Upper Tribunal (Administrative Appeals Chamber)

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 oral hearing before her on 6 to 8 August 2013.

 

17. The contentions of procedural unfairness are summarised by Mr Popplewell as follows in his Skeleton Argument in this appeal:

 

“a. After the hearing before Ms Spicer it took 20 months for anything

substantive to happen in the proceedings, which was the issuing of

further notices against the Licensees. Indeed, the issuing of these

notices only followed the Licensees threatening judicial review

proceedings because of the delay. During this period the Licensees

continually made the OFT aware of the significant effect that the delay

was having on their businesses, particularly the 3rd Licensee,

Roxburghe, which relied on its reputation to both attract and keep

work. The OFT continually made assertions to the Licensees during

this period about further developments being imminent which are

demonstrably untrue and are contradicted by the OFT’s own response

to the judicial review proceedings. It is the Licensees’ contention that

the fact that the OFT was being deliberately untruthful to the Licensees

during this period (a fact which is difficult to deny given the

discrepancies between the communications during this period and the

contents of the OFT’s response to the threat of judicial review

proceedings) is demonstrative of the fact that this delay was a

deliberate (and unfair) tactic of the OFT to either run down the

Licensees’ business, or to force a change in Adjudicator from one that

was favourable to the Licensees to one that was not (see below);

 

b. On 8 November 2012 the Licensees were informed that Ms Spicer was

no longer available to hear the case and that another Adjudicator would

be hearing the action. To date no explanation for this change in

Adjudicator has been given. Leaving aside the inherent and obvious

unfairness that any participant in proceedings would face as a result of

a change from one arbiter to another halfway through proceedings, this

is particularly the case where the original arbiter was minded to find in

the participant’s favour;

 

c. The email to the OFT Investigations Team by Ms Spicer was a breach

of the OFT’s own internal procedures, and in any event rendered the

proceedings unfair. Rather than accept Ms Spicer’s decision to find in

favour of the Licensees, the OFT Investigation team in effect went on a

fact finding mission seeking to bolster their case against the Licensees.

The email was akin to a communication from a judge to only one party

to proceedings behind the back of the other, inviting that party to

bolster its case. Such a communication renders the proceedings

procedurally unfair;

 

d. During the period of delay the OFT inappropriately solicited

complaints from consumers about the actions of the Licensees;

 

e. In the whole, the actions by the OFT were not the actions of a

responsible regulator undertaking a licensing function, but amounted to

an overzealous approach to enforcement which was entirely

inappropriate and unfair. This has coloured the evidence against the

Licensees to such an extent that a fair appeal is impossible.”

 

18. During the delay two of the Companies in relation to whom minded to revoke notices had been issued applied to renew their licences, as a result of which the minded to revoke notices were withdrawn by the OFT. On 11 April 2013 the OFT issued supplemental notices indicating why it was minded to refuse to renew any of the notices.

 

19. The Adjudicator’s determinations of 27 January 2014 were that none of the Companies’ licences should be renewed, on the ground that they were not fit persons to hold a consumer credit licence. That decision extended to 137 pages, and 432 paragraphs.

 

20. In para. 20 of the determination the Adjudicator summarised, very briefly, under 6 headings, complaints by the Companies about procedural unfairness in the adjudication process, but went on to say in para. 21:

 

“The matters raised by [the Companies] at paragraph 20 above are not relevant to fitness and therefore not matters which I can take into account.”

 

21. On 21 February 2014 the Companies and Mr Turnbull appealed to the FTT against the determinations. The effect of the appeals was that the Companies’ existing licences continued pending the determination of the appeals: section 29(4) of the CCA.

 

22. Paragraph 1 of the grounds of appeal stated:

 

“1. The Appellant …… raises the following grounds of appeal:

 

a. Ground 1 – [the Company], within the meaning of section 25 of the CCA is a fit person to carry on business for which a consumer credit licence is required.

 

b. Ground 2 – The Proceedings before the OFT were procedurally flawed and/or unfair.”

 

23. Then, under the heading of Ground 1, paras. 2 and 3 stated as follows:

 

“2. The Appeal is, pursuant to section 41 of the CCA, by way of rehearing. On an appeal the burden is on the OFT to establish that [the Company] is unfit, rather than on [the Company] to establish its fitness. As such [the Company] need do no more than raise as a ground of appeal that it is a fit person to possess a consumer credit licence.

 

3. However, without prejudice to the generality of the Ground of Appeal, and without prejudice to paragraph 1 above, [the Company] voluntarily provides further information in respect of its fitness and in respect of the [Adjudicator’s determination].”

 

24. There then followed, in paragraphs 4 to 64 of the grounds of appeal, a series of detailed contentions in relation to Ground 1, which essentially sought to answer the reasons given in the Adjudicator’s determination as to why the relevant Company had been found to be unfit to hold a licence.

 

25. Then, under the heading of Ground 2, para. 65 stated:

 

“65. For each of the following reasons the proceedings before the Adjudicator were procedurally flawed and/or unfair. The unfairness is only exacerbated when the combined effect of the following is considered.

 

26. Then in paragraphs 66 to 89 of the grounds the allegations of procedural unfairness in relation to the Adjudicator’s determination were detailed.

 

27. The relief sought at the end of the Grounds of Appeal was as follows:

 

“90. [the Company] seeks a variation of the Decision to reflect a finding that [the Company] is a fit person to carry on a consumer credit business within the meaning of s.25 of the CCA. Alternatively [the Company] seeks the quashing of the Decision.”

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(c) The current legislative position under FSMA

28. On 1 April 2014 the main relevant provisions of the Financial Services and Markets Act 2000 (“FSMA”) came into force. Providing most forms of credit and certain other credit related activities are specified activities under the FSMA (Regulated Activities) Order 2001 and therefore carrying on such an activity by way of business is a regulated activity for which authorisation from the FCA is required: ss.19 and 22 of FSMA.

 

29. Applications to the FCA for permission to carry on a regulated activity are made pursuant to s.55A of FSMA. Section 55B provides that before giving permission the FCA must be satisfied that the person will satisfy, and continue to satisfy, the “threshold conditions” set out in Schedule 6 to the Act. If the FCA gives permission this is known for the purposes of FSMA as “Part 4A permission”: s.55A(5).

 

30. The threshold conditions set out in Schedule 6 include, in para. 2E, the requirement that the applicant “must be a fit and proper person having regard to all the circumstances, including …..”.

 

31. Section 55J of FSMA provides that if the FCA has granted Part 4A permission but it subsequently appears that the authorised person is failing, or likely to fail, so satisfy the threshold conditions then the FCA may cancel or vary the Part 4A permission. There are provisions in FSMA governing the notice that an authorised person must be given, and the right to make representations: sections 55Y to 55Z of FSMA. In particular s.55Z(2) provides that if a regulator decides to cancel an authorised person’s Part 4A permission otherwise than at the person’s request, it must give the person a decision notice.

 

32. By s.55Z(3) an applicant who is aggrieved by the cancellation or variation of a permission can refer the matter to the Upper Tribunal. This right of “reference” to the Upper Tribunal therefore replaces what was formerly a right of appeal to the FTT. Provisions as to the powers of the Upper Tribunal on such a reference are contained in s.133 of FSMA.

 

(d) Transitional provisions

33. Transitional provisions are contained in Part 8 of the Financial Services and Markets Act 2000 (Regulated Activities)(Amendment No. 2) Order 2013 (“the 2013 Order”).

 

34. The transitional provisions are considered further in paras. 51 onwards below, but it is common ground that each of the substantive appeals to the FTT is a ‘relevant appeal’ as defined in Article 54(1) of the 2013 Order and that:

 

(a) Since 1 April 2014 the respondent to the appeals has been the FCA in substitution for the OFT: that is the effect of Article 54(3)(b) of the 2013 Order. Under Article 54(3)(a), anything done by the OFT before 1 April 2014 in relation to the appeals is to be treated as having been done by the FCA.

 

(b) Sections 41 and 41ZB of the CCA continue to apply to the appeals: that is the effect of Article 54(2) of the 2013 Order. References to the OFT in section 41ZB are substituted by references to the FCA: Article 54(2)(a) of the 2013 Order. As a consequence: (i) the appeals continue to lie to the FTT: section 41(1); (ii) the appeals are by way of rehearing of the Determination: section 41ZB(1); and (iii) the FTT’s powers are as contained in section 41ZB(2).

 

(e) Events after 1 April 2014

35. On 30 April 2014 the FCA served a response to the grounds of appeal.

 

36. As to Appeal Ground 1, the Response contended that after 1 April 2014 the test to be applied on the appeal was the fit and proper person test in paragraph 2E of Schedule 6 to FSMA, not that in section 25 of the CCA. The Response contended, for reasons set out at length (the Response extends to 93 pages) that the Companies are not fit and proper persons within the test in para. 2E of Schedule 6, alternatively (if the applicable standard is that in section 25 of the CCA) are not fit persons under that provision. 

 

37. As to Appeal Ground 2, the Response contended as follows:

 

“95. Appeal Ground 2 relates to alleged procedural unfairness and delay in the proceedings before the Adjudicators. For the following reasons, the FTT should not and cannot entertain Ground 2.

 

95.1 The matters raised by Appeal Ground 2 are of no relevance to the issue, which the FTT must decide as at the date the appeal is heard by the FTT: namely, whether the Appellants are fit and proper persons or, alternatively, (so far as it is the applicable standard, which is denied) fit persons.

 

95.2 The FTT’s jurisdiction under section 41 of the CCA is limited to

determining this issue and does not extend to determining the matters relied on in Appeal Ground 2.

 

95.3 Further and in any event, the FTT’s powers under section 41ZB(2) of the CCA do not enable it to provide redress to the Appellants in respect of the matters complained of in Appeal Ground 2.

 

96. Accordingly, it is not necessary, appropriate and/or proportionate for the FCA to plead in detail to the substantive allegations relied upon by the Appellants in support of Appeal Ground 2. For the avoidance of doubt these allegations, which are scandalous and without foundation, are denied in any event.”

