Jersey Unreported Judgments

[2010]JRC115A

royal court

(Samedi Division)

18^th June 2010

Before     :

Sir Philip Bailhache, Commissioner, and Jurats Le Breton and Liddiard.

 

Advocate D. S. Steenson for the Appellant.

Advocate B. H. Lacey for the Respondent

judgment

the commissioner:

Introduction

1.        This is an appeal by Russell Shelton Homer ("Mr Homer") against a decision of the Jersey Financial Services Commission ("the Commission") to issue a public statement pursuant to Article 25 of the Financial Services (Jersey) Law 1998 ("the Law") setting out the directions given to Mr Homer by the Commission pursuant to powers conferred by Article 23 of the Law.  Those directions were given by the Commission on the 23rd April, 2009.  The reasons were duly set out in an appendix to the notice containing the directions.  The directions were initially the subject of an appeal by Mr Homer, but that appeal was eventually abandoned.  It is unnecessary to specify the reasons for the directions in this judgment because the Commission does not propose to put them into the public domain.  It seeks to publish only the directions themselves. 

2.        The proposed public statement is in the following terms:-

"Following an investigation into the fitness and propriety of Mr Homer, the Commission wishes it to be known that, on 23rd April, 2009, directions were issued to Mr Homer pursuant to the powers vested in it under Article 23(1) of the Law. 

The effect of the directions is that Mr Homer shall be prohibited from:-

1.1 Acting as a principal person or being employed as a principal person or key person, or defined in the Law; and

1.2 In relation to carrying on financial service business, acting in any capacity with authorised signatory powers over any bank account or being appointed to any office with the capacity to execute any legal documentation whatsoever; and

1.3 Engaging in any other employment at all by any registered person, as defined in the Law, without first having applied to and obtained the written approval of the Commission.

On 23rd April, 2009, Mr Homer was also issued with equivalent directions under each of the other regulatory laws as follows:-

The Collective Investment Funds (Jersey) Law 1988;

The Insurance Business (Jersey) Law 1996; and

The Banking Business (Jersey) Law 1991.

Mr Homer will commit an offence under Article 23(15) of the Law, in the event that he acts in a manner which is not in accordance with the restrictions set out above.  Any person with information to indicate that such an offence has been committed is asked to contact the Commission."

3.        The grounds of appeal are that the decision to make the public statement detailed above was unreasonable having regard to all the circumstances of the case, as a result of the decision being:-

"(a) devoid of merit; and/or

(b) procedurally incorrect and/or unfair; and/or

(c) unreasonable; and/or

(d) consciously or unconsciously perverse; and/or

(e) unjust; and/or

(f) disproportionate, when taking into account, inter alia, the background, type and nature of the reasons for the giving of the Directions.  Having been given, the Directions prohibit the Appellant from working in the Jersey financial services industry without the prior written approval of the Respondent.  Accordingly, the Appellant is prohibited from carrying on unauthorised financial services business and, if found to be in contravention, would face criminal sanction pursuant to Article 7 of the Law, liable to imprisonment for a term not exceeding 7 years.  Further, it is averred that the Directions effectively prevent the Appellant from being employed in the Jersey financial services industry in any event.  In the circumstances, the reputational damage and adverse impact upon health, caused to the Appellant as a result of the proposed public statement, would be disproportionate and unreasonable.

(g) unfair; and/or

(h) procedurally defective, in that the notice of public statement, served upon the Appellant, fails to identify the proposed date of issue of the statement, contrary to the mandatory requirements of Article 25A(3)(b) of the Law; and/or

(i) contrary to the usual working practice of the Respondent where directions have been issued against individuals working in the Jersey financial services industry."

There is an element of tautology in those grounds but we shall examine the arguments of Mr Homer in more detail below. 

Context of the proposed statement

4.        It is helpful first to consider the context in which the Commission proposes to make this public statement which would undoubtedly adversely affect the reputation of Mr Homer.  The Commission is a statutory body, established by the Financial Services Commission (Jersey) Law 1998 ("the Commission Law") which is responsible for the supervision of all businesses and persons carrying on regulated business in Jersey.  In order to carry on a regulated business, entities must apply to the Commission to be registered to carry on the relevant regulated activities, and the Commission has a discretion as to whether or not to grant any such application.  In addition, the Commission is empowered to object to a person becoming a principal or key person of a particular business and thereby to restrict that person's ability to act in that particular role.  It is the duty of the Commission to assess and to determine whether businesses, and any senior persons employed within those businesses, meet the necessary regulatory standards.  The interference with individual freedom is justified by the importance from a public perspective of assuring the integrity and honesty of the financial services industry in Jersey. 

