John Calland v Financial Conduct Authority

JurisdictionEngland & Wales
JudgeLord Justice Lewison,Lord Justice Bean,Lord Justice Laws
Judgment Date13 March 2015
Neutral Citation[2015] EWCA Civ 192
Docket NumberCase No: B2/2013/3238
CourtCourt of Appeal (Civil Division)
Date13 March 2015
Between:
John Calland
Appellant
and
Financial Conduct Authority
Respondent

[2015] EWCA Civ 192

Before:

Lord Justice Laws

Lord Justice Lewison

and

Lord Justice Bean

Case No: B2/2013/3238

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM BOW COUNTY COURT

MR RECORDER STEYNOR QC

1EX00608

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr Hugh Tomlinson QC (instructed by Kitsons LLP) for the Appellant

Mr Javan Herberg QC & Mr Tom Cleaver (instructed by the Financial Conduct Authority) for the Respondent

Hearing date: 4 March 2015

Lord Justice Lewison
1

Until January 1998 Mr Calland was an independent financial adviser. He was principal and then partner in the firm of Calland Insurance and Mortgage Services ("CIMS"). He has since been living in retirement in Spain. His son took over the business, but went bankrupt. In the spring of 2005 employees of the Financial Services Authority contacted him, once by letter, once by telephone and once by e-mail in connection with a review into pension mis-selling. Mr Calland alleges that these events amounted to harassment within the meaning of the Protection from Harassment Act 1997. The FSA applied for summary judgment against him. They failed before DDJ Rea, but succeeded on appeal to Recorder Steynor. With the permission of Gloster LJ Mr Calland brings this second appeal. For the reasons that follow, I would dismiss the appeal. The only defect in the Recorder's judgment is the unacceptable and unexplained nine month delay in delivering it.

2

Section 1 of the Protection from Harassment Act 1997 provides, so far as material:

"(1) A person must not pursue a course of conduct—

(a) which amounts to harassment of another, and

(b) which he knows or ought to know amounts to harassment of the other.

(2) For the purposes of this section…, the person whose course of conduct is in question ought to know that it amounts to or involves harassment of another if a reasonable person in possession of the same information would think the course of conduct amounted to or involved harassment of the other.

(3) Subsection (1) … does not apply to a course of conduct if the person who pursued it shows—

(a) …,

(b) that it was pursued under any enactment or rule of law or to comply with any condition or requirement imposed by any person under any enactment, or

(c) that in the particular circumstances the pursuit of the course of conduct was reasonable."

3

Section 7 provides, so far as material:

"(2) References to harassing a person include alarming the person or causing the person distress.

(3) A "course of conduct" must involve—

(a) in the case of conduct in relation to a single person (see section 1(1)), conduct on at least two occasions in relation to that person…"

4

Harassment is both a tort (section 3) and a crime (section 2).

5

The boundary between conduct which is lawful and conduct which is tortious or criminal is crossed when the impugned conduct ceases to be merely unattractive or unreasonable and becomes oppressive and unacceptable: Majrowski v Guy's and St Thomas's NHS Trust [2006] UKHL 34, [2007] 1 AC 224 at [30]. In life one has to put up with a certain amount of annoyance: things have got to be fairly severe before the law, civil or criminal, will interfere: Ferguson v British Gas Trading Ltd [2009] EWCA Civ 46, [2010] 1 WLR 785 at [17]. Harassment involves persistent conduct of a seriously oppressive nature targeted at an individual and objectively calculated to cause fear or distress: R v Smith [2012] EWCA Crim 2566, [2013] 1 WLR 1399 at [24]; Dowson v Chief Constable of Northumbria Police [2010] EWHC 2612 (QB) at [142]. In deciding whether the boundary has been crossed the context is important; but the touchstone is whether the impugned conduct is of such gravity as to justify the sanctions of the criminal law: Sunderland City Council v Conn [2007] EWCA Civ 1492, [2008] IRLR 324 at [12]. Whether the boundary has been crossed is to be judged objectively: Dowson v Chief Constable of Northumbria Police at [142]. Courts should be astute to separate the wheat from the chaff at an early stage in the proceedings: Majrowski v Guy's and St Thomas's NHS Trust at [30].

