FundHaven Ltd and another v The Executive Director of the Securities Commission of the Bahamas
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hamblen |
| Judgment Date | 26 April 2021 |
| Neutral Citation | [2021] UKPC 11 |
| Court | Privy Council |
| Docket Number | Privy Council Appeal No 0024 of 2017 |
[2021] UKPC 11
Lord Reed
Lord Briggs
Lord Sales
Lord Hamblen
Lord Burrows
Privy Council Appeal No 0024 of 2017
From the Court of Appeal of the Commonwealth of the Bahamas
Appellants Gail Lockhart Charles Robert Strang (Instructed by Sinclair Gibson LLP)
Respondent Gawaine Ward (Instructed by Charles Russell Speechlys LLP (London))
Heard on 8 March 2021
Under section 21(1) of the Court of Appeal Act of the Commonwealth of The Bahamas (“the CA Act”) a second appeal to the Court of Appeal is only permitted on “a point of law alone” and provided that “a Justice of the Supreme Court or of the court shall have certified that the point of law is one of general public importance”.
This appeal concerns the requirement of certification and in particular (i) whether the Court of Appeal was correct to conclude that the Supreme Court Justice did not certify a point of law of general public importance for the purposes of section 21(1) of the CA Act and (ii) whether the Court of Appeal was justified in refusing itself to certify such a point of law.
The second appellant, South American Investment Fund Ltd (“SAIF”), a Bahamian company, is a private investment holding vehicle for an Argentinian family.
In 2004, SAIF elected to be licensed as an investment fund under the Bahamian Investment Funds Act 2003 (“the Act”).
The respondent, The Securities Commission of The Bahamas (“the Commission”), is a statutory body responsible for the supervision and regulation of the activities of the investment funds, securities and capital markets under the Act and under the Securities Industry Act 2011 (and, before its repeal, the Securities Industry Act 1999).
Under section 2 of the Act an “investment fund” is a company, unit fund or partnership “that issues or has equity interests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits or gains arising from the acquisition, holding, management or disposal of investments”. It does not, however, include any such pooled investment funds “where the holder of an equity interest does not have the option to redeem his equity interest or require the issuer to repurchase his equity interest” — ie “closed-end” funds.
Under section 7 of the Act a company may elect to be licensed as an investment fund and is thereby deemed to be an investment fund for the purposes of the Act. Section 7(1) provides:
“7(1) A company, unit trust or partnership, where the holder of an equity interest does not have the option to redeem his equity interest or require the issuer to repurchase his equity interest may elect to be licensed by the Commission as an investment fund and if it so elects shall from the date of licensing be deemed an investment fund for the purposes of this Act.”
The Act makes provision for two categories of investment fund administrators, restricted and unrestricted. By section 13 of the Act, unrestricted fund administrators may themselves license funds under their administration as SMART funds. A SMART fund is “an investment fund established by the Commission as a Specific Mandate Alternative Regulatory Test Fund that satisfies certain prescribed parameters and requirements of a category, class or type of investment fund previously approved by the Commission”.
Section 26 of the Act requires the administrator of an investment fund to “use reasonable efforts to ensure that the investment fund does not carry on or attempt to carry on business as an investment fund contrary to provisions of this Act.”
The Investment Fund Regulations (“the Regulations”) were made in exercise of powers conferred by section 62 of the Act. Regulation 17(1)(g) requires fund administrators to “take all reasonable steps to ensure that operators are meeting their obligations and are complying with the Act and these Regulations”.
SAIF appointed Winterbotham Trust Company Ltd (“Winterbotham”) as its administrator. Winterbotham was an unrestricted investment fund administrator under the Act. On 14 December 2004, Winterbotham licensed SAIF as a SMART Fund Model 003 (SFM003). On 21 March 2006 Winterbotham resigned as SAIF's administrator and cancelled SAIF's SFM003 licence.
In June 2006, SAIF appointed the first appellant Accuvest Fund Services Ltd (“Accuvest”) as its administrator and informed the Commission by letter that it had done so, in succession to Winterbotham. Accuvest was licensed as a restricted investment fund administrator and therefore could not license investment funds. Its directors were Mr Jensen and Mr Nottage, who were also the directors of SAIF.
