Jeffery v The Financial Services Authority

The matter before us arises in consequence of an order made on the papers on 30 January 2012 by Lewison LJ. He thereby refused permission to the applicant, Andrew Jeffery, to appeal on the majority of the grounds upon which he wished to appeal. He was, however, impressed that, on one issue Mr Jeffery might have an arguable point. That related to whether, contrary to the decision of Sir Stephen Oliver QC made in the Upper Tribunal (Tax and Chancery Chamber) on 30 July 2011, the tribunal ought to have made an order on Mr Jeffery’s application requiring the attendance of two police officers for the purpose of giving oral evidence at a substantive hearing currently fixed to commence before the tribunal on 14 February 2012 and estimated to last 14 days.

Lewison LJ adjourned Mr Jeffery’s application for permission to appeal in respect of that single point to the full court on notice to the respondent, the Financial Services Authority (“FSA”), with the appeal to follow immediately if permission should be given. His refusal of permission to appeal on all other grounds was on the basis that he was satisfied that an appeal on those grounds would stand no real prospect of success, for which conclusion he gave short reasons. Mr Jeffery has not sought to renew his application on those other grounds and so the only matter before us is the one I have mentioned.

The circumstances surrounding the hearing of this application are unfortunate and I should explain them. Lewison LJ rightly, in my view, also directed that the hearing should be expedited so as to be heard in advance of the substantive hearing due to start before the Upper Tribunal next week, and it was pursuant to that direction that today’s hearing was fixed.

Mr Jeffery was notified of it last Friday, 3 February. The FSA had earlier made representations to the court that it was very concerned not to lose the 14 February fixture since it had some 19 witnesses lined up to give evidence at it, and any adjournment of that hearing might well involve a delay of several months. Mr Jeffery, however, promptly sought an adjournment of today’s hearing on the grounds that he had not had time to prepare the application, he wanted to seek advice about it and was also committed in relation to a hearing in the Chancery Division that I understand is due to be heard tomorrow and which was absorbing his attention.

I took the view that these were not good grounds for an adjournment and that, in the circumstances described, an adjournment would be unfairly prejudicial to the FSA. I therefore refused the request for adjournment, a decision that was communicated to Mr Jeffery early yesterday morning. Having received that decision, Mr Jeffery asked for it to be reconsidered on the basis that he is currently, and has been for some time, at an undisclosed location overseas and would not be able to attend the hearing because of travelling difficulties. He had, however, in his adjournment application said that he would be coming to the United Kingdom today in readiness for tomorrow’s Chancery matter.

That consideration was, of course, a worrying factor since it is obviously profoundly unsatisfactory if a litigant who wishes to attend a hearing is unable to do so. Mr Jeffery did, however, learn of the date of the hearing last Friday. Whilst that was admittedly short notice, I have explained the relevant time constraints and he ought to have understood them perfectly well. He is not the only party to these proceedings and a just disposal of his application also required the legitimate interests in the proceedings of the FSA to be taken into account.

I was also unaware that there were any reasons why, having been given notice of the hearing last Friday, he could not have promptly sought to come to this jurisdiction for the purposes of the appeal, notwithstanding the inclement weather of last weekend. The travel problem in which he found himself yesterday was in a sense self-induced by what I can only assume was a presumption on his part that he would be granted an adjournment and need do nothing towards catering for the risk that he might not.

In the event, Mr Jeffery has not been present at the hearing and it has proceeded in his absence. He was, however, given the opportunity yesterday to make further written submissions in addition to the skeleton argument that he had prepared on 18 January 2012 and he has taken that opportunity. The FSA has been ably represented by Miss Sarah Clarke, who was also counsel before Sir Stephen Oliver QC at the hearing below, and she has made helpful submissions to the court for which I am grateful.

The background to the proceedings is as follows. In 1986, Mr Jeffery began working for an insurance intermediary, Jeffery Flanders Limited, and he later set up Jeffery Flanders (Consulting) Limited in 2000. He acted as a broker for general insurance contracts, including motor and household insurance and commercial insurance for businesses. As from 14 January 2005, he required approval from the FSA to undertake those activities. He duly received such approval as from that date and was in fact the only approved person at his company.

In 2008 Mr Jeffery was prosecuted for alleged fraud of a nature that I am not aware of. The FSA asserts that it was insurance fraud, although I understand Mr Jeffery to disagree with that characterisation. In June 2008 he was, however, acquitted on all charges. The investigating officers in relation to his trial are said by Mr Jeffery to have been DC Bennett and DS Lambert of the Surrey police. Whilst much is apparently in dispute in this case, what is not in dispute is that in early November 2008 they handed over to the FSA a large quantity of documents relating to Mr Jeffery. The FSA admits that it had also had contact with the police during his trial.

