C v The Financial Services Authority

The claimant sought judicial review of a Financial Services Authority Regulatory Decisions Committee Decision Notice dated 27 October 2010 which censured him and imposed a £100,000 fine for an alleged breach of Principle 6 of the FSA Statements of Principle. The primary legal principle was the statutory duty under section 388(1)(b) of the Financial Services and Markets Act 2000 to give reasons for a decision notice; the court held that reasons must be intelligible and adequate to explain why material representations were rejected so that the recipient can decide what, if any, further steps to take.

The court identified material defects in the Decision Notice: it did not explain why the claimant's detailed written and oral representations were rejected, contained inaccurate or omitted summaries of important submissions and failed to address concessions made by the Enforcement Division during the RDC process. Those deficiencies meant the Decision Notice did not meet the statutory and common-law standard for reasons.

The court further held that referring the matter to the Upper Tribunal was not an adequate alternative remedy in these circumstances because the Tribunal could not compel the RDC to give reasons and the claimant would be prejudiced in deciding whether to refer, given risks of increased charges or penalties on a de novo hearing. The Decision Notice was therefore quashed and the matter remitted for reconsideration by a different RDC.

The claimant, an approved person at Bank D, sought judicial review of an FSA Regulatory Decisions Committee Decision Notice which found a breach of Principle 6 during a two-week period in 2008 and imposed a financial penalty. The claimant argued the Decision Notice failed to give adequate reasons as required by section 388(1)(b) of the Financial Services and Markets Act 2000 and thus should be quashed. The FSA resisted, arguing adequate reasons were given and that the claimant had an adequate alternative remedy by referring the matter to the Upper Tribunal under section 67(7) of the 2000 Act.

Background and procedural posture:

• The FSA investigation produced a Preliminary Investigation Report, a Warning Notice and then the Decision Notice. The claimant made extensive written and oral representations before the RDC. The Enforcement Division had, before and during the RDC hearing, made concessions altering aspects of its case compared with the Warning Notice.
• Permission for judicial review was granted to decide whether the statutory right to refer to the Upper Tribunal was an adequate alternative remedy to judicial review of alleged deficiency in reasons.

Nature of the claim / relief sought: The claimant sought quashing of the Decision Notice on the ground that the RDC failed to give adequate reasons for its decision.

Issues framed by the court:

1. Whether the Decision Notice complied with the duty to give adequate reasons under section 388(1)(b) and common-law principles on reasons;
2. If reasons were inadequate, whether the Decision Notice would be quashed absent the availability of the Upper Tribunal;
3. Whether a reference to the Upper Tribunal was an adequate and suitable alternative remedy rendering judicial review inappropriate in this case.

Court’s reasoning and conclusions:

The court applied authoritative authorities on adequacy of reasons (including South Bucks, Poyser, Save Britain’s Heritage and Clarke Homes) and concluded that reasons must enable the recipient to understand why they lost on the principal controversial issues and what effect material concessions or factual corrections had on the decision. The Decision Notice failed to explain why the claimant’s detailed representations were rejected, contained errors and omitted key responses to material concessions made by the Enforcement Division. The court also concluded that remission to the Upper Tribunal was not an adequate substitute remedy for this particular wrong because the Tribunal cannot compel the RDC to give reasons and a de novo reference posed real risks to the claimant (including the possibility of increased penalties or new allegations). The Decision Notice was quashed and the matter remitted to a different RDC for reconsideration.

The court quashed the FSA Decision Notice because the reasons in the Decision Notice were inadequate: they failed to explain why the claimant's detailed representations were rejected and failed to address material concessions. The court further held that a reference to the Upper Tribunal was not an adequate alternative remedy for that particular wrong, and remitted the matter for reconsideration by a different RDC.