5.        In exercising its functions, the Commission acts under a number of guiding principles set out in Article 7 of the Commission Law.  Those principles are:-

"(a) the reduction of the risk to the public of financial loss due to dishonesty, incompetence or malpractice by or the financial unsoundness of persons carrying on the business of financial services in or from within Jersey;

(b) the protection and enhancement of the reputation and integrity of Jersey in commercial and financial matters;

(c) the best economic interests of Jersey; and

(d) the need to counter financial crime both in Jersey and elsewhere."

6.        In the event that the Commission considers that an individual is not a fit and proper person to work in the financial services industry in Jersey, the Commission may issue directions preventing a person from carrying out specified functions.  Such directions were issued to Mr Homer as set out above.

7.        In the event that directions are issued, the Commission has the power to make a public statement.  Article 25 of the Law provides:-

"The Commission may issue -

(a)       a public statement with respect to, or setting out, any direction that the Commission has given under Article 16 or 23".

The directions were given to Mr Homer under Article 23 of the Law.  Counsel for Mr Homer rightly conceded that the Commission has the power to make a public statement in this case. 

8.        The Commission's approach to the making of public statements has evolved since the Law came into force.  On 30th July, 2008, the Commission published a paper setting out its policy on the use of public statements.  At paragraph 2.1 the Commission stated:-

"The Commission is aware of the serious detrimental effect that a public statement may have on the reputation or business of anyone named, particularly in a Type 1 statement.  However, it is important that the Commission should be able to pursue its regulatory objectives by highlighting the requirements and standards of conduct expected of firms and individuals, and demonstrating that these standards are being effectively enforced, so assisting to maintain standards in the finance industry."

At paragraph 4.1 the Commission stated that a decision to make a public statement was:-

"likely to be based on the need to -

4.1.1 protect the interests of

4.1.1.1 any existing or potential clients or customers of the person to whom the direction was given;

4.1.1.2 the general public; or

4.1.1.3 other regulated businesses in the Island's financial services industry;

4.1.2 protect the reputation of Jersey in commercial and financial matters; or

4.1.3 counter financial crime in Jersey or elsewhere."

9.        Counsel for the Commission submitted that public statements were an important element in promoting awareness both within the industry and amongst the public as to who was and who was not authorised to undertake regulated business.  In her skeleton argument she set out the Commission's general position as follows:-

"(a) The Commission is responsible for assessing the competency of those conducting financial services business in or from within Jersey and will place restrictions on businesses or individuals when it considers the necessary levels of competency and/or integrity are not met.  In the event that the Commission determines that an individual is not fit and proper to be employed at a certain level or at all within the finance industry then the Commission considers it has a duty to warn potential employers and those who might transact business with the individual that such a person's future engagement in Jersey's financial industry has by directions been restricted;

(b) The Commission considered it important that individuals employed in Jersey's finance industry are honest and competent in order that all those dealing or involved with Jersey's finance industry can be satisfied that Jersey's finance industry is [ - ] well regulated and [that Jersey is] a safe and reliable jurisdiction in which to do business.  Insofar as the Commission is concerned this includes, when the need arises, the need to identify whose whom the Commission considers do not meet the requisite standards of competency and integrity; and

(c) Jersey's anti-money laundering regime requires senior personnel within financial institutions to implement, monitor and enforce anti-money laundering procedures within their business.  Anti-money laundering laws and procedures are regarded by the Commission as a key cornerstone in preserving and enhancing Jersey's reputation as a finance centre safe to do business with.  The Commission must be satisfied that individuals in senior positions are competent and, if determined not competent, the Commission considers it its duty to exclude those persons from important, senior employment in Jersey's finance industry."

