Financial Conduct Authority v Skinner & Ors

An application to withdraw admissions under CPR Part 14 requires consideration of the factors in paragraph 7 of Practice Direction 14, including the grounds, party conduct, prejudice, procedural stage, prospects of success and the interests of justice.

Where proposed amendments would replace clear admissions with a defence based on a misunderstanding or belief that does not answer the statutory elements of the claim, and would create prejudice and confusion, the court may refuse permission. A belief that an intermediary was authorised does not by itself answer claims based on unauthorised regulated activity or financial promotion.

The Financial Conduct Authority brought proceedings under sections 19 and 21 of the Financial Services and Markets Act 2000 and section 89 of the Financial Services Act 2012. The claim concerned alleged unauthorised regulated activity and financial promotion connected with investment in Our Price Records Limited. The companies and their directors had filed a composite defence admitting material allegations, with mitigation concerning restitution and remediation.

Following an application for an interim payment, the defendants applied under CPR Part 14 to withdraw those admissions. They said that they had misunderstood what they admitted and wished to rely on their belief that the accountants involved were authorised. The issue was whether the admissions should be withdrawn.

1. Application dismissed. The third to sixth defendants were not permitted to withdraw the admissions in their defences.
2. Under paragraph 7 of Practice Direction 14, the court considered the grounds of the application, the parties’ conduct, prejudice in both directions, the stage reached in the proceedings, prospects of success, and the interests of the administration of justice, including the overriding objective.
3. The grounds were weak. The defence had been drafted by solicitors with counsel’s involvement and contained detailed factual matters apparently derived from the defendants’ instructions. There was no evidence that it failed to reflect those instructions or that the defendants had misunderstood it when it was prepared.
4. Prejudice was significant. Withdrawal would require substantial reworking of the claim and could prejudice investors. Although the application was not made immediately before trial, the claim had proceeded for a considerable period on the basis of the existing defence, and the application was prompted by recognition that immediate liability might be faced.
5. The proposed defence had no real prospect of success. The statutory claims required proof that regulated activity had been carried on without authorisation and that unauthorised financial communications or activities had been undertaken. The directors’ case that they were not knowingly concerned because they believed the accountants were authorised did not answer the facts said to constitute the breaches. It was therefore not an effective defence.
6. Permitting withdrawal would merely replace clear admissions with bare denials and create confusion without furthering the defendants’ case. In the circumstances, the interests of justice and the overriding objective required refusal of the applications.