").

The factual background

2 On July 12th, 2001, pursuant to art. 2 of the Financial Services (Appointment of a Manager) (Jersey) Order 2000 ("the 2000 Order") the court, on the application of the Jersey Financial Services Commission ("JFSC"), appointed two partners of PwC as managers of Chimel Trustee Company (Jersey) Ltd. ("Chimel") and two of its associated companies. All three companies carried on the business of trust and company administration. The basis for the application was that a criminal investigation was being carried on into the affairs of Mr. Peter Michel and others and the Attorney General had obtained warrants under the 1991 Law to seize all the files and documents held by Chimel. Mr. Michel is the proprietor of Chimel and the two associated companies.

3 Following their appointment, the managers discovered that in many cases appropriate due diligence, as required by the various JFSC guidelines and the money-laundering legislation, had not been carried out. Accordingly, they entered into correspondence and held meetings with various clients of Chimel in order to establish such things as the provenance of the funds under administration, or the purpose of the trust or corporate structure in question, etc.

4 On October 4th, 2001, upon the...

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