The High Court said Mr Howard, who is a QC, failed to follow correct procedures under the 1990 Criminal Justice (International Co-operation) Act by simply passing on responsibility to the police for obtaining documents from solicitors, Theodore Goddard, and chartered accountants, Stein Richards. Both firms had clients involved in the fraud allegations.
Lord Justice Butler-Sloss and Mr Justice Laws said the police then further mishandled the case when they secretly and unlawfully obtained warrants to search offices of both companies. The judges also said Judge Anne Goddard QC erred when she approved the 'Draconian' warrants.
Following the ruling yesterday, lawyers said any orders issued in a similar fashion under the Act could now be unlawful. The Home Office estimates that about 4,000 requests for assistance under the Act are made by foreign governments each year, but no figures were available for those acted on by the Home Secretary.
Theodore Goddard, which brought yesterday's judicial review, argued that Mr Howard should have been more specific in instructing the police on what method to use in obtaining the documents and that the police were wrong to argue before the judge that a search warrant rather than a less stringent production order was needed.
Mr Justice Laws said the warrants were unlawful because the firms were not represented and no evidence was given that there was any risk that either would have destroyed the documents.
Costs were awarded against the Home Office, the Metropolitan Police and the Australian Federal Police. Philip Barden of Theodore Goddard said the action of the police and the Home Secretary was an infringement of civil liberties. The Home Office said it could not comment as it was considering an appeal.