Baker Tilly UK Audit LLP & Ors, R (On the Application Of) v Financial Reporting Council & Ors

Professional disciplinary proceedings should ordinarily be determined by the specialist tribunal established for that purpose. A decision to commence such proceedings will rarely be suitable for challenge by judicial review, although there is no jurisdictional bar. The disciplinary decision-maker must apply the relevant scheme correctly, assess the evidential and public-interest tests separately, and act rationally. Auditing standards may be relevant to the standards reasonably expected of accountants, but breach of an auditing standard is not automatically misconduct. Whether a breach is sufficiently significant depends on the circumstances. A guidance document which identifies a non-trivial failure as a factor favouring a hearing is not unlawful where it does not equate that factor with misconduct or make it determinative.

The claimants, an accountancy firm and two partners, challenged the Executive Counsel’s decision to deliver a Formal Complaint to the Financial Reporting Council Conduct Committee under the Accountancy Scheme. The allegations concerned the 2007 audits of Tanfield Group plc and two subsidiaries.

They argued that the Guidance on the Delivery of Formal Complaints was unlawful, that the Executive Counsel had misunderstood the meaning of misconduct, and that the public-interest assessment was irrational, particularly given the delay. The central issues were whether the Guidance misstated the applicable tests, whether the evidential threshold had been applied lawfully, and whether judicial review should intervene before the independent Disciplinary Tribunal considered the complaint.

1. The claim was dismissed. The Guidance was not unlawful. Paragraph 12[1](f) appeared under the public-interest test and identified a non-trivial failure as one example of a factor favouring delivery of a Formal Complaint. Read as a whole, the Guidance did not equate a non-trivial failure with misconduct or serious misconduct, and did not make that factor determinative. The evidential and public-interest tests remained distinct and required an overall assessment.
2. The International Standards on Auditing could be relevant to the standards reasonably expected of an accountant or accountancy firm. However, breach of an auditing standard did not automatically establish misconduct. The question remained whether, on the particular facts, the conduct fell significantly short of the standards reasonably to be expected.
3. The Executive Counsel and the expert had directed themselves to the Accountancy Scheme definition of misconduct and applied it to the allegations. The merits remained for the independent expert Disciplinary Tribunal. The court expressed no view on whether the allegations would ultimately be proved.
4. The public-interest decision was not irrational. Public-interest assessments were matters entrusted to the relevant decision-maker, subject to the ordinary requirements of legality and rationality. The Executive Counsel had considered the Guidance, including delay, and was entitled to conclude that a hearing was desirable.
5. Judicial review was available in principle, but challenges to a decision to bring disciplinary proceedings should ordinarily proceed before the specialist tribunal. The tribunal could consider the evidence, determine the merits, entertain an abuse-of-process application, and exercise its limited costs jurisdiction. The circumstances did not justify intervention at this stage.

First-instance judicial review claim. No prior appellate decision was stated in the judgment.