On 27 April 2007, Accuvest applied to the Commission for SAIF to be licensed as a SMART Fund Model 005 (SFM005). After a period of correspondence during which the Commission required Accuvest to provide certain information, it eventually licensed SAIF as a SFM005 on 25 June 2008.
Under section 3 of the Act, an investment fund “shall not carry on business or attempt to carry on business” unless it is licensed. The Commission formed the view: (i) that SAIF had been operating as an investment fund without a license in breach of section 3 of the Act, because it had remained active but had not been licensed between March 2006 and June 2008; and (ii) that Accuvest had acted in breach of section 26 of the Act and regulation 17(1)(g). These alleged breaches were made the subject of a formal complaint by the Commission as set out in a notice dated 8 November 2010.
There was a hearing of the complaint before the hearing panel of the Commission on 28 January 2011. At the hearing SAIF and Accuvest were represented by Mr Jensen and Mr Nottage.
The panel delivered its decision on 27 January 2011. It found that once Winterbotham resigned as administrator, SAIF's licence could not subsist, and that Accuvest was therefore obliged to ensure that the required documents were submitted to the Commission to license SAIF. The panel found that SAIF had not ceased operations, and so had been operating without a licence, and therefore found the breach of section 3 of the Act to be proven. In relation to Accuvest, the panel found that it had failed to use reasonable efforts to ensure SAIF did not carry on business contrary to the Act, or to ensure that it met its obligations, and therefore found the breach of section 26 of the Act and regulation 17(1)(g) to be proven. In its final decision in March 2011, the panel imposed fines on SAIF and Accuvest totalling $81,000.
Accuvest and SAIF (“the appellants”) appealed against the panel's decision to the Supreme Court. The appeal was heard by Hepburn J on 18 and 19 July 2011. She gave judgment on 6 January 2012, dismissing the appeal save in relation to the fines imposed, which were reduced by one third.
On 3 July 2013, the appellants filed a notice of motion in the Court of Appeal seeking the leave of the Court of Appeal to appeal out of time against the judge's decision.
On 3 September 2013, the Court of Appeal ruled that, in accordance with section 21(1) of the CA Act, the appellants required a certificate from the judge, certifying that the point of law upon which they appealed was one of general public importance. Section 21(1) of the CA Act provides as follows:
“Any person aggrieved by any judgment, order or sentence given or made by the Supreme Court in its appellate or revisional jurisdiction, whether such judgment, order or sentence has been given or made upon appeal or revision from a magistrate or any other court, board, committee or authority exercising judicial powers, and whether or not the proceedings are civil or criminal in nature may, subject to the provisions of the Constitution and of this Act, appeal to the court on any ground of appeal which involves a point of law alone but not upon any question of fact, nor of mixed fact and law nor against severity of sentence: Provided that no such appeal shall be heard by the court unless a Justice of the Supreme Court or of the court shall certify that the point of law is one of general public importance.”
Since there was no certificate, the Court of Appeal dismissed the application and suggested that the appellants re-file it with a certificate.
On 2 October 2013, the appellants made an application to the judge to certify their appeal as involving a point of law of general public importance. The 16 grounds of appeal were as follows:
“(1) That the judge erred in failing to find that there was no evidence before the disciplinary committee or the Court to prove that SAIF was not an investment fund within the meaning of the Act;
(2) That the judge erred in finding that the disciplinary committee was entitled to find that SAIF and Accuvest were guilty of the breaches alleged in circumstances where there was no evidence before the disciplinary committee or the Court to prove that SAIF was an investment fund within the meaning of the Act;
(3) That the judge erred in finding that the correspondence passing between the Commission and SAIF was evidence capable of proving that SAIF was operating as a fund within the meaning of the Act;
(4) That the judge erred in finding that the correspondence passing between the Commission and SAIF was evidence capable of confirming the operation of an unlicensed fund;
(5) That the judge erred in finding that the disciplinary committee was entitled to find that the correspondence passing between the Commission and SAIF was evidence capable of proving that SAIF was operating as a fund within the meaning of the Act;
(6) That the judge erred in finding that the disciplinary committee was entitled to find that the...
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