Court of Appeal Overturns Upper Tribunal on FCA Issuing Notice of Discontinuance

The Financial Conduct Authority v Hobbs [2013] EWCA Civ 918 (29 July 2013)

In this case, the Court of Appeal (Sir Stanley Burnton, Rimer and Ryder LJJ) overturned the Upper Tribunal’s (UT) decision and held that if the Financial Conduct Authority (FCA or the Authority) publishes a statement intimating discontinuance on its website and subsequently removes that statement, the Authority is not in fact bound by such a statement because the statement does not follow the procedural requirements set out in the Financial Services and Markets Act 2000 (the Act). The FCA could therefore pursue its appeal even after retracting the statement announcing discontinuance on its website.

Sounds rather extreme. Yet the Court of Appeal so held and of course from what one can make of it their lordships were dead right.

I. Background

The FCA appealed against the UT’s decision that the Authority had bungled in properly making its case that the respondent trader David John Hobbs (H) was not a fit and proper person to perform functions in relation to a regulated activity within the meaning of the Act. H, who conducted proprietary trading for Mizuho, traded in coffee futures and associated derivatives on the London International Financial Futures and Options Exchange.

FSA: LIBOR Internal Audit Report

Punishing banks – Barclays, UBS and RBS – by imposing fines against them for manipulated LIBOR submissions has been a vexing issue for the Financial Services Authority (FSA). After receiving its final notice, Barclays told the Treasury Committee (see Fixing LIBOR: some preliminary findings) that – in order to avoid negative media comment (lowballing) – the issue that firms were making inappropriate LIBOR submissions was raised with the FSA on 13 occasions. Noting media and academic concern, the Treasury Committee highlighted that:

44. Barclays’ continuing manipulation of its own LIBOR setting took place against a background of media concern about the LIBOR setting process during the [financial] crisis. On 25 September 2007, an article by Gillian Tett in the Financial Times entitled “LIBOR’s value called into question” noted the complaint of the Treasurer of one of the largest City banks that “The LIBOR rates are a bit of a fiction. The number on the screen doesn’t always match what we see now.”

45. On 16 April 2008, the Wall Street Journal published an article called “Bankers cast doubt on Key Rate amid crisis” by Carrick Mollenkamp. This noted that: “The concern: Some banks don’t want to report the high rates they’re paying for short-term loans because they don’t want to tip off the market that they’re desperate for cash. The LIBOR system depends on banks to tell the truth about their borrowing rates.

The Privilege Judgment

R (on the application of Prudential plc and another) (Appellants) v Special Commissioner of Income Tax and another (Respondents) [2013] UKSC 1

The Supreme Court has spoken on the thorny issue of legal advice privilege (or “LAP”). In sum, the relationship between lawyer and client is sacrosanct and, at least on the initiative of the Court, the ambit of LAP is not extendable to another species of legal advisor. In the provision of legal advice, LAP protects the communications between client and lawyer (acting in a professional capacity). Lord Neuberger of Abbotsbury PSC, Lord Hope of Craighead DPSC, Lord Walker of Gestingthorpe, Lord Mance and Lord Reed JJSC so held by delivering concurring judgments. But the affair was not without disagreement and Lord Clarke and Lord Sumption JJSC have produced their own dissenting judgments.

In the controversial ruling the Court said that even in circumstances where legal advice was imparted by a person who was a qualified person, LAP’s scope would not be extended to communications in connection with advice given by professional people – such as chartered accountants – other than members of the legal profession. It was a really great hearing to watch live online; despite Lord Pannick QC’s valiant efforts, he could not sway the Supreme Court to reverse Mummery, Lloyd and Stanley Burnton LJJ’s judgment [2010] EWCA Civ 1094 in the Court of Appeal when it heard the matter on appeal from Charles J [2009] EWHC 2494 (Admin) who had, of course, dismissed the claim for judicial review before him.

Legal Professional Privilege and Article 8: Prudential Case Live in UK Supreme Court: 5 November – 7 November 2012

Ever since its doors opened for business in October 2009, the UK Supreme Court has ruled on numerous cases related to article 8 of the European Convention on Human Rights. But the instant case is unique. In contrast to the family and private life limbs of article 8, R (on the application of Prudential plc and another) (Appellants) v Special Commissioner of Income Tax and another (Respondents) UKSC 2010/0215 turns on tax, accountancy, the legal profession and the right to respect for correspondence. Lords Neuberger, Hope, Walker, Mance, Clarke, Sumption and Reed JJSC will hear the matter from 5 November until 7 November 2012 (sittings commence on 11:00 AM Monday and 10:30 AM Tuesday – Thursday, Lunch Recess 1:00 – 2:00 PM,  Greenwich Mean Time). Please watch these proceedings live ONLINE HERE. The issue before the court is whether, at common law, legal professional privilege (“LPP”) applies to communications between a client and an accountant seeking and giving legal advice on tax law.

Crucially, LPP is an (almost) absolute rule. It not only entitles clients to refuse to disclose documents or answer questions, but also requires advisers and others to do the same. Hence LPP, which traces its roots to the sixteenth century, creates a real conflict with general public policy that cases should be decided by reference to all available relevant evidence. From Prudential’s perspective the Human Rights Act 1998, applying the ECHR, protects LPP and requires any limitation on LPP to be justified.

Because of the important nature of the case, the Law Society, the General Council of the Bar and the Institute of Chartered Accountants in England and Wales are intervening in the matter as are the Association Internationale pour la Protection de la Propriété Intellectuelle UK Group and the Legal Services Board.

Re Globespan Airways: Administration, Liquidation and Registration

Re Globespan Airways Ltd (In Liquidation) also called Cartwright & Anor v The Registrar of Companies [2012] EWCA Civ 1159 (24 August 2012), read judgment.

The Court of Appeal (Lord Neuberger MR, Arden and Moses LJJ) has unanimously held that it was not possible for an administrator of a company to convert administration into a creditors’ voluntary liquidation (CVL) by simply giving a conversion notice to the Registrar of Companies  (“the registrar”) because conversion only occurred once the registrar had registered a notice on the company’s file at Companies House.

In taking the above approach, the Court of Appeal has reversed Briggs J’s earlier decision that where a notice of movement from administration to CVL under Schedule B1 (“administration”) paragraph 83 of the Insolvency Act 1986 (“the IA 86”) was received by the registrar before the termination of the administration, paragraph 83(4) was to be interpreted as meaning that the date of receipt of the notice was the effective date of registration, regardless of whether the administrative steps necessary for registration had been completed.