Summary
In a reference against regulatory sanctions, the Tribunal must determine the allegations, circumstances and evidence comprising the subject matter of the reference. A reference is a complete rehearing, but the Authority cannot introduce a materially different allegation which was not put to the Regulatory Decisions Committee or included in the statutory notices. Fresh evidence may be considered if it relates to an allegation within the reference.
Recklessness requires awareness of a risk and an unreasonable decision to take it, having regard to the circumstances known or believed by the person concerned. A failure may be established without amounting to recklessness or lack of integrity. Where an alternative breach of a Statement of Principle has not been pleaded or properly tried, procedural fairness may require the Tribunal to decline to determine it.
Factual background
The Applicant challenged a Decision Notice imposing a £25,000 penalty, withdrawing his approval to perform controlled functions at Financial Solutions (Euro) Ltd and making a prohibition order. The Authority alleged failures concerning financial-crime systems, supervision of mortgage advisers and the conduct of mortgage business after professional indemnity insurance had lapsed.
The Applicant relied on the earlier decision concerning the company, Financial Services (Euro) Limited v FCA [2020] UKUT 0139 (TCC), and objected that some allegations in the Authority’s Statement of Case were outside the subject matter of the reference. The central issues were whether the earlier findings were binding, whether the expanded allegations were within jurisdiction, and whether the Applicant had acted recklessly or without integrity.
Held
- Estoppel and abuse of process. The earlier proceedings involved different parties, legal issues and key factual issues. The earlier findings that the company had ceased trading were incidental findings on an issue not necessary to the earlier decision. They did not create an issue estoppel and did not prevent the Authority from relying on fresh evidence concerning regulated business after the insurance expired. The Authority’s conduct was not abusive.
- Subject matter of the reference. Under Financial Services and Markets Act 2000, section 133(4), the Tribunal may consider evidence relating to the subject matter of the reference, including evidence unavailable to the decision-maker. The subject matter comprises the allegations, circumstances and evidence before the Regulatory Decisions Committee, rather than merely the operative decision. The allegation that the Applicant failed to prevent regulated business without professional indemnity insurance after 11 May 2017 was sufficiently connected with, and of the same nature as, the allegation pleaded in the Decision Notice concerning the period after 10 July 2017. It was therefore within jurisdiction.
- The allegation that the Applicant failed to deal transparently with the Authority and the Upper Tribunal concerned different facts and a different category of conduct. It was not included in the Warning Notice or Decision Notice and was outside the subject matter of the reference. The Tribunal had no jurisdiction to determine it, although it made alternative factual findings and rejected recklessness.
- Recklessness and integrity. The applicable test was whether the Applicant was aware of the relevant risk and, if so, whether it was unreasonable to take that risk in the circumstances as he knew or believed them to be. The Applicant was responsible for preventing regulated mortgage business without insurance and failed to ensure that this did not occur. However, he reasonably believed that insurance would be renewed and had instructed advisers not to take on new business. His failures were not reckless and did not demonstrate a lack of integrity.
- The Authority failed to establish any breach of Statement of Principle 1. The alternative possibility of breach of Statement of Principle 2 had not been pleaded, particularised or tried. Although the Tribunal assumed that it might have jurisdiction to consider a lesser alternative allegation based on the same facts, it declined to do so because the Applicant had not received fair notice or a proper opportunity to address the applicable standard and evidence.
- The reference was allowed. No financial penalty or other disciplinary sanction was to be imposed. The decisions withdrawing approval and making a prohibition order were remitted for reconsideration in accordance with the Tribunal’s findings, including the mitigation identified and whether any other Statement of Principle or supervisory action should be considered.
The court’s approach to earlier authorities
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Appellate history
First-instance reference to the Upper Tribunal from the Financial Conduct Authority’s Decision Notice dated 29 January 2021. The Tribunal allowed the reference and remitted the withdrawal of approval and prohibition decisions for reconsideration.
Appeal route
- This judgment [2023] UKUT 101 (TCC) Upper Tribunal (Tax and Chancery Chamber)
- Appealed to[2024] EWCA Civ 1575Outcomeappeal allowed in part; reference dismissed in respect of approval withdrawal and prohibition; financial penalty remitted to fca at £10,000
Key cases cited
27 authorities cited.
- O (A Child) v Rhodes (Rhodes v OPO) [2015] UKSC 32
- Virgin Atlantic Airways Limited v Zodiac Seats UK Limited (formerly known as Contour Aerospace Limited) [2013] UKSC 46
- In re B (Children) (FC) [2008] UKHL 35
- Regina v. G and another (Appellants) (On Appeal from the Court of Appeal (Criminal Division)). [2003] UKHL 50
- Martin v Kogan [2020] EMLR 4
- Simetra Global Assets Ltd & Anor v Ikon Finance Ltd & Ors [2019] EWCA Civ 1413
- The Financial Conduct Authority v Hobbs [2013] EWCA Civ 918
- Moorjani & Ors v Durban Estates Ltd & Anor [2019] EWHC 1229 (TCC)
- Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor [2013] EWHC 3560 (Comm)
- Andrew Mark Thomas Page & Ors. v The Financial Conduct Authority [2022] UKUT 124 (TCC)
- Forsyth v FCA and PRA [2021] UKUT 162 (TCC)
- Lewis Alexander Ltd v FCA [2019] UKUT 49 (TCC)
- Hussein v FCA [2018] UKUT 186 (TCC)
- Ford v Financial Conduct Authority [2018] UKUT 358 (TCC)
- Tinney v FCA [2018] UKUT 435 (TCC)
- Reynolds v FCA [2017] UKUT 313 (TCC)
- Bittar v Financial Conduct Authority [2017] UKUT 82 (TCC)
- Carrimjee v FCA [2016] UKUT 447 (TCC)
- Tariq Carrimjee v FCA [2015] UKUT 79 (TCC)
- Khan v Financial Conduct Authority [2014] UKUT 186 (TCC)
- Allen v Financial Conduct Authority [2013] 5 WLUK 766
- Jabre v Financial Services Authority [2002] UKFSM FSM035
- Barrow v Bankside Members Agency Ltd [1996] 1 WLR 257
- Arnold v National Westminster Bank plc [1991] 2 AC 93
- GRACE SHIPPING INC. AND HAI NGUAN & CO. v. C. F. SHARP & CO. (MALAYA) PTE. LTD. [1987] 1 Lloyd's Rep 207
- ARMAGAS LTD. v. MUNDOGAS S.A. (THE "OCEAN FROST") [1985] 1 Lloyd's Rep 1
- Henderson v Henderson
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Cases citing this case
5 later cases · 3 positive · 1 caution · 1 negative
Most senior citing decisions:
- The Financial Conduct Authority v BlueCrest Capital Management [2024] EWCA Civ 1125 disapproved
- EAK Group Ltd v The Financial Conduct Authority [2025] UKUT 82 (TCC) applied
- Ashraf Wealth Management Limited v The Financial Conduct Authority [2024] UKUT 265 (TCC) explained
- Promethean Finance Limited v The Financial Conduct Authority [2024] UKUT 229 (TCC)
- Banque Havilland SA & Ors v The Financial Conduct Authority [2023] UKUT 136 (TCC)
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