The Financial Conduct Authority v Thomas Seiler & Anor

The Court of Appeal dismissed the Financial Conduct Authority's appeal against an Upper Tribunal costs order. The Upper Tribunal had held that the FCA acted unreasonably in particular aspects of its conduct of the references, triggering the Rule 10(3)(d)/(e) threshold for an award of costs in a financial services case under the Tribunal Procedure (Upper Tribunal) Rules 2008.

The principal material grounds for the Upper Tribunal's decision were: (1) the Authority's continued reliance on a materially different version of the "Third FX Transaction" without having amended the Warning Notice; (2) failures and inadequate efforts to call or to explain the non-attendance of potentially material witnesses (including alleged "feeble" attempts to obtain assistance from Swiss-based witnesses); and (3) the Authority's refusal to answer focussed requests for clarification about what others knew, which the Tribunal found would have assisted assessment of integrity. The Court of Appeal held those conclusions were factual, evaluative and within the Upper Tribunal's range of judgment, and identified no error of law that would justify disturbing the costs order. The court noted a single judge had refused permission to appeal on the Third FX Transaction ground, leaving that finding intact.

Background and parties: The FCA issued Decision Notices (under FSMA) proposing prohibition orders against executives of Julius Baer, including Mr Thomas Seiler and Mrs Louise Whitestone, on the basis they acted recklessly and lacked integrity in relation to arrangements with Mr Merinson and certain foreign-exchange transactions. The respondents referred the Decision Notices to the Upper Tribunal. The Upper Tribunal (Judge Timothy Herrington) allowed the substantive references, remitted the matters for reconsideration and, in a subsequent Costs Decision ([2023] UKUT 00270 (TCC)), awarded costs to the respondents in respect of particular aspects of the proceedings.

Nature of the application and procedural history: The FCA appealed to the Court of Appeal seeking to overturn the Upper Tribunal's costs order. Permission to appeal was granted on two grounds. The appeal proceeded from the Upper Tribunal costs decision following the substantive Upper Tribunal judgment ([2023] UKUT 00133 (TCC)).

Issues framed: (i) Whether the Upper Tribunal erred in law in finding the FCA acted unreasonably by failing to call material witnesses or by taking insufficient steps to obtain their evidence; (ii) whether the Upper Tribunal erred in law in finding the FCA acted unreasonably by refusing to provide clarification and certain details of its investigation in reply to requests from Mr Seiler. The statutory and regulatory framework considered included FSMA 2000 (Parts V and sections 56, 57 and 133), the Tribunals, Courts and Enforcement Act 2007 (sections 13 and 29) and the Tribunal Procedure (Upper Tribunal) Rules 2008 (notably Rules 10(3)(d)/(e) and Rule 16).

Court’s reasoning and disposition: The majority (Fraser LJ and Lewison LJ) treated the threshold test for making a costs award as a question of evaluative fact for the Upper Tribunal. On the facts, the Judge had detailed knowledge of the lengthy hearing and the complex factual matrix, and his findings that the FCA acted unreasonably in particular respects were within the permissible range of conclusions. The majority also emphasised that one ground of unreasonable conduct (the Third FX Transaction) had not been permitted on appeal and remained undisturbed, and that alone sufficed to vest the Upper Tribunal with jurisdiction to make a costs order. The majority therefore dismissed the appeal and left the costs orders intact.

Dissent: Elisabeth Laing LJ disagreed and would have allowed the appeal. Her reasons included that the Upper Tribunal had erred in principle (and acted perversely) by treating evidence from certain external witnesses as legally relevant when their evidence did not bear on the critical legal issues, and by failing to recognise that the Rules provided procedural remedies (directions, witness summons, strike-out) which the respondents could have sought during the proceedings rather than relying on a later costs award.

Subsidiary findings and practical points: The Upper Tribunal found a range of investigatory and procedural failings by the FCA: inconsistent particulars between Warning Notices and Decision Notices (notably the Third FX Transaction), inadequate investigation and document-handling, failures to call or properly consider calling specific witnesses, late and inadequate attempts to obtain overseas witness co-operation, and unsatisfactory responses to requests for clarification. The ultimate quantum decisions were not challenged on this appeal.

Appeal dismissed. The Court of Appeal (majority) held that the Upper Tribunal had lawfully applied the costs threshold in Rule 10(3)(d)/(e) and that its factual and evaluative findings that the FCA had acted unreasonably in specific respects (notably the handling of the Third FX Transaction, failures to call or properly attempt to secure relevant witnesses, and refusal to provide helpful clarification) were within the range of permissible conclusions and did not disclose an error of law. A dissenting judge would have allowed the appeal, considering there were errors of principle and that remedies under the Rules had not been engaged by the applicants below.

Appeal to the Court of Appeal (Civil Division) from the Upper Tribunal (Tax and Chancery Chamber). Upper Tribunal Costs Decision: [2023] UKUT 00270 (TCC) (Costs Decision). Upper Tribunal substantive determination on the references: [2023] UKUT 00133 (TCC). This Court’s judgment: [2024] EWCA Civ 852.