 

38. On 30 May 2014 a Judge of the FTT made directions, with the consent of the parties, for the determination of the following preliminary issues arising in the appeals:

 

 

“1. In respect of the standard to be applied on the appeals:

 

1.1 is each of the [Companies] to be assessed by the Tribunal by reference to: (a) the fit and proper person standard set out in paragraph 2E of Schedule 6 to [FSMA]; or (b) the fit person standard set out in section 25 of the [CCA]?

 

1.2 What is the nature of the standard under the [CCA] by reference to which [Mr Turnbull] is to be assessed by the Tribunal?

 

2. Is the burden of proof in relation to the aforesaid standard on the Appellants or the FCA?

 

3. Can and should the Tribunal entertain the Appellants’ second ground of appeal, namely the contention that the proceedings before the Adjudicators were procedurally flawed and/or unfair?”

 

39. On 24 July 2014 the Companies applied to amend their grounds of appeal to insert, as new paragraphs 86 to 96, additional allegations of procedural unfairness headed “inconsistency in the OFT’s approach to regulation and overzealous action against the Licensees.”

 

40. Following a hearing of the preliminary issues before Judge Findlay on 17 September 2014, she (by the decision now under appeal to me) directed on 18 September as follows:

 

“1. The standard to be applied in respect of all issues in these appeals is that set out in s. 25 of the [CCA].

 

2. It is not appropriate to make exhaustive directions at this stage on the onus of proof. ……………………..

 

3. The Respondents’ application in the Skeleton Argument is treated as an application to strike out the Appellants’ second ground of appeal.

 

4. The second ground of appeal as drafted is struck out.

 

5. The Tribunal has no jurisdiction to entertain the Appellants’ second ground of appeal, namely that relating to procedural unfairness equivalent to judicial review. However, the Appellants are at liberty to amend their grounds of appeal to include arguments that any decision was a nullity and the contention that aspects of the Respondent’s procedure have a bearing on the weight to be attached to any evidence relied on.”

 

41. The Directions then continued with case management directions in relation to the appeals, including directions for disclosure of documents.

 

42. On 26 September 2014 Judge Findlay refused the FCA’s application for a statement of the reasons for her decision of 18 September, stating that “reasons will be issued when a determination has been made which finally disposes of all issues in the proceedings.” However, on 20 October 2014 she gave permission to all the parties to appeal her decision of 18 September.

 

43. In these appeals now before me the FCA appeals (i) para. 1 of the Directions (in so far as it relates to the Companies) and (ii) the second sentence of para. 5 of the Directions, and the Companies and Mr Turnbull appeal para. 4 and the first sentence of para. 5 of the Directions. Neither party appeals what the FTT Judge said in para. 2 of the Directions about the incidence of the burden of proof.

 

44. Purportedly pursuant to the permission to amend given by the FTT Judge, the Companies served amended grounds of appeal, but made clear that the amendments were without prejudice to their appeal against the decision of the preliminary issues. The amended grounds of appeal incorporated the additional allegation of procedural unfairness referred to in para 39 above. Two other categories of amendment were made (the amendments being indicated in bold below). First, paragraph 1(b) was amended so that it reads:

 

“b. Ground 2 – The Proceedings before the OFT were so procedurally flawed and/or unfair as to render the decision of the OFT a nullity”

 

Secondly, at the end of the part of the grounds relating to Ground 1, the following was added:

 

“The effect of procedural unfairness on the weight of the evidence in the Appeal

 

65A Particularised in Ground 2 below are allegations of procedural unfairness which the Appellants maintain make the Decision a nullity.

 

65B. If, contrary to Ground 2, the Decision is not a nullity the procedural unfairness is nevertheless relevant to the weight that the Tribunal should give to the evidence relied upon by the OFT in the proceedings before the Adjudicators and which is to be relied upon by the FCA in the appeals:

 

(a) ……

(b) ……

(c) …….

(d)…….”

 

45. Under para 65B (a) to (d) the Companies set out four respects in which they contended that the allegations of procedural unfairness, if made out, should affect the weight of the evidence.

 

46. At the time of serving the amended grounds of appeal the Companies’ solicitors wrote to the FCA stating as follows:

 

“Following the Directions [dated 18 September 2014], we are entitled to rely on the allegations of procedural unfairness as a means of challenging the validity of the original decision, and also as relevant to the weight to be attached to the evidence that will be heard in this appeal. The revised grounds raise those issues. As a result of this, the forthcoming disclosure exercise must encompass not only the substantive allegations that are made against ourselves, but also our grievances in respect of the procedure that we have been subject to.”

 

47. The letter went on to state that the Companies were entitled, by reason of the issues relating to procedural fairness, to disclosure of the categories of documents which had previously been itemised in a letter dated 13 February 2014, and the additional categories listed in the letter, said to be relevant to the additional procedural grounds in what had been new paragraphs 86 to 96 of the grounds of appeal.

 

 

(2) The first preliminary issue: the appropriate standard

 

48. As noted above, Judge Findlay held, in answer to the first preliminary issue, that the appropriate standard by which the Companies were to be assessed was the fit person standard set out in s.25 of the CCA, and not the fit and proper standard set out in para. 2E of Schedule 6 to FSMA.

 

49. It has not been suggested by either the FCA or the Companies that it will make any specific difference, in the present case, which standard applies, and as noted above the FCA in its Response to the grounds of appeal asserted that the Companies were not fit (or fit and proper) persons on either basis.

 

50. However, it is understandable that the FCA is reluctant for the appeals to proceed on what it considers to be the wrong basis, and has therefore appealed Judge Finday’s decision.

 

(a) Transitional provisions: the 2013 Order

51. Article 56 of the 2013 Order provides for those who immediately before 1 April 2014 had a standard licence under the CCA, and who had notified the FCA of their desire to obtain interim permission, to be treated as having an interim permission under FSMA. The Companies had standard licences under the CCA immediately before 1 April 2014, as their licences were required to be treated as continuing pending their substantive appeals. The Companies all obtained interim permission. By Article 56(9) such an interim permission is to be treated as a “Part 4A permission” for the purposes of FSMA.

 

52. By Article 58(1) of the 2013 Order, where the licensee applies under FSMA for Part 4A permission, the interim permission generally lasts until that application is determined. However, by Article 58(2) that does not affect the ability of the FCA to vary or cancel an interim permission under FSMA. As I understand it, it is common ground that if the Companies were to lose the substantive appeals to the FTT, their interim permissions would therefore terminate. If they were to win the appeals, the interim permissions continue until determination of their applications for Part 4A permission.

 

53. Article 38 of the 2013 Order provides, so far as material, as follows:

 

“(1) Paragraphs (3) to (5) apply if, before 1 April 2014 –

 

(a) the OFT had given notice of its determination under section 27 of the 1974 Act not to renew the standard licence of a person (A”),

(b) the appeal period in relation to that determination had not ended, and

A is a relevant person

 

(3) The notice is to be treated as –

(a) if A has Part 4A permission only by virtue of this Order, a decision notice given under section 55Z(2) of the Act by the FCA to A of the decision by the FCA to cancel A’s Part 4A permission …..

(b) ………………………………..

 

(4) But if A had, before 1 April 2014, submitted a notice of appeal to the First-tier Tribunal under section 41 of the 1974 Act (appeals to First-tier Tribunal under Part 3), section 55Z3 of the Act (right to refer matters to the Tribunal) does not apply.

 

(5) The notice has effect subject to any necessary modifications.”

 

54. In the 2013 Order, “appeal period” has the same meaning as it had in the CCA: Article 29. Section 189(1) of the CCA defined it as follows: “the period beginning on the first day on which an appeal to the First-tier Tribunal may be brought and ending on the last day on which it may be brought or, if it is brought, ending on its final determination, or abandonment.” It is therefore common ground that the provisions of Article 38(1) were satisfied.

 

55. Chapter 3 of the 2013 Order addresses appeals from the CCA regime.

 

56. Where no notice of appeal under s.41 of CCA had been served by 1 April 2014, Article 55 in effect provided that the licensee’s right to appeal to a FTT under s.41 was replaced by a right to refer the matter to the Upper Tribunal pursuant to the FSMA procedure.

 

57. In the case where notice of appeal had been served by 1 April 2014, Article 54 provided:

 

“(1) Paragraphs (2) and (3) (in addition to provision made in Chapter 2) apply where a person (“A”) had, before 1 April 2014, submitted a notice of appeal to the First-tier Tribunal under section 41 of the 1974 Act (appeals to First-tier Tribunals under Part 3) (“a relevant appeal”).

 

(2) Sections 41 to 41ZB of the 1974 Act (appeals, Tribunal procedure rules and disposal of appeals) continue to apply to a relevant appeal (notwithstanding any repeal made by this Order) with the following modifications to section 41ZB –

(a) for each reference to the “OFT” substitute “FCA”;

(b) omit subsections (5) and (6).

 

(3) In any relevant appeal –

(a) anything done by the OFT before 1 April 2014 in relation to the appeal is to be treated as having been done by the FCA

(b) the FCA is substituted for the OFT as a party to the appeal.”

 

 

58. It is common ground that each of the appeals is a ‘relevant appeal’ as defined in Article 54(1) of the 2013 Order, with the consequences set out in para. 34 above.

 

 

 

(b) Analysis and conclusions in respect of the first preliminary issue

59. There is no express provision stating which standard applies in the case where a licence was revoked or not renewed before 1 April 2014, and an appeal was made before that date. However, in my judgment the FCA is right in submitting that the effect of Article 38(3) of the 2013 Order is intended to be that in determining the appeal the FTT must apply the threshold conditions in Schedule 6 to the FSMA, and in particular the “fit and proper person” requirement in para 2E of Schedule 6. I accept the FCA’s submission that that must be the effect of providing, in Article 38(3), that the OFT’s notice of refusal to renew the licence is to be treated as a decision notice given by the FCA to cancel A’s Part 4A permission. The question whether a Part 4A permission, granted or deemed to have been granted under  FSMA, has rightly been cancelled must be decided by reference to the threshold conditions in Schedule 6, and not by reference to the standard in the CCA, which has no application to Part 4A permissions.

