Acting to stop harm: the FCA and Appointed Representatives
Decision date: 25 May 2012
Determination of Financial Services Authority (FSA) quashed on application for judicial review as reasons in Decision Notice inadequate.
The Claimant (C) challenged the decision of the Regulatory Decisions Committee (RDC) of the FSA to issue a Decision Notice (‘the Notice’) to him dated 27 October 2010, which censured C and imposed a fine of £100,000 for allegedly breaching Principle 6 of the FSA’s Statements of Principle for Approved Persons. During the relevant period, C was approved by the FSA to perform a controlled function of Bank D.
It was argued on behalf of C that the Notice was flawed and that it should be quashed as the RDC failed to give proper or adequate reasons for its decision in breach of its duty to do so. It was claimed that not only did the Notice fail to acknowledge ‘concessions’ made by the Enforcement Division during the course of the investigation, but crucially it failed to explain how the FSA dealt with the representations made by C during the course of the investigation and in particular why his representations were not accepted.
It was argued on behalf of the FSA that adequate reasons were given, but that in any event a claim for judicial review could not be pursued on the grounds that C had available to him an alternative remedy (namely a reference to the Upper Tribunal pursuant to Section 67(7) of the Financial Services and Markets Act 2000). It was further argued that if C was allowed to bypass the statutory tribunal by challenging the FSA’s decision notices by way of judicial review, this would set an extremely dangerous precedent that could result in serious disruption and extensive delay in the enforcement process.
Mr Justice Silber held that:
‘the reasons given in the Decision Notice are basically just saying that the RDC accepts the FSA’s case, but it fails to give any or any adequate reasons as to why the detailed case for the claimant was rejected. It is not clear, for example, if the claimant was disbelieved on all or parts of his evidence or if his representations were wrong as a matter of law or if he did not understand his duties. In my view, the decision of the RDC fails to satisfy the test for adequacy of reasons, even without considering the concessions.’
Though unnecessary for the purposes of quashing the Notice, it was further found that the failure to deal with the concessions made by the FSA in the course of investigation also rendered the Notice defective.
With regard to the jurisdiction issue, Mr Justice Silber rejected the submissions of the FSA; to simply say that the claimant could take the matter to the Upper Tribunal ‘runs contrary to the basic principle of fairness and justice that a party should know why he or she has lost, especially where those reasons might influence a decision to be taken by the losing party’. Although it is settled law that a remedy by judicial review is not to be made available where there is another statutory means for the party to obtain the redress sought, this case falls within the accepted exceptions to that general rule.
Considered case law showed that:
a) judicial review will not be granted where there is an alternative remedy available as long as it is ‘equally effective and convenient’ (per Lord Widgery in R v Hillingdon LBC, ex parte Royco Homes Ltm  QB 720); and
b) judicial review can be brought where the alternative remedy is ‘nowhere near so convenient, beneficial and effectual’ (per Lord Denning in R v Paddington Valuation Officer, ex parte Peachey Property Corp Ltd  1 QB 380).
Applying those propositions to the facts of the present case, it was held that the alternative here (remitting the case to the Upper Tribunal) was not ‘equally effective and convenient’ nor ‘suitable to determine the issue’. The Upper Tribunal would have no jurisdiction to ensure that the FSA complies with its statutory duty to give reasons; the Tribunal’s role is not to adjudicate on the rightness or otherwise of the decision notice. It was important to note that although the Tribunal could make recommendations for the future, they could not remedy the wrong of a failure to give reasons. The alternative remedy was ‘nowhere near so convenient, beneficial and effectual’ as the present claim for judicial review.
It was therefore held that ‘a claimant can bring a claim for judicial review where inadequate reasons are given, as in the present case, and where, as in the present case, there is prejudice suffered by the claimant as a result of the failing’.
To allay the fears of the FSA that the decision would undermine the statutory regime, it was stressed that;
‘although the Decision Notice in this case will be quashed, this does not mean that any challenge or indeed anything other than very few challenges to the decisions of the FSA can be the subject of successful judicial review applications…in the vast majority of cases the Upper Tribunal provides a suitable alternative remedy especially when the challenge is to the content of a decision notice or when the challenge is to the correctness of the rationality of the actual decision. The present case constitutes an exception to this and the FSA can without difficulty avoid cases like the present one in the future simply by giving full and proper reasons.’
This case helpfully considers those cases where judicial review is the appropriate remedy despite there being a form of statutory appeal in existence. It further confirms the need for Decision Notices to deal with why representations given have been rejected and fairly refer to any relevant concessions made during the investigation.
By Sarah Harris
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