The legal test

10.      Article 25(c)(3) of the Law provides that an appeal to the Court against a decision of the Commission "may be made only on the ground that the decision of the Commission was unreasonable having regard to all the circumstances of the case".  These grounds mirror those set out in Article 11(3) of the Law (dealing inter alia with appeals against a refusal to register a person or to revoke a registration).  In Anchor Trust Company Limited-v-Jersey Financial Services Commission [2005] JLR 428 (an appeal under Article 11), the Court referred to the test in planning appeals laid down in Token Limited-v-Planning and Environment Committee [2004] JLR 016 (approved by the Court of Appeal in subsequent cases) and to the comments of Beloff JA in the Guernsey Court of Appeal case of Walters-v-States Housing Authority (1997) 24 Guernsey Law Journal 39, and stated:-

"13 In our judgment, these authorities confirm that there are at least three possible degrees of 'wrongness' which the court may find in respect of a decision under appeal.  In ascending order of 'wrongness', they are as follows:-

(a)       The decision was wrong in the sense that it is not the decision which the Jurats would themselves have reached.

(b)      The decision was wrong to such an extent that the Jurats would categorize it as unreasonable.

(c)       The decision was wrong to such an extent that it goes beyond merely being unreasonable and becomes a decision to which no reasonable decision-maker could have come, i.e. 'Wednesbury unreasonable' or 'irrational'.

14 On an appeal under the 1998 Law (and any similarly-worded Law) the Jurats should dismiss the appeal if their conclusion falls within (a) of the preceding paragraph but should allow the appeal if it falls within (b).  Contrary to Mr Kelleher's submissions, the decision does not have to be categorized as falling within (c) before an appeal can be successful."

Both counsel agreed that this was the test to be applied in this case. 

11.      It is helpful to refer to two other observations of Birt, Deputy Bailiff (as he then was) in Anchor.  At paragraph 66 he referred to the procedural grounds of appeal and, as to the Commission's duty to act fairly, adopted the formulation in Interface Management Limited-v-Jersey Financial Services Commission [2003] JLR 524 where the Court stated at paragraph 11:-

"We are in no doubt that the Commission is under a duty to act fairly towards an applicant for registration under the 1998 Law.  Any decision reached in circumstances where the Commission has acted unfairly is liable to be quashed.  In particular, the applicant is entitled to know the general nature of the case against him (i.e. the matters relied upon by the Executive to suggest that he should be refused registration) and to have an adequate opportunity of responding to those matters.  It is the fairness of the procedures as a whole which will fall to be considered but clearly what is required by way of fairness from the Executive (in its investigating and recommending rôle) is not exactly the same as that required by the Board (in its quasi-judicial role).  Nevertheless, both must act fairly in their respective rôles and the Commission as a whole must act fairly throughout the overall process."

12.      When Anchor reached the Court of Appeal [2006] JCA 040, Vos JA summarised the position at paragraph 25 as follows:-

"(i) The Court should look at the correctness and fairness of the procedure in order to decide whether the proceedings of the decision-maker were in general sufficient and satisfactory; and

(ii) The Court should look at the merits of the decision, on the basis that an appeal should be allowed if the decision of the Commission was wrong 'to such an extent that the Jurats would categorise it as unreasonable'.  In other words, it was not necessary for the Appellant to go so far as to establish Wednesbury unreasonableness."

The contentions of Mr Homer

13.      Counsel for Mr Homer did not press strongly the submission that the Commission's procedure had been unfair or defective, and we think that he was right to take that approach.  Paragraph (h) of the grounds of appeal assert that the notice of an intention to make a public statement was procedurally defective in that it failed to identify the proposed date of issue of the statement, contrary to the requirements of Article 25A(3)(b) of the Law.  That sub-paragraph provides that:-

"(3) A notice... shall -

...

(b) Give the proposed or actual date of issue of the statement;".

Paragraph 1.2 of the notice issued to Mr Homer on 17th December 2009 stated:-

"The Commission, having issued you with directions under Article 23 of the Law on 23^rd April 2009, has decided to issue a public statement, which will be published one month from the date hereof, pursuant to its powers under Article 25 of the Law".

While it might have been preferable to stipulate a specific date upon which the statement was to be published, the formulation adopted by the Commission is sufficiently precise, in our judgement, to comply with the requirements of Article 25A(3)(b).  We reject this ground of appeal.