 

60. I cannot put it more clearly than counsel for the FCA did in the following extracts from their skeleton argument, with which I agree:

 

“8.2 Article 38 of the 2013 Order could not be clearer: the OFT’s decision to refuse to renew the Companies’ standard licences is to be treated for the purposes of the appeal as a decision by the FCA to cancel the Companies’ Part 4A permissions. Thus, there is simply no room for the application of section 25 of the CCA: the appeal can only proceed on the basis that it is treated as a challenge to the FCA’s decision to cancel (under section 55J(1)(a) of FSMA) the Companies’ Part 4A permissions because they have failed to satisfy the threshold conditions under Schedule 6 to FSMA (including under paragraph 2E that they are “fit and proper” persons having regard to all the circumstances).  It is incongruous to suggest, as is the Companies’ case, that even though under Article 38 the appeal is treated as a challenge to the FCA’s decision to cancel the Companies’ Part 4A permissions, in assessing that decision the CCA standard should apply rather than the threshold conditions applicable to Part 4A permissions under FSMA.

 

8.3 Further, the appeal is by way of rehearing, by reference to the time when the appeal comes before the Tribunal (European Environmental Controls Limited v. The Office of Fair Trading [2009] UKFTT 316 (GRC), [25]) ………….

 

8.3  Section 25 of the CCA was repealed with effect from 1 April 2014 so it is nonsensical to suggest that the rehearing should be conducted by reference to a statutory standard that is no longer in existence and is no longer relevant to the position pertaining to the appellant. The only applicable standard in force is that in FSMA, i.e. the threshold conditions under Schedule 6. The rehearing can only relate to the Companies’ (interim) Part 4A permissions, which are a creature of FSMA and to which the FSMA provisions apply.

 

8.4 The position is not, and cannot be, changed by the continuing application of sections 41 and 41ZB of the CCA. First, the application of these provisions is retained by Article 54 of the 2013 Order, which makes plain that it is to be read in conjunction with Article 38 (being a provision made in Chapter 2). Secondly, those provisions are no more than procedural in nature, and make it plain that (i) the FCA is substituted for the OFT as a party to the appeal, (ii) any appeal continues to lie to the First-tier Tribunal rather than the Upper Tribunal, and (iii) any appeal is to be by way of rehearing. The provisions are, however, silent as to the substantive standards that are to be applied by the Tribunal on the appeal, and they do not change the inevitable conclusion that flows from Article 38 of the 2013 Order, namely that it is the FSMA rather than the CCA standard that must apply.”

 

61. Mr Popplewell contends that Article 38 of the 2013 Order does not have that effect, for the following reasons.

 

62. First, he contends that Article 38 is not intended to have any substantive effect on the standard to be applied. He submits that but for Article 38 an appeal from an adverse determination by an OFT Adjudicator would be irrelevant to a person with interim permission, because the appellant could say that even if he lost his appeal against that determination that did not affect his interim permission, which is governed by different legislation. He submits that Article 38 merely ensures that this is not the case, and provides that if the appellant loses his appeal against the adverse CCA determination he will, as a consequence, also lose his interim permission. He submits that there is no need to interpret Article 38 as going beyond this. 

 

63. Article 38(3)(a) provides that the Adjudicator’s determination is to be treated as a decision notice given under section 55Z(2) of FSMA, and I accept that section 55Z is a procedural provision: it is headed “Cancellation of Part 4A permission: procedure.” Article 38(3)(a) does not say that the Adjudicator’s determination is to be treated as a cancellation under one of the earlier, substantive, provisions in section 55. However, I nevertheless consider that the FCA is correct in submitting that it is implicit in Article 38(3)(a) that the notice must also be treated as having been given under the relevant substantive power, in this case section 55J of FSMA. A decision notice can only be given under section 55Z(2) where a relevant substantive power to cancel arises. I do not therefore accept that the purpose and effect of Article 38 was as limited as Mr Popplewell contends.

 

64. Secondly, Mr Popplewell contends that for the appeal to remain a rehearing (the Companies’ right to which is expressly preserved by Article 54 of the 2013 Order) the applicable standard must remain the same as it was at the time of the Adjudicator’s determination. Otherwise the appeal is not a rehearing. I accept that in general an appeal will be determined by reference to the law applicable at the time material to the first instance decision. Changes in the law after the first instance decision will not in general be material, even on an appeal by way of rehearing de novo. However, the purpose of the rehearing in the present case is in effect to determine whether the trader should continue to have a licence. The appellant is treated as continuing to have permission until the appeal is determined. The practical effect of the appeal is therefore to determine the position for the future. It was considered by an FTT in European Environmental Controls Ltd [2009] UKFTT 316 (GRC) at [25], in my judgment rightly, that

 

“The question to be decided by the Tribunal is not whether on the evidence adduced before the Adjudicator the Appellant was a fit person to hold the licence but whether he is fit to hold such licence on the evidence adduced before the Tribunal and with the time at which the Appellant’s fitness to hold a licence is to be determined being not the time of the hearing before the Adjudicator but at the time the appeal comes before the Tribunal.”

 

65. That of course does not expressly say that the standard of fitness which the appellant must satisfy is that in force at the time of the rehearing, because no change in the standard was in issue there, but on the face of it it would be odd if an appellant’s continuing fitness to have permission were to be determined by reference to a standard which had ceased to be applicable. If changes in factual circumstances occurring between the date of the Adjudicator’s determination and the date of the appeal hearing must be taken into account, it would be strange if changes in the applicable standard could not be.

 

66. Thirdly, Mr Popplewell contends that it would be remarkable if the applicable standard varied in the middle of the appeal process. Leaving aside unfairness to the traders, it would, he submits, present significant practical problems in terms of amending grounds of appeal etc. He submits that there would have been even greater practical problems in respect of an appeal which by 1 April 2014 was closer to its hearing date than these ones were, where witness statements might need to be amended or additional evidence gathered. At least a partial answer to that is in my judgment that the 2013 Order was made on 25 July 2013, but did not come into force until 1 April 2014. It was therefore known from July 2013 that if an appeal did not come to be decided until after 1 April 2014 it would be governed by the FSMA standard. In the present case that was obvious from the commencement of the appeal. In addition, as I have already noted it is not clear that there is any difference between the two standards which would be likely to lead to a need significantly to alter pleadings or evidence.

 

67. Fourthly, Mr Popplewell contends that by far the majority of allegations against the Companies are historic allegations relating to when the applicable legislation governing their conduct was the CCA. To judge these actions against the FSMA standard would be to retrospectively apply the FSMA standard to the Companies’ conduct. However, I accept the FCA’s contention that there is no objectionable element of retrospectivity in the application of the FSMA standard for the purpose of determining whether the Companies are fit to continue to have permission. An enactment is not retrospective in any objectionable sense where it is simply applied at a time after its commencement to a state of affairs existing at that time, even though that state of affairs came into existence before commencement: Ben Nevis (Holdings) Limited v Revenue and Customs Commissioners [2013] STC 1579 at [48] – [50].

 

68. Further, although Mr Goodall did not put it this way, it seems to me that the issue in the appeal will in substance be whether the Companies’ interim permissions should continue for the future (not whether the Adjudicator was right to determine that they should not be renewed). As I understand it the Companies are being treated as continuing to have interim permission, and success or failure in the appeal will only determine their position for the future, not the past. There is nothing objectionable about determining whether the interim permission should continue by reference to the standard applicable at the time of determining the appeal. If someone applies for a licence, and the statutory conditions which must be satisfied in order to obtain one change shortly before determination of the application, one would expect him to have to satisfy the new conditions. That is, indeed, the effect which Article 31 of the 2013 Order (Applications for a standard licence where no determination made before 1 April 2014) appears to have. Article 32 appears to have the same effect if the application was determined before 1 April 2014, but the “appeal period” was still running on that date. It would certainly appear odd if such a person could to require a Part 4A permission to be issued to him even if he does not satisfy the threshold conditions, and odd if it made a difference whether the determination of the application under appeal was made on 31 March or 1 April 2014.  

 

69. What would clearly be unfair is if, in determining whether they should continue to have permission, the Companies’ past conduct, in the sense of whether it constituted appropriate practice and behaviour, were be to judged by reference to a standard not applicable at the time. It would be wrong to criticise an appellant for having acted in a particular way, if that constituted acceptable conduct by the standard applicable at that time. But the FCA’s contention would not lead to that being done.

 

70. Fifthly, Mr Popplewell contends that the issue only matters if the test makes a difference – i.e. if the Companies would satisfy the appeal under the CCA standard but fail in an appeal under the FSMA standard, and that this is precisely why the CCA standard is to be preferred. Otherwise, he submits, the decision of the Adjudicator would have been wrong at the time it was given but the Companies could still fail in their appeal. However, for the reasons which I have given, I do not accept that it follows that the CCA standard is to be preferred.

 

71. Sixthly, Mr Popplewell submits that Article 59(6) of the 2013 Order suggests that the threshold conditions are not relevant to the cancellation of interim permission. Article 59(6) provides that when the FCA exercises an own-initiative power under section 55J or 55L of FSMA to vary or cancel an interim permission (or impose a requirement), “section 55B(3) of [FSMA] (satisfaction of threshold conditions) does not require the regulator to ensure that A will satisfy, and continue to satisfy, in relation to the regulated activities for which A has an interim permission, the threshold conditions for which that regulator is responsible.” However, I accept the FCA’s contention that Article 59(6) simply ensures that the FCA is not required by section 55B(3) to ensure compliance with the threshold conditions. Article 59(6) does not have the effect that the FCA is not entitled to apply those conditions when exercising its powers. The purpose of Article 59(6) appears to be the practical one of not placing the FCA under a statutory duty to do something it could not hope to achieve immediately upon taking over regulation of the consumer credit sector on 1 April 2014. The FCA was not required to determine that firms met the threshold conditions when they secured interim permission, so it cannot be the case that it was under an immediate duty to ensure that they continued to satisfy those conditions thereafter.

