UK: Misinformation And "Maxwellisation": Taveta Investments Limited v. The Financial Reporting Council

Last Updated: 27 July 2018
Article by Tanya Alfillé, Richard Caird and Thomas Leyland

It is accepted that when a regulatory body such as the Financial Reporting Council (the investigative and disciplinary body for accountants and actuaries in the UK) investigates one of its members, its findings will be made public. But what if those findings also make criticisms of third parties who have not taken part in the investigation? In Taveta Investments Limited v. The Financial Reporting Council [2018] EWHC 1662 (Admin) the court considered a challenge to the FRC's decision to publish its detailed findings without first affording the third party a chance to respond to allegations made against it.


The proceedings arose in the context of an investigation by the FRC into an audit of BHS. At the time of the relevant audit, BHS was part of the Taveta group. Following its investigation, the FRC agreed a settlement with the auditors, PwC, which admitted misconduct and accepted the imposition of fines and other sanctions. The FRC and PwC entered into a settlement agreement, annexing a document setting out agreed "particulars of fact and acts of misconduct".

In accordance with its publication policy, the FRC intended to publish a press release announcing the settlement and decision to impose sanctions. The settlement agreement and particulars would then be made available on the FRC website.

The FRC notified Taveta of its intention to publish the documents. Taveta complained that these included materially inaccurate statements and criticisms of Taveta's management. The FRC rejected the complaints and refused to make any alterations to the documents. Instead, the FRC offered to include a disclaimer. The proposed disclaimer, drawn from the decision in R (Lewin) v. FRC and others [2018] 1 WLR 2867, stated that the press release, settlement agreement and particulars made no findings (nor would it be fair to treat them as doing so) against any individual or entity other than PwC.

Taveta issued a claim for judicial review, on the basis that the FRC's decision to publish the documents without first giving Taveta a fair opportunity to answer any criticisms was unlawful. Pending the outcome of those proceedings, Taveta also applied for urgent injunctive relief to restrain publication of any part of the documents that contained or referred to any express or implied criticisms of Taveta, its directors or employees.

Claim for judicial review

In deciding whether to grant an order preventing publication of the documents, the court first had to analyse the claim for judicial review and its prospects of success. At that stage, the court needed to be satisfied only that the claim raised a serious issue to be tried. It held that there was a serious issue to be tried as to:

  • whether the documents contained allegations that would defame Taveta's personnel;
  • whether the FRC owed Taveta a duty of fairness; and
  • whether the FRC had breached that duty in failing to allow Taveta a fair opportunity to respond to the allegations.

Whether the particulars contained criticism of Taveta

Although the FRC recognised that the particulars contained material which could be used as "grounds for advancing criticism", it submitted that any harm caused by this could be adequately dealt with by publishing the disclaimer. As to any implied criticism of Taveta's management, the FCR suggested that it was not appropriate to apply defamation authorities in a public law context to ascertain the meaning of the particulars.

The judge disagreed. The particulars were to be published to the world at large, and their meaning could not depend on whether the complaint about their publication was in the context of a public law challenge or a defamation claim. Having applied the well-established principles for determining meaning from the defamation authorities, the judge held that:

  • the particulars and settlement agreement made implied criticisms of Taveta's personnel, and bore a meaning that was capable of defaming them. Were they to be published in that form, there was a serious issue to be tried as to whether they would defame Taveta's personnel in the meaning the judge had found; and
  • it was arguable that the disclaimer would not be sufficient to remove the defamatory character of the particulars when taken as a whole.

Whether the FRC owed a duty of fairness

Taveta argued that the FRC owed it a duty of fairness based on the general principle that a person should not be criticised in a public report without having a fair opportunity to respond to that criticism. The process of providing that opportunity before publication is often called "Maxwellisation", referring to the 1970s litigation involving Robert Maxwell. The FRC's position was that any such duty is limited to the subject of the investigation (i.e. the auditor), and that Taveta simply did not fall within its remit or its investigation.

The court held that there was a serious issue to be tried as to whether the FRC owed Taveta and its personnel a duty of fairness arising from its intention to publish documents containing criticism of them. In particular, it found that:

  • the duty of fairness was not limited to the subject of an investigation, but also applied to third parties, who would be equally at risk were findings of misconduct to be made against them in a published report without them first having the opportunity to respond;
  • it was strongly arguable that the remedies that a trial would give a third party whose reputation had been seriously damaged by the publication of defamatory allegations contained in an FRC report were inadequate;
  • it was not in the public interest for bodies like the FRC to publish defamatory allegations against third parties, and the chances of avoiding such an outcome would be considerably improved by allowing third parties the opportunity to refute them.

