7722656 Canada Inc & Anor v The Financial Conduct Authority & Ors

For an appeal from the Upper Tribunal on a point of law, a finding about foreign law is ordinarily a finding of fact. The Court of Appeal may intervene only where the tribunal applied the wrong legal test, had no evidential basis, or reached a conclusion which no properly instructed tribunal could reasonably reach. Whether a foreign company continues to exist after dissolution is determined by the law of its place of incorporation, but the evidential assessment remains for the tribunal. A foreign provision permitting proceedings against a dissolved company may support a limited continuing status without determining English procedural capacity. For market abuse, conduct may be effected jointly through an automated intermediary, and conduct concerning contracts for differences may occur in relation to the qualifying shares to which those contracts relate.

The Regulatory Decisions Committee of the Financial Services Authority found that Swift Trade had committed market abuse under section 118 of the Financial Services and Markets Act 2000 and imposed an £8 million penalty. Swift Trade and Peter Beck referred the decision notice to the Upper Tribunal (Tax and Chancery Chamber), which upheld it. The decision was reported at [2013] Lloyd’s L.R.(F.C). 381ff.

Swift Trade was later amalgamated and dissolved under Canadian law. The appeal challenged the Upper Tribunal’s jurisdiction on the basis that Swift Trade no longer existed when the decision notice was issued. It also challenged the conclusion that the conduct involved transactions or orders to trade in qualifying investments, or otherwise occurred in relation to qualifying investments, although the immediate contracts were contracts for differences.

1. Disposition. The appeal was dismissed by a majority. Longmore LJ and Floyd LJ held that the Upper Tribunal was entitled to find, on the available evidence of Canadian law, that the dissolved company retained a limited existence sufficient for the proceedings. Lewison LJ would have allowed the appeal on that ground, but agreed with Longmore LJ on the market-abuse grounds.
2. Foreign law and appellate review. The status of a foreign company is determined by the law of its place of incorporation. Foreign law is treated in England as a question of fact, although of a special kind. On an appeal limited to points of law, intervention is justified where the tribunal applied an incorrect legal approach, had no evidence for its conclusion, or reached a conclusion which no properly instructed tribunal could reasonably reach. The majority considered that Mr Connelly’s evidence, his oral evidence and Enron Canada Corp v Husky Oil Operations Ltd (2007) ABCA 27 provided a sufficient evidential basis.
3. Dissolution. The majority accepted that section 226(2) of the Canada Business Corporations Act 1985 could be relevant to whether the company retained a limited existence, even though it permitted proceedings against a dissolved company. Lewison LJ disagreed, holding that section 226 was procedural and that dissolution ended the company’s substantive existence.
4. Market abuse. A person may effect transactions or orders to trade through an automated intermediary. Conduct involving contracts for differences relating to particular shares occurs in relation to those shares. The statutory words are broad and cannot be narrowed by the separate concept of related investments. The court found no ambiguity requiring a restrictive construction by reference to the quasi-criminal character of the legislation, the Convention or the relevant EU Directive.
5. Section 118(8). Because the conduct fell within sections 118(1) and 118(5), there was no need to determine whether section 118(8) would also apply.
6. Final order. The decision of the Upper Tribunal was upheld and the appeal dismissed.

• Court of Appeal (Civil Division) — [2013] EWCA Civ 1662: appeal dismissed by majority.
• Upper Tribunal (Tax and Chancery Chamber) — upheld the Regulatory Decisions Committee’s decision notice and the £8 million penalty; reported at [2013] Lloyd’s L.R.(F.C). 381ff.
• Regulatory Decisions Committee of the Financial Services Authority — found market abuse under section 118 of the Financial Services and Markets Act 2000 and imposed an £8 million penalty.