 

72. Finally, Mr Popplewell submits that the fact that the CCA test applies to Mr Turnbull (even though he is no longer subject to a Group Licence under the CCA) makes it difficult to see why the other Licensees cannot be subject to the CCA test, even though they are no longer the holders of a CCA licence. He submits that common sense would dictate that the position must be the same for all.

 

73. However, I accept the following submission by counsel for the FCA in their skeleton argument:

 

“Prior to 1 April 2014, Mr Turnbull had been carrying out consumer credit activities under the group licence afforded to the Law Society by the OFT under section 27 of the CCA. The determination appealed against is the OFT’s decision, under sections 28 and 31(3) and (5) of the CCA, to exclude Mr Turnbull from that group licence. However, since 1 April 2014, the position in relation to group licensing has fundamentally changed: there is no equivalent regime under FSMA to the group licensing regime that existed under the CCA. The 2013 Order does not make any provision for those operating under a group licence under the CCA to ‘transition’ automatically into the FSMA regime; nor (understandably, given there is no equivalent under the FSMA regime) is there any deeming provision in the 2013 Order treating the OFT’s decision to exclude Mr Turnbull from the group licence as a decision made by the FCA, unlike in relation to the OFT’s decision not to renew the Companies’ standard licences (Article 38). Mr Turnbull’s position is therefore entirely different to that of the Companies, and the FCA accepts that – in circumstances where there is no equivalent FSMA regime and the 2013 Order does not ‘transition’ those operating under a group licence pursuant to the CCA into the FSMA regime – Mr Turnbull’s appeal can only be determined by reference to the CCA. The standard which applies to him can have no bearing on the standard to be applied to the Companies which, unlike him, are subject to the 2013 Order.”

 

 

(3) The third preliminary issue: jurisdiction re procedural irregularity and unfairness

 

74. The issue is whether the FTT would have jurisdiction to entertain the allegations of procedural irregularity and unfairness which are made under Ground of Appeal 2. The FCA’s contention, which appears to have been accepted by Judge Findlay, is in short that the FTT is required by s.41ZB(1) of the CCA to undertake a “rehearing” of the Adjudicator’s determination – i.e. to determine itself whether or not the Companies are fit and proper persons to be given permission to carry on regulated activity – and that issues relating to the fairness of the procedure adopted by the OFT or the Adjudicator are not relevant to that exercise and therefore outside the FTT’s jurisdiction. The Companies contend, on the other hand, that as a matter of construction of s.41 and (so far as material) 41ZB of the CCA the appeal to the FTT is a general one, permitting the FTT to consider issues of procedural irregularity or unfairness which would warrant quashing the Adjudicator’s determination as wrong in law.

 

(a) The legislation

75. It is common ground that the FTT is a creature of statute, established by the Tribunals, Courts and Enforcement Act 2007 “for the purpose of exercising the functions conferred on it under or by virtue of this Act or any other Act”: s.3(1) of the 2007 Act. It therefore has only the powers given to it by statute: see, for example, Revenue and Customs Commissioners v. Hok Ltd [2013] STC 225 (TCC); Inland Revenue and Customs Commissioners v Noor [2013] UKUT 71 (TCC).

 

76. Further, whereas sections 15 to 21 of the 2007 Act, together with a Practice Direction issued by the Lord Chief Justice ([2009] 1 WLR 327), confer a limited jurisdiction on the Upper Tribunal to judicially review decisions of FTTs, the FTT is not given any judicial review jurisdiction.  That proposition is confirmed by the decisions in Hok and Noor .

 

77. The extent of a FTT’s jurisdiction is determined by the legislation conferring the particular right of appeal, which as noted above was in this case the CCA.

 

78. As noted in para. 34 above, the effect of reg. 54 of the 2013 Order is that, because the appeals to the FTT were begun before 1 April 2014, sections 41 to 41ZB of the CCA continue to govern the appeals, with the FCA being substituted as respondent to the appeals, and with anything done by the OFT before 1 April 2014 being treated as having been done by the FCA.

 

79. Sections 41 and 41ZB, as in force on 31 March 2014 and so far as directly material, provide as follows:

 

“41(1) If, in the case of a determination by the OFT such as is mentioned in column 1 of the table set out at the end of this section, a person mentioned in relation to that determination in column 2 of the table is aggrieved by the determination he may, within the specified period, appeal to the First-tier Tribunal.

 

 

41ZB (1) The First-tier Tribunal shall decide an appeal under section 41 by way of rehearing of the determination appealed against.

 

(2) In disposing of an appeal under section 41 the First-tier Tribunal may do one or more of the following –

 

(a) confirm the determination appealed against;

 

(b) quash that determination;

 

(c) vary that determination;

 

(d) remit the matter to the OFT for reconsideration and determination in accordance with the directions (if any) given to it by the Tribunal;

 

(e) give the OFT directions for the purpose of giving effect to its decision.

 

(5) Where the First-tier Tribunal remits a matter to the OFT, it may direct that the requirements of section 34 of this Act are not to apply, or are only to apply to a specified extent, in relation to the OFT’s reconsideration of the matter.”

 

80. The table at the end of s.41 includes determinations refusing to renew and determinations to revoke a licence.

 

81. The Companies place some reliance on the history of the provisions conferring appeal jurisdiction, and I should therefore set out the following. The history is complex, and I hope I have understood it correctly from the materials provided to me.

 

82. The appeals from OFT determinations were originally to the Secretary of State. Then from 6 April 2008 the appeals went to a specially created consumer credit appeals tribunal. Since 1 September 2009 the appeals have gone to the First-tier Tribunal (General Regulatory Chamber).

 

83. As I understand it, during the time when appeals were to the Secretary of State the legislation contained no equivalent of the provision in s.41ZB(1) that the appeal is to be by way of rehearing. Section 41(1) provided for the appeal to be to the Secretary of State, and then sections 41(2) and (3) provided as follows:

 

“(2) Regulations may make provision as to the persons by whom (on behalf of the Secretary of State) appeals under this section are to be heard, the manner in which they are to be conducted, and any other matter connected with such appeals.

 

(3) On an appeal under this section, the Secretary of State may give such directions for disposing of the appeal as he thinks just, including a direction for the payment of costs by any party to the appeal.”

 

84. The Regulations referred to in s.41(2) were the Consumer Credit Licensing (Appeals) Regulations 1976, which did not appear expressly to state that the appeal was to be by way of rehearing. They did, however, provide in reg. 14 (headed “procedure at hearing”) that the person appointed to conduct the hearing should permit each party or his representative to call witnesses and to question the other party’s witnesses, which appears strongly to imply a rehearing.

 

85. Then, when the consumer credit appeals tribunal was set up to hear appeals from 6 April 2008, section 41 was amended so as to insert a subsection (1C), which was in the terms of the later s.41ZB(1), providing for a rehearing, and so as to remove s.41(2) and (3). At that time para. 12 of Schedule A1 to the CCA was enacted, which provided:

 

“(1) The Tribunal shall decide an appeal by reference to the grounds of appeal set out in the notice of appeal.

 

(2) [was in the same terms as the later s.41ZB(2)]”

 

86. Then, when s.41ZB was enacted at the time when appeals were transferred to the FTT, section 41(1C) and para. 12 of Schedule A1 were repealed as no longer necessary.

 

(b)  Case law

87. It is apparent from the authorities to which I have been referred that, as one would expect, statutes conferring rights of appeal to courts and tribunals have been cast in a wide variety of terms. Some do no more than state that a person may appeal against a decision. (See, for example, section 12(2) of the Social Security Act 1998, which states simply that in the case of (most) social security decisions by the Secretary of State “the claimant ……. shall have the right to appeal to the First-tier Tribunal.” In R(IB) 2/04, at para. 14, it was noted by the Tribunal of Social Security Commissioners that it had been universally accepted since the introduction of the adjudication and appeal scheme that the appeal was general – i.e. on fact and law, and at paras. 19 to 26 it was explained that the appeal was by way of rehearing, in the sense that the tribunal would determine afresh what decision ought to have been made by the decision maker.)

 

88. Legislation which is more specific than providing simply for an appeal may provide for any or all of the following matters:

 

(i) the grounds on which an appeal can be made (the most usual restriction, if there is one, being to errors of law). For example, CPR 52.11 provides that the appeal court will allow an appeal where the decision of the lower court was (a) wrong or (b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court;

 

(ii) whether the appeal is to be limited to a review of the lower court’s decision, or is to be by way of re-hearing; thus, CPR 52.11(1) provides that every appeal will be limited to a review of the decision of the lower court unless a practice direction makes different provision for a particular category of appeal or the court considers that it would be in the interests of justice to hold a rehearing;

 

(iii) the evidence which can be relied on before the appellate body. For example, it may be provided that no new evidence can be relied on, or that new evidence can only be adduced if certain conditions are fulfilled;

 

(iv) whether the appeal body can take into account changes of circumstances which have occurred since the decision maker’s decision; for example, s.12(8)(b) of the Social Security Act 1998 provides that such changes of circumstances cannot be taken into account by a First-tier Tribunal hearing social security appeals;

 

(v)  The relief which the appeal body can grant if it finds that the decision under appeal was wrong. As noted above, in the case of the present legislation, during the long period when appeals were to the Secretary of State s.41(3) provided merely that the Secretary of State might give “such directions for disposing of the appeal as he thinks just”, but s.41ZB is now more detailed.  

