FCA has its knuckles rapped in Upper Tribunal costs decision

1 February 2019

In a recently published decision of the Upper Tribunal (Tax and Chancery Chamber), the Financial Conduct Authority (FCA) has been ordered to pay a portion of the costs incurred by Alistair Burns, the ex-chief executive of collapsed IFA Tailormade, in relation to proceedings arising from his reference of the Authority’s decision to the Upper Tribunal.  The Upper Tribunal had upheld the decision of the Authority to fine and ban Mr Burns, although it had reduced level of the fine imposed. 

Mr Burns did not seek to challenge the tribunal’s decision itself but made an application for his costs, based on the contention that both the Authority’s Decision Notice and its conduct in respect of the reference to the tribunal were unreasonable.

In the decision, dated 26 January 2019, HHJ Herrington found that the tribunal did have jurisdiction to make a costs order in favour of Mr Burns.  He found that the decision of the Authority’s Regulatory Decisions Committee (RDC) in relation to the specific issue raised by Mr Burns was indeed unreasonable, and also that the Authority’s decision not to address this issue in its original Statement of Case was unreasonable. 

Mr Burns had argued that he should be entitled to all of the costs incurred in respect of his reference, on the basis that he would have settled the proceedings earlier had it not been for the way in which the Authority had dealt with the issue in question.  The tribunal did not accept this argument, finding that there was no basis to award costs incurred after the Authority had made the appropriate concessions.  However, the tribunal did award a costs order in the sum of £4,440.55 relating to the period between the reference having been made by Mr Burns and the date upon which the concession was made by the Authority.

HHJ Herrington rejected the Authority’s policy-based arguments as to why an award of costs should not be made notwithstanding the findings of unreasonableness on its part.  He said:

To do so will send out an important message to the Authority that, even in circumstances of what is found to be serious misconduct on the part of the applicant, which I accept is the position here, it is imperative that all subjects of investigation and enforcement proceedings should be treated fairly and reasonably. There have been a number of 25 significant instances in this case where I have found that the Authority has fallen below the standards that should reasonably be expected of it."

While the sum awarded by the tribunal was small, this does not detract from the significance of the finding.  In assessing the reasonableness of its conduct of the case, HHJ Herrington notes a series of “unfortunate” and “surprising” failures and omissions by the case team, and found that the Authority approached the specific issue at the heart of the litigation “with something of a closed mind”. 

The decision sends a strong message to the Authority that it is expected to conduct its investigations and proceedings fairly, to narrow the issues where appropriate and to communicate fairly with the other side.  It will act as a reminder that its handling of each stage of its investigation and proceedings may ultimately come under the scrutiny of the courts and that it may be called upon to justify the decisions made throughout this process.  Given the considerable stress and costs borne by those, particularly individuals, who find themselves on the other side of what can be a painfully protracted procedure, it is surely absolutely right that this should be the case.

About the author

Jill Lorimer is a Partner in the Criminal Litigation Department specialising in advising individuals facing investigation and prosecution by the Financial Conduct Authority (FCA) and the Serious Fraud Office (SFO). Jill has developed a particular expertise in representing those being prosecuted for insider dealing.

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