R v Life Assurance Unit Trust Regulatory Organisation Ltd, ex parte Ross
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE GLIDEWELL,LORD JUSTICE STOCKER,LORD JUSTICE McCOWAN |
| Judgment Date | 11 June 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J0611-4 |
| Docket Number | 92/0553 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 June 1992 |
[1992] EWCA Civ J0611-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Royal Courts of Justice,
Lord Justice Glidewell
Lord Justice Stocker
Lord Justice Mccowan
92/0553
CO/2602/90
MR ANDREW COLLINS Q.C. and MISS C. BOOTH (instructed by Messrs. Carter Faber) appeared on behalf of the Appellant.
THE HON. MICHAEL BELOFF Q.C. and MR R. GORDON (instructed by Messrs. Slaughter & May) appeared on behalf of the Respondent.
This is an appeal against a decision of the Divisional Court (Mann L.J. and Hidden J.) which, in a judgment given on 5th July 1991, refused Mr Ross relief on his application for judicial review. The appellant, Mr David Hugh Ross, is the Finance Director of, and a shareholder in, the Winchester Group plc ("Winchester"). The respondent body is the Life Assurance Unit Trust Regulatory Organisation Limited ("LAUTRO").
In these proceedings Mr Ross seeks to challenge a notice of Exercise of Intervention Powers issued by the Board of LAUTRO to Norwich Union Life Insurance Society ("Norwich Union"), and three associated or subsidiary companies, dated 30th October 1990. I shall call this "the Intervention Notice". Mr Ross also challenges the refusal by the Board of LAUTRO to permit him, or Winchester, to appeal against the Intervention Notice to the Appeal Tribunal constituted under LAUTRO's rules.
The relief claimed against LAUTRO was originally an Order of Certorari to quash the Intervention Notice, and a declaration that the Notice was unlawful. By leave of the Divisional Court, Mr Ross was permitted to argue two further issues: firstly, whether Winchester was a member of LAUTRO, and secondly whether Winchester, either as a member or as a non-member of LAUTRO, had any right of appeal against the Intervention Notice of 30th October 1990.
The Financial Services Act 1986 introduced a regime for the control of persons and bodies carrying on various kinds of financial business, or offering financial services by what has come to be known as self-regulation.
It is necessary to start by considering the structure of the 1986 Act, so far as is relevant. Section 3 of the Act provides:
"No person shall carry on,….. investment business in the United Kingdom unless he is an authorised person under Chapter III or an exempted person under Chapter IV of this Part of this Act."
Section 4 makes it an offence to carry on investment business in contravention of Section 3.
By Section 7(1):
"…. a member of a recognised self-regulating organisation is an authorised person by virtue of his membership of that organisation."
Section 8 provides:
"(1) In this Act a 'self-regulating organisation' means a body (whether a body corporate or an unincorporated association) which regulates the carrying on of investment business of any kind by enforcing rules which are binding on persons carrying on business of that kind either because they are members of that body or because they are otherwise subject to its control.
"(2) In this Act references to the members of a self-regulating organisation are references to the persons who, whether or not members of the organisation, are subject to its rules in carrying on the business in question.
"(3) In this Act references to the rules of a self-regulating organisation are references to the rules (whether or not laid down by the organisation itself) which the organisation has power to enforce in relation to the carrying on of the business in question or which relate to the admission and expulsion of members of the organisation or otherwise to its constitution".
By Section 114 of the Act, the Secretary of State for Trade and Industry is empowered to transfer many of his functions under this Act to a body corporate which is able and willing to discharge those functions. In the exercise of that power, the Secretary of State has transferred many such functions to Securities and Investments Board Limited ("SIB"). Where I refer to sections of the Act which confer powers upon the Secretary of State which are now exercised by the SIB, I shall refer to that body.
By Sections 9 and 10 of the Act, a SRO may apply to SIB for an order declaring it to be a recognised SRO for the purposes of the Act. In order to secure recognition, a SRO must have rules which comply with the requirements of Schedule 2 of the Act. For present purposes, the relevant requirements in that Schedule are:
"1.(1) The rules and practices of the organisation must be such as to secure that its members are fit and proper persons to carry on investment business of the kind with which the organisation is concerned.
"2. The rules and practices of the organisation relating to—
-
(a) the admission and expulsion of members; and
-
(b) the discipline it exercises over its members, must be fair and reasonable and include adequate provision for appeals".
There is a special regime for insurance companies which are authorised to conduct business under Sections 3 or 4 of the Insurance Companies' Act 1982. By Section 22 of the Financial Services Act 1986, an insurance company authorised under those sections of the 1982 Act to carry on insurance business which is investment business within the meaning of the 1986 Act, is an authorised person by virtue of the authorisation under the 1982 Act, and not by virtue of membership of a SRO. However, Section 129 and Schedule 10 of the 1986 Act have the effect of making an insurance company which is a member of a recognised SRO subject to the rules of that SRO in the conduct of investment business.