 

89. In the absence of a provision precisely and unequivocally answering the jurisdictional question at issue, the jurisdiction of the appeal body will generally need to be determined as a matter of construction of the legislative provisions governing the appeal, read as a whole, in that it is plain that the matters which to which I referred in the previous paragraph are closely related. See, generally, Jacobs, Tribunal Practice and Procedure, 3^rd ed (2014), paras. 4.44 onwards. But the legislation will also need to be read against the background of (in particular) the subject-matter of the decision under appeal and the nature of the decision-making process undertaken by that decision maker. It is apparent from the authorities that the latter is particularly important.

 

90. The direction that an appeal should be dealt with “by way of rehearing” is one which has appeared in legislation for a long time, and consequently has been the subject of some authority.  

 

91. At the time of the appeal to the Court of Appeal in Quilter v Mapleson [1882] 9 QBD 672 the Rules of Court provided that “all appeals to the Court of Appeal shall be by way of rehearing.” Jessell M.R said, at p.676, that

 

“on an appeal strictly so called, such a judgment can only be given as ought to have been given at the original hearing; but on a rehearing such a judgment may be given as ought to be given if the case came at that time before the Court of first instance.”

 

92. In Builders Licensing Board v Sperway Constructions (1976) 135 CLR 616 a builder whose licence was cancelled by the Board had a right to appeal against the Board’s determination to a District Court, and the appeal was required to be “dealt with by way of a rehearing”. The issue was whether at that hearing the Board was required to begin again and adduce evidence in support of the complaint – i.e. whether the hearing was required to be a hearing de novo. The High Court of Australia held that it was required to be a hearing de novo. There is in the judgment of Mason J. at pp. 619 to 622 an interesting discussion of the “different meanings to be attached to the word “rehearing.” At p.621 he concluded that

 

“Where a right of appeal is given to a court from a decision of an administrative authority, a provision that the appeal is to be by way of rehearing generally means that the court will undertake a hearing de novo, although there is no absolute rule to this effect.”

 

93. He contrasted that with the meaning of “rehearing” in the provisions for appeal to the Court of Appeal in England, of which he said:

 

“This appeal by way of rehearing involves rehearing of the casus at the date of the appeal, that is “by trial over again on the evidence used in the Court below; but there is special power to receive further evidence”(In re Chennell; Jones v Chennell (1878) 8 Ch D 492, at p.505). On such appeal the rights of the parties must be determined by reference to the circumstances as they then exist and by reference to the law as it then exists; the appellant court may give such judgment as ought to be given if the case at that time came before the court of first instance. But this appeal by way of rehearing did not call for a fresh hearing or hearing de novo; the court does not hear the witnesses again.”

 

94. On p.621 Mason J noted the importance, in determining whether a “rehearing” was required to be a hearing de novo, of the nature of the proceedings before the administrative authority, and concluded that

 

“in the end the answer will depend on an examination of the legislative provisions rather than upon an endeavour to classify the administrative authority as one which is entrusted with an executive or quasi-judicial function, classifications which are too general to be of decisive assistance. Primarily it is a question of elucidating the legislative intent, a question which in the circumstances of this case is not greatly illuminated by the Delphic utterance that the appeal is by way of rehearing.”

 

95. It is, I think, common ground that if a FTT does conduct “a rehearing of the determination appealed against”, as provided for in s.41ZB(1), (i) the hearing is to be a hearing de novo – i.e. the FTT is in no way limited to deciding the matter on the evidence which was before the Adjudicator - and (ii) the FTT is not limited to considering the circumstances as they were at the date of the Adjudicator’s decision. I refer to the passage from the FTT case of European Environmental Controls Ltd [2009] UKFTT 316 (GRC) set out at para. 64 above. The above authorities as to the meaning of “an appeal by way of rehearing” in other contexts are therefore of little assistance.

 

96. The Companies contend that Calvin v. Carr [1980] AC 574 (PC), and the authorities referred to in it, show that there are numerous examples of procedural unfairness below being taken as a ground of appeal in an appeal by way of rehearing.

 

97. In Calvin v Carr there had been an appeal to the committee of the Australian Jockey Club against a decision by race stewards that a jockey had been guilty of an offence and that the plaintiff (the owner of the horse) and the jockey should be disqualified from racing for a year. The committee had dismissed the appeal. The plaintiff applied to the court for a declaration that the disqualification was void. The question before the Privy Council was whether, on the assumption that the Judge had been correct in holding that there had been a failure to observe natural justice in the proceedings before the stewards, the Judge had been right to find that the hearing before the Committee had cured that breach of natural justice. It was held that he had been right so to find.

 

98. The provisions governing appeals to the Committee were to be found in the Australian Jockey Club Act 1873 and the Australian Rules of Racing. Section 32(2)(a) of the 1873 Act provided that an appeal to the Committee should be “in the nature of a re-hearing”, but there were also provisions relating to the admission of fresh evidence, and as to the Committee’s powers following the rehearing, which included a power to remit the matter to the body from which the appeal was brought.

 

Lord Wilberforce said at p.592:

 

“Their Lordships recognise and indeed assert that no clear and absolute rule can be laid down on the question whether defects in natural justice appearing at an original hearing, whether administrative or quasi-judicial, can be ‘cured’ through appeal proceedings”.

 

99. He then went on to consider three different situations. The first was where rules provided for a rehearing by the original body, or some fuller or enlarged version of it. In such cases it was not difficult to reach the conclusion that the first hearing was superseded by the second. The second situation was where, after examining the whole hearing structure in the context of the particular activity to which it related, the conclusion was reached that a complainant had the right to nothing less than a fair hearing both at the original and at the appeal stage. But then he drew attention to a third, intermediate class of case, as to which he said:

 

“In them it is for the court, in the light of the agreements made, and in addition having regard to the course of proceedings, to decide whether, at the end of the day, there has been a fair result, reached by fair methods, such as the parties should fairly be taken to have accepted when they joined the association. Naturally there may be instances when the defect is so flagrant, the consequences so severe, that the most perfect of appeals or re-hearings will not be sufficient to produce a just result. Many rules (including those now in question) anticipate that such a situation may arise by giving power to remit for a new hearing. There may also be cases when the appeal process itself is less than perfect: it may be vitiated by the same defect as the original proceedings: or short of that there may be doubts whether the appeal body embarked on its task without predisposition or whether it had the means to make a full and fair inquiry, for example where it has no material but a transcript of what was before the original body. In such cases it would no doubt be right to quash the original decision. [My emphasis]

 

It remains to apply the principles stated above to the facts of the present case. In the first place, their Lordships are clearly of the view that the proceedings before the committee were in the nature of an appeal, not by way of an invocation, or use, of whatever original jurisdiction the committee may have had. The nature of the appeal is laid down by s. 32 of the Australian Jockey Club Act of 1873, and by the rules. Under the Act, the appeal is to be in the nature of a rehearing – a technical expression which does little more than entitle the committee to review the facts as at the date when the appeal is heard (see [the Builders Licensing Board v Sperway case] at 260, 261 per Mason J), not one which automatically insulates their findings from those of the stewards.”

 

100. Both parties rely on Lloyd v McMahon [1987] AC 625. In that case a district auditor issued a certificate under the Local Government Finance Act 1982 “surcharging” the appellant councillors in the sum of £106,103, being the amount of a loss incurred or deficiency caused, as the auditor found, by their wilful misconduct. The appellants appealed to the Divisional Court under s.20(3) of the 1982 Act, which provided for an appeal to the High Court by anyone “aggrieved” by the decision of an auditor, and further provided that on the hearing of the appeal “the court may confirm, vary or quash the decision and give any certificate which the auditor could have given”, which Lawton LJ in the Court of Appeal (p.645D) considered must mean “that the court rehears the case.”

 

101. The Divisional Court, dismissing the appeals, held that the appellants’ misconduct was fully established and that there had been no procedural unfairness by the auditor. The councillors were invited by the Divisional Court to give oral evidence, but declined to do so. On appeal from the Court of Appeal to the House of Lords, the latter held that the auditor’s decision was not vitiated by procedural unfairness, and that the question whether such unfairness, had it existed, was capable of being cured by appeal to the High Court did not arise for decision. In relation to that question, however, Lord Keith said (at 697D to G):

 

“It is, however, my opinion that the particular appeal mechanism provided for by section 20(3) of the Act of 1982, considered in its context, is apt to enable the court, notwithstanding that it finds some procedural defect in the conduct of an audit which has resulted in a certificate based on wilful misconduct, to inquire into the merits of the case and arrive at its own decision thereon. Section 20(3)(b) empowers the court to “confirm the decision or quash it and given any certificate which the auditor could have given.” The relevant rules of court enable a rehearing of the broadest possible scope to take place. ………… In the circumstances, it would be quite unreasonable and not in accordance with the intendment of the enactment to hold that the court, where an issue is raised as to the fairness of the procedure adopted by the auditor, is confined to a judicial review species of jurisdiction so as to have power only to quash or affirm the auditor’s certificate without entering upon its own examination of the merits of the case. No doubt there may be cases where the procedural defect is so gross, and the prejudice suffered by the appellant so extreme, that it would be appropriate to quash the auditor’s decision on that ground. But in my opinion the court has a discretion, where it considers that justice can properly be done by its own investigation of the merits, to follow that course.”

 

102. Lord Bridge said: (at p.709G):

 

“In every case it must be for the court, as a matter of discretion, to decide how in all the circumstances its jurisdiction under section 20(3) can best be exercised to meet the justice of the case. But I am clearly of opinion that when the court has, as here, in fact conducted a full hearing on the merits and reached a conclusion that the issue of a certificate was justified, it would be an erroneous exercise of discretion nevertheless to quash the certificate on the ground that, before the matter reached the court, there had been some defect in the procedure followed.”