6

I begin with the context in which the communications with Mr Calland took place. As the Deputy District Judge recorded, the background was a large scale investigation by the regulators into possible mis-selling of pension schemes in the 1990s. The review was launched in October 1994. The regulator has changed over the years. At the time when Mr Calland was in business it was the Personal Investment Authority. Subsequently it became the Financial Services Authority and latterly the Financial Conduct Authority. Nothing turns on the different identities; and I will simply refer to the regulator.

7

There were two phases to the investigation. Phase 1 for urgent cases ran from October 1994. Phase 2, for cases falling outside Phase 1 ran from August 1998, that is to say some seven months after Mr Calland retired. Phase 2 was to be a direct approach by financial advisers to their potentially affected clients. There were to be four elements:

i) Firms were to write directly to investors and invite them to put their case forward for review (a direct invitation);

ii) The investors were to provide information to the firms about themselves for the review;

iii) Firms were to send one reminder letter to the investors;

iv) The regulator would monitor and keep informed the investors and oversee a high profile publicity campaign to raise awareness of the review.

8

This was to be done by the end of June 2002. In the event of an investor asking for a review, the review would follow a number of key stages:

• Information gathering from the firm's own records, from occupational pension schemes and from investors;

• A loss test to establish whether an investor was likely to lose or gain from the decision to take out a personal pension rather than remain in or join an occupational scheme;

• A compliance test to establish whether the investor was given advice or information which fell materially short of the regulatory standards in force at the time it was given;

• A causation test to establish whether, if there was a loss, that loss was – on the balance of probabilities – caused by a failure in compliance by the firm;

• Redress for the investors financially harmed by non-compliance.

9

In parallel with the review the regulator made the Financial Services (Compensation of Investors) Rules 1994. These rules set up the Investors Compensation Scheme ("ICS"). The essential function of ICS was to pay compensation to investors, where the investment firm was financially unable to do so. If a firm was unable to meet claims then it was said to be "in default". Whether a firm was in default was to be established at an early stage, because if it was then ICS would deal with any claim itself for the purposes not merely of paying compensation but also the anterior stage of deciding whether any compensation was in fact due as a result of regulatory non-compliance. All this was explained to Mr Calland in ICS' letter to him of 5 April 2001 in connection with a claim that had been made by a client of CIMS. As the letter said in terms:

"At this stage we have not investigated the circumstances surrounding the advice given."

10

However, although ICS had not investigated the circumstances in which the advice had been given, what it had done was to identify a potential loss of £6,742. This follows the staged approach in which the loss test is applied before the non-compliance and causation tests. In order to be in a position to decide whether a firm was "in default" ICS needed to be provided with financial information about the firm. The letter concluded:

"We hope to deal with this matter as soon as possible. Accordingly please either:

• Confirm to us that you or your firm will be in a position to deal with these claims in the event that liability is proven; in which case we will direct the investor(s) to you …; or

• Confirm that you or the firm are unable to deal with the claims by completing the attached questionnaire and statement of assets and liabilities.

If we do not hear from you within 14 days of the date of this letter we will proceed to make a decision as to whether Calland Insurance should be declared "in default" on the basis of such information as we already hold."

11

It is not alleged that Mr Calland replied to this letter; and indeed on 5 July 2001 ICS wrote to the investor who had made the claim stating that Mr Calland had not provided any information about his financial status. ICS has since been replaced by the Financial Services Compensation Scheme ("FSCS").

12

The three important points to note about the background are:

i) The involvement of the firm in Phase 2 was designed to identify investors who might request a review. Once they had been identified, handling of the review passed to the firm or, if appropriate, the compensation scheme;

ii) The loss test was a key stage to be performed before going on to the questions of compliance and causation; and

iii) Provision of the financial information would determine who was to investigate the merits of any individual claim.

13

It is also to be noted that Mr Calland's son had been adjudicated bankrupt, and the regulator had no information about Mr Calland's financial affairs. Mr Tomlinson QC, who appeared for Mr Calland, argued that the "safety net" of the ICS did not apply to Mr Calland, because he had the resources to meet any claims made. But since he had not given any financial information to ICS that was no more than an assertion.

14

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