By Section 44(1), an appointed representative, as defined in Section 44(2), is an "exempted person." By Section 44(2):
"For the purposes of this Act an appointed representative is a person—
(a) who is employed by an authorised person (his 'principal') under a contract for services which—
(i) requires or permits him to carry on investment business to which this section applies; and
(ii) complies with subsections (4) and (5) below; and
(b) for whose activities in carrying on the whole or part of that investment business his principal has accepted responsibility in writing;
and the investment business carried on by an appointed representative as such is the investment business for which his principal has accepted responsibility".
The remainder of Section 44 governs the relationship between an appointed representative and his or its principal. The relationship between them is essentially one of contract, and Section 44 contains a number of requirements as to the contents of such a contract. The effect of the section is to make the principal responsible to investors for the business carried on by the appointed representative.
Thus under the self-regulatory structure created by the Act, the SIB may accord recognition to a SRO, and may in appropriate circumstances revoke that recognition. A recognised SRO controls those authorised persons who are members of it by requiring them to comply with the rules of the organisation. The authorised person as principal controls its appointed representatives who are exempted persons within Section 3 by virtue of them being representatives whose authorisation may be terminated.
In the present case LAUTRO is a recognised SRO. Norwich Union is an authorised person by virtue of Section 22 of the 1986 Act, but is a member of and is subject to control under the rules of LAUTRO. Winchester was, at the material time, an appointed representative of Norwich Union, and therefore an exempted person. It is common ground that the business carried on by Winchester as an appointed representative of Norwich Union was investment business within the meaning of the 1986 Act.
As I have said, it is claimed on Winchester's behalf that in addition to being an exempted person, it was also a member of LAUTRO itself, and thus in addition an appointed person. I shall return later to this argument, which is in issue.
LAUTRO's rules were revised in February 1992. One of the revisions relates to a matter which arises in this appeal, and I shall refer to it later. However, on 30th October 1990, when the Intervention Notice was issued, LAUTRO's then current rules included the following provisions which are relevant to the present appeal:
Rule 2.12.(1) provided:
"A member shall
"a) establish and maintain rules and procedures…. by reference to which each officer, employee, company representative and appointed representative of the member can ensure that he complies with these rules and the principles in his dealings with investors…."
By Rule 3.4.(1):
"The member shall ensure that a person is not appointed as a company representative of that member except on terms which impose on him a duty to act in the performance of his functions as a company representative in such a way as to comply with the Code of Conduct…."
By Rule 3.5(A) (1):
"A body corporate or an unincoporated association shall not be appointed as, or be permitted to continue as, a member's appointed representative unless the member is satisfied that the controllers, directors and senior management of the body or association are of good character and are competent and otherwise suitable to manage the marketing of investment contracts on the member's behalf".
Rule 7.3. covers the intervention powers of LAUTRO. By Rule 7.3(2):
"The Board may prohibit a member in the course of the member's relevant investment business from:
a) entering into...
To continue reading
Request your trial
-
Elliott Associates L.P v The London Metal Exchange
...generally impose a duty to consult where a democratically elected body decided not to impose such a duty. iv) R v Life Assurance Unit Trust Regulatory Organisation Ltd, ex p. Ross [1993] QB 17: Mann LJ said in the Divisional Court (at p. 32F) that procedural fairness will not require a dec......
-
Secretary of State for the Home Department v E
...87. Mr Singh argued that in view of the impact of the control order on S and the children, and in the light of R v LAUTRO, ex p. Ross [1993] QB 17 at 50, that fairness also required that they be given an opportunity to make representations. It was submitted that the need for such an opport......
-
Christine Evangelou and Others v Iain McNicol (sued as a representative of all members of the Labour Party except the Claimants)
...Lloyd's Rep 557 at 574; Shearson Lehmann Hutton Inc v MacLaine Watson and Co Ltd [1989] 2 Lloyd's Rep 570 at 624; R v LAUTRO, ex p. Ross [1993] QB 17; Swain v Law Society [1983] 1 AC 598; Carmichael v General Dental Council [1990] 1 WLR 134; Enderby Town FC Ltd v Football Association Lt......
-
The Queen (on the application of Paul Rupert Lewin) v (1) The Financial Reporting Council Ltd
...18 Of the duty to act fairly to persons who are not direct parties to the decision maker's decision, Glidewell LJ in R v LAUTRO Ex p Ross [1993] QB 17, [50] stated: “I accept that very frequently a decision made which directly affects one person or body will also affect, indirectly, a numbe......
-
The Future for Financial Regulation: The Financial Services and Markets Bill
...Mergers, ex p Datafin PLC [1987] QB 115. For examples of judicial review ofdecisions of FSA 1986 regulators see RvLAUTRO, ex p Ross [1993] 1 All ER 545 and Bank ofScotland vIMRO 1989 SLT 432.14 L.C.B. Gower, ‘Big Bang and City Regulation’ (1988) 51 MLR 1.15 See Elliot and Henshaw, ‘Self-reg......