 

103. Lord Templeman said (at p.716 E to G):

 

“The task of the court was to “give any certificate which the auditor could have given” (section 20(3) of the Act of 1982). The court was not concerned with any defects in the procedure adopted by the auditor because those defects (if any) did not hamper the prosecution or conduct of the appeal. Different considerations apply if a statute only allows an appeal to a court on a question of law, or entitles or obliges the court of law to rely on the facts found by the tribunal. And the defects in the inquiry conducted by the tribunal may be so prejudicial to the aggrieved person that the court in its discretion may decide to quash the decision and not to proceed with an appeal on the merits in the absence of the views of the tribunal after a proper inquiry. In the present case the Divisional Court was entitled to consider the appeal on its merits and on the basis of the evidence presented to the court.”

 

104. The Companies contend that Calvin v Carr is authority that procedural unfairness by the decision maker can be relied upon even where the appeal is by way of rehearing. However, I agree with Mr Goodall that that decision was not directly about the jurisdiction of the body which hears the first appeal (by way of a rehearing). It was about the circumstances in which, on a further appeal, the first appellate body’s decision could be vitiated by procedural unfairness or irregularity by the initial decision maker. However, it is I think implicit in what Lord Wilberforce said in the sentence which I italicised (see para. 99 above) that he considered that the statutory provisions and rules applicable, notwithstanding that they provided for a rehearing by the Committee, did permit the Committee, if it considered that a fair hearing before the Committee could not be given, to quash the stewards’ decision and remit. But, as Mr Goodall points out, that can in any event only have been a decision in relation to the particular rules and jurisdiction under consideration in that case.

 

105. The above citations from Lloyd v McMahon, and in particular the passages which I italicised in the speeches of Lords Keith and Templeman, on which Mr Popplewell relies, indicate that their Lordships considered that, under the statutory provisions there applicable, it was open to the Divisional Court, in cases of gross procedural abuse, to quash the auditors’ certificate and remit the matter to the auditors, rather than to proceed with a rehearing on the merits. However, the provisions conferring jurisdiction on the Divisional Court were of course not the same as those applicable here. In particular, they did not provide in apparently mandatory terms that the appeal should be by way of rehearing of the district auditor’s certificate.

 

106. The FCA relies on a number of authorities which they contend indicate that the provisions in s.41 and 41ZB should not be construed as permitting contentions of procedural unfairness in relation to the Adjudicator’s decision to be raised on appeal to the FTT.

 

107. In Hok the taxpayer appealed pursuant to s.100B of the Taxes Management Act 1970 against five £100 penalties incurred on the ground of late filing of a return. The ground of appeal was that had HMRC provided timely notice of the default, the default would have been remedied at an earlier time, thus avoiding ongoing penalties. Section 11B of the 1970 Act provided that an appeal could be brought against “the determination of a penalty” and set out the possible decisions which the First-tier Tribunal could make, which depended on whether the First-tier Tribunal found that no penalty had been incurred, or whether the amount of the penalty was correct or incorrect.

 

108. The First-tier Tribunal allowed the taxpayer’s appeal, discharging all but the first of the five penalties. It held that by failing to issue a penalty notice until 4 months after the date of default, HMRC had neither acted fairly nor in good conscience. However, the Upper Tribunal reversed that decision, holding that the First-tier Tribunal had jurisdiction on the appeal only to decide whether the penalty had been incurred, and if so in what amount. The tribunal had no statutory power to discharge or adjust a penalty because of a perception that it was unfair or for any similar reason. That could be done, if at all, only by way of judicial review, and the First-tier Tribunal had no judicial review jurisdiction.

 

109. A similar conclusion was reached in Noor. There the taxpayer appealed to the First-tier Tribunal against a decision of HMRC that he was not entitled to deduct the VAT shown as input tax on certain invoices which he had paid, because the VAT was in respect of services supplied to him more than 6 months before his effective date of registration for VAT. The taxpayer contended that he had been advised by HMRC that he would be able to reclaim input tax within 3 years, and that he had a legitimate expectation that he would be able to claim the tax shown on the invoices as input tax. The First-tier Tribunal held in favour of that contention, but the Upper Tribunal again reversed that decision. The provision conferring the jurisdiction on the FTT provided that “an appeal shall lie to the tribunal with respect to ….. the amount of any input tax which may be credited to a person.” The Upper Tribunal held that the First-tier Tribunal had jurisdiction to consider only whether input tax fell to be deducted under the terms of the VAT legislation, and not to consider matters of fairness arising from legitimate expectation, which were a matter for judicial review. As the Upper Tribunal emphasised at para. [1] of its decision, however:

 

“…while it is inevitable that much of what we say will be seen as relevant to other aspects of the jurisdiction of the FTT, the issue of jurisdiction arises in this appeal in the context of a claim for input tax credit, and we emphasise that our actual decision relates only to that claim.”

 

110. The FCA relies on the decision of the Upper Tribunal in CW v Hertfordshire County Council [2013] ELR 423. In that case there had been an appeal to the First-tier Tribunal against a decision by a local authority to cease to maintain a statement of special education needs. The FTT allowed the appeal on the ground that the local authority had not followed the correct procedures in coming to its decision.  Para. 11(2) and (3) of Schedule 27 to the Education Act 1996 provided that the parent of the child could appeal to the FTT against a determination to cease to maintain a statement, and that on the appeal the FTT “may (a) dismiss the appeal, or (b) order the local authority to continue to maintain the statement in its existing form or with such amendments… as the Tribunal may determine.” Upper Tribunal Judge Jacobs set aside the FTT’s decision and remitted the matter for rehearing. The essence of his reasoning was as follows:

 

“22. The tribunal’s powers were set by para. 11(3). That provision gives the tribunal only two options. One is to dismiss the appeal, which has the effect that a statement is no longer maintained. The only other power is to order the statement to continue as it stands or with amendments.

 

23. The form of disposal is dictated by the tribunal’s decision on the issue it has to decide. That issue is whether it was any longer necessary to maintain a statement. The local authority was not an independent decision maker on that issue. Accordingly, the tribunal’s task is to consider that issue afresh on the facts and on the law, on the evidence and on the submissions before it. Its task is not to undertake a review of the decision-making process.”

 

111. Again, therefore, it is apparent that the reasoning turned on an analysis of the meaning of the statutory provision conferring jurisdiction on the FTT, construed against the relevant background.

 

112. I was referred by counsel for the FCA to a number of decisions by FTTs in which they have refused to determine consumer credit licensing appeals by reference to alleged delays or misconduct by the OFT rather than the fitness of the licence holder. However, I also note that in Finance Select (UK) Limited v OFT CCA/2008/0002 the Appellant had appealed against a determination revoking its licence. The FTT directed the hearing of a preliminary issue, namely whether or not the notice procedure followed by the OFT in seeking to revoke the Appellant’s licence had complied with the provisions of the CCA. Essentially, the OFT had served a minded to refuse notice, which should have been a minded to revoke notice because the person serving the notice was unaware that a licence had in fact been issued in error. The FTT held that the statutory procedure had not been properly complied with, and that the OFT’s revocation of the licence fell to be quashed, without any determination by the FTT of the Appellant’s fitness to hold a licence. I was not referred to this decision by either side, and came across it only when preparing this decision. I have not felt it necessary to obtain further submissions on it as it is not binding on me and appears to support the view to which I would have come without its aid.

 

(c) Analysis and conclusions

113. The parties’ submissions diverged on which section of the CCA conferred the appeal jurisdiction. Mr Popplewell contends that it is s.41, and that the extent of the FTT’s jurisdiction is therefore governed by the provision in that section that a person who is “aggrieved” by a determination may appeal. He says that no limit is placed on the respects in which the appellant may consider himself aggrieved by the determination, and that the permissible grounds of appeal therefore extend to any ground which makes the determination wrong in fact or law, including procedural unfairness constituting a breach of natural justice.

 

114. Mr Goodall contends, however, that s. 41 merely identifies the persons who may appeal (i.e. persons “aggrieved”) and identifies the FTT as the destination of appeals in relation to certain matters. He contends that s.41 does not prescribe the extent of the Tribunal’s jurisdiction, which is the function of section 41ZB(1).

 

115. I do not think that anything is to be gained by attempting to seek an answer to the question which section confers the right of appeal. It seems to me plain that one must derive the extent of the FTT’s jurisdiction from s.41 and section 41ZB, read together. Nor have I, in the end, derived any real assistance from considering the history of the provisions conferring the right of appeal.

 

116. I have come to the conclusion, on balance, that sections 41 and 41ZB of the CCA do give the FTT jurisdiction to set aside an Adjudicator’s determination on procedural grounds. The FTT is not in my judgment necessarily required to redetermine whether (in the case of refusal to renew, or revocation of, a licence) the licensee is a fit person to be given permission. My main reasons for reaching that conclusion are these.

 

117. First, section 41ZB(2) gives to the FTT a range of options, in disposing of an appeal, which is in my view difficult to reconcile with the FCA’s contention that the FTT must necessarily undertake a rehearing of the determination. I refer in particular to the options in subsection (2)(b) to “quash” the determination and in subsection (2)(d) “to remit the matter to the OFT for reconsideration and determination in accordance with the directions (if any) given to it by the tribunal.”

 

118. If the FTT, after conducting a rehearing, allows an appeal against a determination to either refuse to renew or to revoke a licence, it appears that the appropriate decision would be to “vary” the determination, as provided for in subsection (2)(c). In other words, the FTT would substitute for the adjudicator’s determination a decision that the licence should be renewed, or should not be revoked, as the case may be. It would in those circumstances in my view not be appropriate simply to “quash” the determination under (2)(b). It would certainly not be appropriate to do so in the case of renewal, because the licensee needs and would be entitled to a positive decision in his favour renewing the licence. But even in the case of revocation it would not in my view really be appropriate simply to quash the adjudicator’s determination revoking the licence. The FTT will have decided that the licensee remains fit to hold a licence, and the naturally correct form of decision would be to replace the adjudicator’s determination with a positive decision that the licensee remains fit to hold a licence and that the licence should not be revoked. In terms of the relief set out in subsection (2) I would regard that as a variation of the determination, rather than a simple quashing of it.

