Financial Conduct Authority GC 5264 2014
| Jurisdiction | UK Non-devolved |
| Judge | Judge C. Turnbull |
| Judgment Date | 23 March 2015 |
| Neutral Citation | 2015 UKUT 118 AAC |
| Subject Matter | Consumer credit |
| Respondent | HFO Services Ltd, Roxburgh (UK) Ltd, HFO Capital Ltd, AT |
| Court | Upper Tribunal (Administrative Appeals Chamber) |
| Docket Number | GC 5264 2014 |
| Appellant | Financial Conduct Authority |
IN THE UPPER TRIBUNAL Case Nos. GC/5264 and 5296 to 5299/2014
ADMINISTRATIVE APPEALS CHAMBER
1. These are appeals by both sides against a decision made by a Judge of the First-tier Tribunal, Judge Jacqueline Findlay, on 18 September 2014 in respect of two preliminary issues. On one side are three companies (“the Companies”) and Mr Alasdair Turnbull, and on the other side the Financial Conduct Authority (“FCA). Those preliminary issues (and a third one, Judge Findlay’s decision of which is not appealed) arose in appeals to the FTT by the Companies and Mr Turnbull against a determination by the Office of Fair Trading (OFT), the then Regulator of the Companies’ consumer credit businesses. That determination refused (in the case of the Companies) to renew their consumer credit licences. Following a transfer of the regulatory functions from the OFT to the Financial Conduct Authority (FCA) with effect from 1 April 2014, the FCA replaced the OFT as the respondent to the substantive appeals.
2. I held an oral hearing of these appeals on 11 February 2015, at which Mr Patrick Goodall QC and Mr Mark Fell of counsel appeared on behalf of the FCA, and Mr Simon Popplewell of counsel appeared on behalf of the Companies and Mr Turnbull.
3. In order to explain how the preliminary issues arose, I should set out the following by way of legislative, factual and procedural background.
4. For the sake of simplicity I shall throughout refer only to the appeals by the Companies. Mr Turnbull’s position is dealt with separately in paras. 152 to 155 below.
(1) Legislative and factual background
(a) The historic legislative position under the Consumer Credit Act 1974 (“the CCA”)
5. Both the carrying on of a consumer credit business and the carrying on of a debt collection business required a standard consumer credit licence: s.21(1) of the CCA. Such licences were issued by the OFT.
6. Pursuant to s.25 of the CCA the OFT was required to issue an applicant with a licence if it was satisfied that the applicant was “a fit person to carry on that type of business with no limitation.” Section 25 set out in detail the matters that might be relevant to whether or not a person was fit to hold a consumer credit licence.
7. If, after granting a person a licence, the OFT subsequently became dissatisfied with that person to the extent that had the person at that time applied for a licence the OFT would have refused it, then the OFT was entitled to revoke the licence: s.32. Similarly, if a licence came up for renewal the OFT would again determine if it was satisfied that the licensee was a fit person under s.25, and if not refuse to renew that licence: s.29(3).
8. If the OFT was minded to refuse to renew or to revoke a standard consumer credit licence the OFT was required by s.29 (renewal) and 32 (revocation) to issue a notice to the licensee setting out its reasons, and inviting the licensee to submit representations in accordance with s.34. Under that provision the licensee was entitled to require the opportunity to make oral representations, as well as written ones. The OFT then decided whether to revoke or to refuse to renew. In these cases the standard that the Adjudicator applied was the standard in s.25 of the CCA, the “fit person” test.