In reaching its conclusions, the court rejected the FRC's suggestion that the decision in Lewin supported its position that it owed no duty of fairness to third parties, or that such a duty could be satisfied by publication of a disclaimer. In Lewin, the director of a public company unsuccessfully challenged the inclusion (and publication) of findings of serious wrongdoing on his part in a report by the FRC following its investigation into the company's auditors. The court in Taveta pointed out, among other things, that the fact that the FRC's remit covers only auditors and actuaries does not mean it does not have a duty to act fairly to other third parties. It also highlighted important differences between the two cases: unlike Lewin, the FRC did not contend that it was essential to include any criticism of Taveta in order to understand the allegations made against PwC, and the FRC had positively denied any intention to publish any criticism of Taveta.

Whether there was a breach of the duty of fairness

The court considered whether the FRC had given Taveta a proper and fair opportunity to respond to the criticisms contained in the documents. The FRC contended that any duty of fairness it owed would be satisfied by (a) the proposed disclaimer and (b) its consideration of the representations Taveta had made since issuing its judicial review claim.

The judge did not agree that the duty of fairness could, in all cases, be satisfied by publication of a disclaimer. Whether any particular form of wording in a disclaimer will act as a sufficient antidote to extinguish the defamatory allegations was a matter of fact and degree. As to the response to Taveta's submissions, he considered that the FRC's "almost dogged" refusal to amend its documents in the face of Taveta's submissions was the clearest indication that the FRC was operating with a closed mind. The judge also pointed to the fact that the FRC had not been able to show that the points raised by Taveta had been considered by the decision-maker (i.e. the author of the particulars).

The court therefore concluded that there was a serious issue to be tried as to whether there had been a breach of the duty of fairness.

Application to prevent publication

The court turned to the question of whether it should grant Taveta an order restraining publication of the alleged criticisms until the outcome of its judicial review proceedings.

Such an order, if granted, would affect the FRC's right of freedom of expression and would not be granted unless the court could be satisfied under s.12(3) Human Rights Act 1998 that Taveta was likely to establish that publication should not be allowed. The court was satisfied that this test had been met.

However, it concluded that the test for granting injunctions in public law cases was higher than that applied in private law proceedings, and that Taveta had to show that there were "pressing grounds" or "exceptional circumstances" for restraining publication. Although the judge had "serious reservations" as to whether setting the bar so high was correct or could be justified, he felt bound to follow the authorities confirming that test. He also expressed his "real misgivings" that these authorities effectively gave presumptive priority to Article 10 (freedom of expression) rights over Article 8 (privacy, including protection of reputation).

Applying the higher test, the court concluded that Taveta had not demonstrated that its claim was the sort of exceptional case that permitted publication to be restrained: the threatened publication of criticisms capable of being defamatory was not exceptional, the defamatory meaning was not of the utmost seriousness, and Taveta had not shown that it was likely to suffer harm that was sufficiently serious to mark it out as exceptional. The application for an injunction preventing publication was therefore dismissed.


The decision demonstrates the careful way in which competing rights must be balanced in a regulatory context. On the one hand, there is a clear public interest in regulatory bodies such as the FRC publishing their decisions in an open and transparent way. On the other, there is the right of an individual to protect his reputation. As the judge in Taveta made clear, the publication of false information causing reputational damage is not a matter that affects just the individual; it also harms the public interest (quoting from Lord Hobhouse in Reynolds v. Times Newspapers Ltd [2001] 2AC 127):

"The liberty to communicate (and receive) information has a similar place in a free society but it is important always to remember that it is the communication of information not misinformation which is the subject of this liberty. There is no human right to disseminate information that is not true. No public interest is served by publishing or communicating misinformation."

The potential harm is all the more acute where reputational damage results from publication of defamatory allegations by a body such as the FRC which is discharging a regulatory role of significant public interest.

In Lewin, any interference with the claimant's Article 8 rights was considered to be justified by the public interest in having the FRC's report into its investigation published, and the inclusion of the disclaimer was said to be sufficient to meet the FRC's duty of fairness. By contrast, the court in Taveta took the view that the FRC's decision to publish material containing potentially defamatory material, without giving Taveta the opportunity to respond, was arguably unlawful.

Whilst the judge felt unable to grant an interim injunction preventing publication of the FRC's decision, having applied the "exceptional circumstances" test, he observed that publication of the settlement agreement and particulars in unamended form might have consequences. He suggested that, were Taveta to bring a defamation claim, the FRC might not be able to rely on a defence of qualified privilege on the basis that publication would arguably be malicious (in the legal sense) in circumstances where the FRC could not believe that the defamatory meaning was true.

Following the decision not to grant the injunction, the FRC was free to publish the settlement agreement and particulars without awaiting the outcome of Taveta's judicial review proceedings. However, it appears that the FRC may have heeded the judge's warning and his suggestion that it was for the FRC to consider whether, following his judgment, it would be lawful to publish these in unamended form, since the FRC has yet to publish anything more than a summary of its decision.

Before publishing their decisions, the FRC and other regulatory bodies will need to consider whether it is necessary to include criticisms of third parties and, if so, whether their duty of fairness requires them to go through the process of Maxwellisation.

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