 

119. The opening words of subsection (2) make clear that the FTT can do “one or more of the following”. The possibility, envisaged by that wording, of the FTT simply quashing the determination, and doing no more, is in my view not really consistent with the notion that if the FTT allows an appeal it must necessarily have found in the appellant’s favour on the merits, having conducted a “rehearing”. The option of the FTT quashing the determination, without more, seems to envisage the possibility of the FTT simply setting aside the determination on some procedural or other ground which has not involved a rehearing on the merits such as to result in the determination being either confirmed (subsection (2)(a)) or varied. Indeed, the mere use of the word “quash” is, I think, suggestive of some such outcome. It is redolent of the language traditionally used in relation to the relief granted by means of the prerogative orders by way of judicial review.

 

120. The power in subsection (2)(d) to remit the matter to the OFT for reconsideration and determination seems clearly to contemplate that the FTT can, rather than itself redetermining the matter, set aside the determination and remit the matter to the OFT for it to redetermine. I struggle to see how that could ever be appropriate if the FTT has itself redetermined the matter after a rehearing. It seems to me that it could only be appropriate where the FTT holds that the determination ought for some reason to be set aside, and where the FTT considers that it is more appropriate that the reconsideration and redetermination be by an Adjudicator (whether the same or different) than by the FTT. That seems to me to be inconsistent with a contention that the FTT must necessarily rehear and redetermine the matter on the merits itself.  

 

121. It is suggested on behalf of the FCA that the FTT’s ability to remit for redetermination is consistent with their contention because, for example, it would be open to the FTT on a rehearing to conclude that problematic aspects of a trader’s conduct could be addressed through the imposition of “requirements” on the trader rather than through cancellation (see the (now repealed) s.33A of the CCA). In such circumstances, the case could be remitted back to the FCA with a direction to issue a notice imposing requirements. However, as Mr Popplewell points out, s.41ZB(2)(d) permits the FTT to remit the matter to the FCA for reconsideration and determination “in accordance with the directions (if any) given to it by the tribunal.” It seems to contemplate that it could be appropriate simply to quash the FCA’s determination and remit it, without directions.

 

122. The FCA contends that the power to remit might also be used by the FTT in appeals against determinations imposing requirements so as to allow the FCA to consider the imposition of different requirements. However, a decision to that effect would, it seems to me, necessarily require some directions to the FCA. Further, if the FCA were to do that it would, it seems to me, necessarily have done something less than remaking the Adjudicator’s determination. It would have decided that the Adjudicator’s requirements were for some reason inappropriate, but without redeciding what appropriate requirements would be. That would itself in my view be inconsistent with the FCA’s contention that the FTT must redetermine the matter on the merits.

 

123. The second main reason for my conclusion is that it would have been in the mind of the legislators that, as Mr Popplewell emphasises, from the point of view of the trader the process leading to an Adjudicator’s determination has the advantage that it is less elaborate and therefore potentially less expensive than a rehearing by the FTT, and that the OFT is not present or represented: see para. 12 above.  

 

124. This is perhaps exemplified in the present case by the fact that the hearing before the second Adjudicator lasted 3 days, whereas I understood the parties to accept at the hearing before me that a rehearing by the FTT would be likely occupy a matter of weeks rather than days.

 

125. It would further have been in the contemplation of the legislature, I think, that an Adjudicator’s determination might be vitiated on some ground which could be established relatively shortly, and that in such circumstances it might be considered more appropriate for that determination to be simply set aside, and the matter remitted for redetermination by an Adjudicator, rather than being required to proceed for a redetermination the merits by the FTT. Examples which I raised during the hearing might be where (in breach of the requirement in s.27 of the CCA) written representations by the appellant had not been taken into account, perhaps because they had not reached the Adjudicator, or where (although admittedly less plausibly) it could be shown that the Adjudicator had been guilty of actual bias or of having some financial interest in the case.

 

126. Mr Goodall’s contention was that even in such a situation the FTT would have no option but to rehear the determination on the merits. Procedural or fairness points of that nature could be taken only by way of judicial review, he submitted. However, it seems to me that s.41 and 41ZB, read as a whole, are more likely to have been intended to permit the FTT, in those sorts of situation, simply to set aside the Adjudicator’s determination on procedural grounds and remit. A similar example might be if the Adjudicator had based his determination on grounds substantially different from those contained in the minded to revoke notice, and which the licensee had had no proper opportunity to deal with.

 

127. Another example might be where it appears from the Adjudicator’s reasoning that his decision would have been in favour of the licensee had he (the Adjudicator) not been labouring under what is clearly some form of error as to fact or law. In those circumstances it might be more appropriate for the FTT to set aside the Adjudicator’s decision and remit the matter to the same Adjudicator for redetermination, rather than redetermine the whole matter on the merits itself. If the Adjudicator’s decision was still adverse, the applicant would still have the opportunity of appealing on the merits.

 

128. I accept, of course, that if the statutory provisions were construed as giving the FTT jurisdiction only to redetermine the merits, licensees would not have been  without remedy in respect of procedural error by the OFT, as they could have applied for judicial review of the Adjudicator’s determination. However, that might well have involved the Administrative Court in having to consider whether it was appropriate to permit a claim on procedural grounds to continue when there was also on foot an appeal on the merits to a specialist tribunal. The legislature would not in my judgment have seen it as a particularly satisfactory to have jurisdiction in relation to an Adjudicator’s decision in effect split between two judicial bodies.

 

129. Mr Goodall submits that there could be no point in remitting the matter back to the FCA on procedural grounds where the FTT itself has power to conduct a full rehearing of the determination. He further contends that if there had been procedural unfairness by the OFT it would be odd to remit the matter for a procedurally fair determination. However, it is in my judgment possible to envisage cases, such as those which I have mentioned above, where that would be the appropriate course. If it appeared more appropriate for the FTT to rehear the matter on the merits, then it would, it seems to me, be open to it, in its discretion, to refuse to permit an appeal on procedural grounds to proceed. That may well be the appropriate course in the present case.

 

130. Mr Goodall emphasises that s.41ZB(1) provides not simply for a rehearing, but that the First-tier Tribunal shall decide an appeal “by way of a rehearing of the determination appealed against”. He submits that that is particularly emphatic in terms of always requiring a redetermination of the merits. However, when the section is construed as a whole, against the relevant background, I do not think that s.41ZB(1) has that effect. I think that the purpose of the provision that the appeal is to be by way of rehearing of the determination appealed against is to make it clear that in redetermining the merits the FTT is not to be limited to some sort of review of the Adjudicator’s decision, by reference to the evidence which was before the Adjudicator, but that its redetermination is to be on all the evidence put before it. I do not think that it amounts to a direction that the FTT must necessarily in all cases conduct a redetermination on the merits. I think that the s.41ZB(1) is intended to indicate the approach to be taken by the FTT, but without intending to limit jurisdiction to a rehearing on the merits.

 

131. As Mr Popplewell submits, the FTT’s jurisdiction is clearly general in the sense that it extends to issues of both fact and law. When s.41ZB(2), and in particular sub-paragraphs (b) and (d), are taken into account, I think that the intention was not to restrict the scope of the jurisdiction to issues of law which need to be resolved by the FTT in the course of its redetermination of the merits. I think that it includes errors of law vitiating the Adjudicator’s determination on procedural grounds, and rendering a quashing of the Adjudicator’s determination and a remittal to the FCA more appropriate than a redetermination by the FTT on the merits.

 

132. I accept, of course, that the FTT is not given judicial review jurisdiction, whether by the CCA or any other statutory provision. However, an appeal by reason of error of law is of course capable of covering errors of law which could also be the subject of judicial review.

 

133. The type of procedural unfairness which is contended for by the Companies in this case is far removed from the simple and straightforward sort of procedural or other error which I referred to above as potentially in the mind of the legislator. To permit an appeal on procedural grounds of the nature alleged in the present case would on the face of it appear unnecessary, given that the FTT can rehear the determination on the merits. However, Mr Goodall did not invite me, in this appeal from the Judge Findlay’s decision of the preliminary issues, to hold that even if the FTT has some jurisdiction to set aside an Adjudicator’s determination for procedural error or unfairness, and to remit without redetermining the merits, that jurisdiction does not extend to the types of error or unfairness alleged in the present case. I do not therefore see how, in this appeal, I could properly hold that the jurisdiction extends to some types of procedural error or unfairness amounting to error of law, but not others.

 

134. It might be argued that there is a difference between an error consisting of a failure by the OFT to follow the procedure required by the CCA (e.g. as to service of a minded to refuse or revoke notice, and as to the consideration of representations), in relation to which the FTT may have no option but to quash the determination, and other types of procedural unfairness. Again, however, Mr Goodall’s submissions did not admit the possibility of any quashing or setting aside for procedural error. Thus, on the issue of “nullity” (see below), his submission is that an Adjudicator’s determination is either a complete nullity, in which case the FTT can have no jurisdiction to hear an appeal or at all, or, if the FTT does have jurisdiction, that jurisdiction is only to rehear the determination on the merits.  He submits that there is no possibility of the FTT quashing or setting aside the determination, even for failure to satisfy statutory procedural requirements. His submission, which I have rejected, is that that can only be done by way of judicial review. It seems to me that to accept Mr Goodall’s submission would be to require the licensee to proceed for judicial review even in the case of the relatively simply type of procedural error which occurred in the Finance Select (UK) Limited case (para. 112 above).

 

135. Although it cannot be relevant to the construction of sections 41 and 41ZB, I think that Mr Goodall accepted that, on a reference to the Upper Tribunal under the procedure which has applied since 1 April 2014 (see para. 32 above), the provision in section 133(5) of FSMA that the Upper Tribunal “must determine what (if any) is the appropriate action for the decision-maker to take in relation to the matter” would permit the Upper Tribunal to set aside the decision maker’s decision by reason of procedural irregularity and remit the matter to the decision-maker for redetermination.