9. The decision whether to issue a “minded to refuse to renew” or a “minded to revoke” notice, and the decision whether to refuse to renew or revoke, was in practice taken by an OFT Adjudicator. The CCA did not lay down any requirement that decisions as to the grant/revocation of licences be made by an employee of the OFT who had not been involved in the investigatory process. However, I have been referred by Mr Popplewell to a report dated 30 March 2001 by the Ombudsman into a complaint of maladministration by the OFT in respect of Colourvision Ltd, which in para. 7 includes the following helpful explanation of the role of OFT “adjudicating officers”, as they were then called:
“OFT’s adjudicating officers operate under procedures developed in consultation with, and approved by, the Council on Tribunals. Those procedures require a “Chinese wall” to be maintained between adjudicating officers and other parts of the OFT. Adjudicating officers play no part in the investigation of licensing issues. That is the responsibility of OFT’s regulatory section who, if they believe that evidence obtained casts sufficient doubt on fitness, prepare a draft minded to revoke notice. That draft notice, together with the supporting evidence gathered by the regulatory section, is then placed before the adjudicating officer. The adjudicating officer does not have to be satisfied that the case for revoking the licence has been proved, but rather that there are sufficient doubts as to fitness to warrant issue of a minded to revoke notice. The adjudicating officer should see only material which is being adduced as formal evidence (and so made available to the licensee). ………………………..The main purpose of OFT’s “Chinese wall” is that the adjudicating officer should know only as much about the case as is contained in the file of evidence supporting the minded to revoke notice to be issued to the licensee. That is in the interests of fairness, and so that the licensee is aware of all the evidence before the adjudicating officer and can make effective representations about it. If further evidence should then come to the regulatory section’s attention which casts further doubt on the licensee’s fitness to hold a licence, the section may put that further evidence before the adjudicating officer for him to consider the possible issue of a supplementary minded to revoke notice.”
10. Appendix C to that 2001 report by the Ombudsman set out a list of major procedural changes which the OFT said that they had implemented in the light of the investigation of the Colorvision case. These included:
“5. The regulatory section has no access to the adjudication section’s database, even for precedent purposes. Therefore the regulatory section is not aware of the progress or timing of a case once it is with adjudication.”
11. At the end of that list of changes the report comments:
“All but the last of these changes have been brought in to strengthen the Chinese Wall and to ensure that the only information seen by, or communicated to, the adjudicator is that which forms part of the MTR notice and attachments. These changes directly address many of the Ombudsman’s concerns over the breaches of the Chinese Wall that he refers to in his report.”
12. Mr Popplewell emphasised that, as compared with a hearing before a FTT on appeal, a hearing before an OFT adjudicator was informal and non-adversarial. There was no party present from the OFT presenting the OFT’s case, and the only persons present besides the Adjudicator (and occasionally a legal adviser to the Adjudicator) were the licensee, its legal representation (if any) and those persons the licensee wished to have at the hearing. Evidence was not given on oath and there was no cross-examination of witnesses; indeed the makers of any witness statements that were being relied upon by the OFT to justify the refusal/revocation of the licence would not be at the hearing. In the present case the licensees were legally represented at the hearings before both Adjudicators referred to below.
(b) Events down to 1 April 2014
13. On 20 May 2011 an OFT Adjudicator, Alison Spicer, served on each of the 3 Companies notice that the OFT was minded (in the case of one of them) to refuse to renew and (in the case of the other two of them) to revoke their consumer credit licences, on the ground that they were not fit persons, within the meaning of s.25 of the CCA, to carry on their type of consumer credit businesses. The notices were identical, each extending to 61 pages (not including a large number of documents attached to the notices) and giving notice in detail of the matters on which the OFT had relied in forming its view.
14. In July 2011 the Companies submitted a combined set of written representations, extending to 144 pages (not including the exhibits listed in Schedule 12), and requested the opportunity to make oral representations.
15. There was then an oral hearing before the Adjudicator, Ms Spicer, on 15 and 16 August 2011. Following that hearing, on 21 August 2011 the Adjudicator sent an email to her supervisor saying that she was “minded to give favourable outcomes in relation to Roxburghe and Alasdair Turnbull, with requirements on HFO Services”. On the following day she sent an email to the OFT Investigations Team which the Companies contend informed the Investigations Team that she was minded to find in favour of the licensees. The Companies were not informed of either email.
16. The Companies contend that those and subsequent events which occurred following the hearing before the Adjudicator amounted to gross procedural unfairness in relation to the decision by the OFT as to whether the licences should be renewed/revoked. There was undoubtedly very substantial delay before determinations were eventually made by a different OFT Adjudicator (Ms Spicer having ceased in the meantime to be available) on 27 January 2014, following an...
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