14.      In so far as the general procedure of the Commission is criticised, we find no force in that criticism. Before issuing the formal notice on 17^th December, 2009, the Commission had told Mr Homer, in a personal letter dated 17th April, 2009, that a public statement would be made following the conclusion of criminal proceedings against him which were then pending.  Following the conclusion of the criminal trial and upon Mr Homer's abandonment of his appeal against the directions of 23^rd April, 2009, in November 2009, a draft public statement was issued by the Commission to Mr Homer and his legal advisers, which included the reasons for restricting Mr Homer's activities in the financial services industry.  Correspondence then ensued between the Commission and Mr Homer's legal advisers in relation to the mental health of Mr Homer.  A psychiatric report was submitted in support of a request that no public statement should be made.  We shall refer to that in more detail below.  After consideration of all matters, the Commission determined it appropriate that a public statement in limited form should be issued, omitting any reference to the reasons for which the directions dated 23^rd April, 2009, had been given.  The Director General then wrote to Mr Homer on 17^th December, 2009, attaching a notice containing the now limited public statement and the reasons it was required.  We find no substance in the allegations that the proceedings of the Commission have been incorrect or unfair.  On the contrary, it is clear that Mr Homer was given every opportunity to make submissions to the Commission, and the Commission in fact moderated its position in the light of submissions that were made. 

15.      Counsel for Mr Homer contended that the decision of the Commission to make a public statement was wrong and unreasonable because insufficient weight had been given to a number of personal factors affecting Mr Homer.  Mr Homer's affidavit states that the impact of the public statement would be catastrophic.  It would so damage his reputation that he would be unable to find employment in the financial services sector anywhere in the world.  Counsel submitted that a public statement was disproportionate to the errors which had led to the directions being given.  He addressed us at some length on those errors but we do not think that it is necessary or appropriate for this Court to express any view on them.  The fact of the matter is that the Commission decided to issue directions on the basis of its assessment of the conduct of Mr Homer.  Mr Homer appealed against the directions, but later elected not to pursue his appeal.  That is all now water under the bridge, and the question for us is the reasonableness of the Commission's decision to put into the public domain the fact that directions have been issued. 

16.      Counsel submitted that his client had endured a very difficult and stressful three years prior to the issue of the notice in December 2009.  He had been engaged in lengthy and hostile litigation involving a former client who had threatened and abused him.  This dispute had led to criminal proceedings being brought against Mr Homer although at trial he had been found to have no case to answer.  His marriage had collapsed and his relationship with the son of that marriage had been a casualty of that collapse.  The shame of his public humiliation would be used by his former wife to demonstrate to his son what a disreputable person he was.  He had lost his business.  He had been obliged to sell his house and his finances were in ruins. 

17.      So catastrophic had been his fall from grace that his health and his mental equilibrium had been adversely affected.  Counsel placed before us reports from a psychiatrist Dr John Sharkey.  Dr Sharkey stated that he had treated Mr Homer for depression and he expressed concerns that a public statement would remove the last of the structures upon which his self esteem was built. 

Conclusion

18.      The Court naturally has sympathy for the personal crises suffered by Mr Homer during the past three years.  It is clear from the papers that the Commission also paid close regard to the difficulties which he had experienced on many levels.  The first psychiatric report from Dr Sharkey was instrumental in persuading the Commission that the reasons underpinning the directions did not need in the circumstances of this case to be published.  The Commission does, however, owe a statutory duty to investors, other regulated bodies and to the public to ensure that they are aware of the restrictions to which Mr Homer is subject.  Miss Lacey was at pains to emphasise that the Commission did not seek to impose punishment on Mr Homer.  Their purposes in making a public statement were to protect all those, both in Jersey and elsewhere, to whom a duty was owed, to protect the Island's reputation as a jurisdiction where high regulatory standards are enforced, and thereby to inhibit the commission of financial crime. 

19.      The decision by the Commission to make a statement putting into the public domain the direction given to Mr Homer pursuant to its functions under the Law, cannot in any sense be characterised as mistaken or unreasonable.  The Commission was following a path which it had trodden before in relation to individuals against whom directions had been issued.  To exempt Mr Homer from the usual consequences of the issue of a notice restricting his activities in the financial services sector would have been inconsistent with past practice and might indeed have exposed the Commission to justifiable criticism.  We are satisfied that the Commission properly took into account all relevant considerations, and reached a conclusion which was entirely reasonable in all the circumstances.  The appeal is accordingly dismissed.

Authorities

Financial Services (Jersey) Law 1998.

Anchor Trust Company Limited-v-Jersey Financial Services Commission [2005] JLR 428.

Token Limited-v-Planning and Environment Committee [2004] JLR 016.

Walters-v-States Housing Authority (1997) 24.

Interface Management Limited-v-Jersey Financial Services Commission [2003] JLR 524.