 

(d) Nullity

136. Judge Findlay’s decision in relation to the third preliminary issue was to strike out the second ground of appeal as drafted, on the ground that there was no jurisdiction to determine “allegations of procedural unfairness equivalent to judicial review”, but to give the Appellants leave to amend “to include arguments that any decision was a nullity ….” I understand that this possibility (i.e. of “nullity”) was introduced into her decision by Judge Findlay of her own motion, and without either party having made any submissions on the point to her.

 

137. If the Adjudicator’s determination was wholly void so that there was nothing which could properly be considered a “determination” at all, then the FTT would have no jurisdiction to entertain any appeal. However, if a decision has practical consequences, as the Adjudicator’s determination here did, it is unrealistic to think that the correct result could be that the appellate body is deprived of jurisdiction to hear an appeal: see Calvin v Carr at pp.589-590.

 

138. However, there is some authority suggesting that, although a particular decision qualifies as a “decision” (or, in the language of the CCA, “determination”) for the purpose of conferring jurisdiction on appeal, it may nevertheless be so flawed that it must simply be set aside on appeal as not being a decision within the decision-maker’s statutory powers. In R(IB) 2/04 a Tribunal of Social Security Commissioners said at para. 72 that “there may be some decisions made by the Secretary of State which have so little coherence or connection to legal powers that they do not amount to decisions under section 10 [of the Social Security Act 1998] at all.” I refer in this context again to the decision of the FTT in the Finance Select (UK) Limited case: see para. 112 above. It may be that it was that sort of possibility which Judge Findlay had in mind.

 

139. In my judgment, however, it is not arguable that the nature of the unfairness alleged by the Companies in the present case renders the decision a nullity in the sense of depriving the FTT of jurisdiction, on appeal, to do anything other than set it aside or declare it a nullity, as opposed to undertaking a rehearing on the merits.

 

140. As I am holding that the FTT does have jurisdiction to set aside an Adjudicator’s decision by reason of at least some types of procedural error or unfairness amounting to error of law, it seems to me that the contention in the amended grounds of appeal that the Adjudicator’s decision was a “nullity” is probably unnecessary and adds nothing. But it is not necessary for me to make any decision about that.

 

(e) Weight

141. Judge Findlay also gave permission to amend the grounds of appeal to include a contention that “aspects of the [OFT’s] procedure have a bearing on the weight to be attached to any evidence relied upon.” I understood from counsel that (like the “nullity” point) this was also not a contention which Mr Popplewell had advanced before Judge Findlay, but that she had, of her own motion as it were, inserted it in the Directions dated 18 September 2014.

 

142. As noted at para. 44 above, para. 65B of the Amended grounds of appeal contains a contention under Ground 1, inserted pursuant to that permission, that the procedural unfairness is relevant to the weight to which the FTT should give to the evidence relied on by the FCA, for reasons given in four sub-paragraphs.

 

143. The FCA submits that contentions as to the weight which should be given to certain evidence do not form substantive grounds of appeal, and therefore should not be in the grounds of appeal. Rather, those contentions are a matter, if necessary, for directions from a FTT Judge, in exercise of case management powers.

 

144. The Companies contend, on the other hand, that these contentions are not introduced as a distinct ground of appeal, but as part of Ground 1. They contend that it is appropriate that the Companies should identify, at an early stage, the effect which they say the procedural unfairness has on the weight of the evidence, because that may affect the evidence that will be called. Both parties would need to provide disclosure in respect of the alleged procedural unfairness, and each would (if it chose to do so) call evidence to either prove, or disprove, the procedural unfairness. They contend that Judge Findlay did not go wrong in law in permitting the Companies to set out their case on this in their grounds of appeal. However, Mr Popplewell did in his submission to me in reply accept that there was substantial force in the FCA’s contention that the “weight” arguments were not appropriate matters to be inserted in grounds of appeal. He said that what primarily mattered from the Companies’ point of view was that they were able to rely on these contentions before the FTT, and in particular when the scope of what documents should be disclosed by the FCA was being considered.

 

145. As I have held that the FTT has jurisdiction to consider Ground 2, the question whether the contentions in relation to weight can properly be included in Ground 1 may assume less significance. I do not think that I need to make a decision about it, and that it should be left to considered, if necessary, as part of the further case management directions to be given by the FTT.

 

(f ) Should Ground of Appeal 2 be entertained?

146. I remind myself of the wording of the third preliminary issue:

 

“Can and should the Tribunal entertain the Appellants’ second ground of appeal, namely the contention that the proceedings before the Adjudicators were procedurally flawed and/or unfair?”

 

147. The submissions to me were directed entirely to the question of jurisdiction, namely whether the FTT “can” entertain the second ground of appeal. Mr Goodall did not contend that, if I hold that the FTT can (as a matter of jurisdiction) entertain the second ground, it should nevertheless be struck out or stayed on the ground that the FTT should not entertain it, whether because it has no prospect of succeeding or for some other reason. As I understand it, the parties contemplate, and in any event it is my view, that any contentions which the FCA may wish to raise about that are best dealt with by the FTT at the time when further case management directions, including the scope of any necessary disclosure, are considered.

 

148. At the hearing I pointed out that, even on the footing that there is jurisdiction in the FTT to set aside a determination by reason of procedural error or unfairness, the grounds of appeal as presently framed appear to lack coherence in that the primary relief sought is a variation of the Adjudicator’s determination so as to declare that the Companies are or are not fit persons. That being the case, I do not see how there could realistically be room for the second ground of appeal to fall for consideration, particularly as in the last paragraph of the grounds the relief sought on the basis of it, namely quashing of the determination, is sought only in the alternative. The redetermination of the merits by the FTT would render any procedural errors or unfairness by the Adjudicator irrelevant.

 

149. Mr Popplewell’s response to that was that he could cure any such incoherence by further amendment. But he also contended that on the construction of the legislation the Companies had a right to a fair hearing both before the Adjudicator and the FTT. In other words, they are entitled to “two bites of the cherry”, with the result that if there is procedural unfairness in relation to the Adjudicator’s determination it must be set aside, and the unfairness cannot be cured by the FTT. That is in effect a submission that the case falls into the second category of case referred to by Lord Wilberforce in Calvin v Carr (see para. 99 above). That contention is in my view plainly wrong. The legislation in my judgment plainly contemplates that in general a rehearing before the FTT on appeal will provide what the applicant is entitled to by way of a fair hearing.

 

150. I have referred above to it having been contemplated, in Calvin v Carr and Lloyd v McMahon, that there may be cases in which the defects in the initial decision making process are so gross that they cannot be cured on appeal. I have great difficulty in seeing how that could possibly be the case here, where the FTT is entirely independent and (in terms of the primary relief sought) would conduct a full rehearing on the merits: cf. Foulser v IRC [2013] UKUT 38 (TCC) at [50]. In any event, although Mr Popplewell’s skeleton argument for these appeals to me, in summarising the allegations of procedural unfairness, included (see para. 17 above) a contention that the OFT’s approach “has coloured the evidence against the Licensees to such an extent that a fair appeal is impossible”, no such contention is contained in the grounds of appeal themselves. However, Mr Popplewell did state in his submissions to me in reply that he would if necessary apply for permission to amend to plead that.

 

151. However, the points which I have outlined in paras. 148 to 150 above seem to me to be issues falling within the scope of the part of the third preliminary issue which asked whether the FTT “should” entertain ground 2, which was not argued before me and which, as I have said, would appear best considered along with case management issues.

 

 

(4)  Mr Turnbull’s position

 

152. Mr Turnbull was formerly a director of each of the Companies. The part of the Adjudicator’s determination of 27 January 2014 against which Mr Turnbull appealed to the FTT was a decision, under sections 28 and 31(3) and (5) of the CCA, to exclude him from the group licence afforded to the Law Society by the OFT under s.27 of the CCA.

 

153. As regards the first preliminary issue (the appropriate standard), it is common ground that the FTT Judge’s decision that the CCA s.25 standard was applicable was correct in relation to Mr Turnbull: see para. 73 above.

 

154. As regards the third preliminary issue (procedural unfairness), the position is the same in relation to Mr Turnbull as in relation to the Companies.

 

 

(5)  Disposal

 

155. In my judgment, for the reasons given above, paras. 1, 4 and 5 of the Directions of Judge Findlay dated 18 September 2014 (set out at para. 40 above) were wrong in law and the whole of those Directions (i.e. not just those paragraphs) must be set aside. In exercise of the jurisdiction in s.12 of the Tribunals, Courts and Enforcement Act 2007 I decide that they should be replaced with the following:

 

“1. In respect of the standard to be applied on the appeals:

 

1.1 The appropriate standard by reference to which the Companies are to be assessed by the First-tier Tribunal are the threshold conditions under Part 1B of Schedule 6 to FSMA (including the “fit and proper person” test under paragraph 2E).

 

1.2 The standard applicable to Mr Turnbull is the fit person standard in section 25 of the CCA.

 

2. [As in Judge Findlay’s para. 2)]

 

3. In relation to the third preliminary issue, the Tribunal has jurisdiction to entertain the Appellants’ second ground of appeal, but without prejudice to the question (also raised in the third preliminary issue, and which remains to be determined) whether the Tribunal ought to entertain that ground of appeal.”

 

156. I consider that each of the parties should have liberty to apply to me within one month from the date of issue of this decision in the event that they contend that I have not dealt with any matter properly falling within the scope of the appeals to me.

 

157. It will now be for a FTT Judge to reconsider what case management directions are appropriate in the light of this decision and any further representations which may be made to the FTT by the parties, who should consider what further applications to the FTT they wish to make. I have not given any permission to amend the grounds of appeal, and as I have set aside Judge Findlay’s grant of permission to amend it follows that there is no extant permission to amend the original grounds of appeal. The Companies and Mr Turnbull will need to consider whether they wish to apply to the FTT for permission to amend, and if so in precisely what terms.

 

 

 

 

 

 

Charles Turnbull

Judge of the Upper Tribunal

23 March 2015