The FSA’s evidence is that it decided not to investigate the insurance issues that it understood were the subject of the unsuccessful prosecution. It did, however, investigate other aspects of Mr Jeffery’s activities. That investigation commenced on 25 February 2009 and it was followed in March 2009 by two unannounced visits to his business premises. On 23 October 2009 the FSA removed Mr Jeffery’s permission to conduct regulated activities and, on 20 January 2010, it issued a final notice cancelling his permission.

On 13 July 2010, following the giving of a warning notice on 28 May 2010, the FSA made a decision (a) to impose a penalty on Mr Jeffery of £150,000 for breaches of statements of Principles 1 and 4 in the period between 14 January 2005 and 23 October 2009; and (b) to make a prohibition order under s.56 of the Financial Services and Markets Act 2000, preventing him from carrying out any function in relation to any regulated activity carried on by any authorised person.

The decision was made on the following five grounds:

“(1)

That through your insurance intermediary business, following receipt of payment from clients, you recklessly did not effect insurance and/or failed to inform clients of the identity of their insurers.

(2)

You knowingly forged or caused to be forged documentation and correspondence in the names of clients potentially to mislead recipient insurance companies.

(3)

You continued to carry on regulated activities and received payments for services provided to clients since 25 January 2009, contrary to the position stated by you in your letter to the FSA dated 16 April 2009.

(4)

You have failed to deal with the FSA in an appropriate, open and co-operative way, in particular failing to notify the FSA of any changes in either your contact details or your business activities, and failing to provide information and documents as requested. This is despite repeated attempts by the FSA to contact you by email, telephone and letter;

(5)

You have also failed to attend an interview at the offices of the FSA despite the requests made pursuant to the FSA’s compelled powers.”

The particulars of such grounds were set out in what was, in effect, a schedule to the decision notice, such particulars having been lifted directly from the earlier warning notice.

The substantive proceedings in which Mr Jeffery made the application the subject of his present application are his reference under s.55 of the Act of that decision notice to the Upper Tribunal. The making of that reference was followed by the service on 10 January 2011 of the FSA’s statement of case and on 7 February 2011 by a response from Mr Jeffery running to 152 paragraphs. In paragraphs 5 and 6, he asserted that the FSA’s conduct had been linked to Surrey police since April 2004 and that it was untrue that, as the FSA claimed, it had only started its investigation into him in 2009.

A directions hearing took place on 15 March 2011 which Mr Jeffery did not attend, but in which he was given until 12 April 2011 to apply for the issue of a summons or summonses under Rule 16 of The Tribunal Procedure (Upper Tribunal) Rules 2008 requiring named individuals to attend as witnesses at the hearing and/or to produce documents relevant to the matters in issue in the reference. Mr Jeffery took advantage of those directions by seeking the issue of summonses against at least some 27 people, although not all were clearly identified.

The hearing of that application took place on 27 June 2011 before Sir Stephen Oliver QC. In his reserved judgment, which was released on 13 July 2011, he explained the principles applicable to applications for the issue of such summonses and why he was refusing all of Mr Jeffery’s applications. Mr Jeffery applied to the Upper Tribunal for permission to appeal to the Court of Appeal but his application was refused on 25 October 2011. His Appellant’s Notice was filed on 17 November 2011.

As I have said, Lewison LJ refused permission to appeal in respect of all the applications save for two of them, which are based on the same ground, in respect of which the application for permission is now before us. They were applications for the issue of summonses against two policemen referred to in various places in the documents, including I think by Mr Jeffery, as DC Bennett and DS Bennett, although as I have indicated, I believe that the latter reference should in fact be to DS Lambert. Mr Jeffery sought from them the production of documents and an order for them for the giving by them of oral evidence. Lewison LJ refused permission in relation to the documents request and that seems to me, with respect, to have been well founded, not least because Mr Jeffery’s Grounds of Appeal appear to accept that the two policemen had passed all the relevant documents to the FSA at a meeting in November 2008.

The only question before us is, therefore, whether the policemen or either of them should be issued with summonses to attend the substantive hearing and give evidence. Sir Stephen Oliver QC refused the application. The inference from paragraph 32 of his judgment is that Mr Jeffery’s primary point in support of the application was his assertion that the Surrey police had instituted a malicious prosecution against him in collusion with the FSA. Sir Stephen’s view was that the pursuit of such an allegation was irrelevant to the issues before the tribunal and that, if Mr Jeffery wished to pursue such allegations, he must, subject to the considerations of relevance, be confined to doing so in the course of his cross-examination of the FSA’s witnesses. In his view the witness summons was no more than what he called a “fishing” expedition.

I cannot, for my part, see that Sir Stephen’s exercise of judgment in that particular respect was erroneous and, without more, I would not consider that there would be any basis upon which this court can or should review such exercise. Lewison LJ perceived, however, that Mr Jeffery’s skeleton argument was directed to raising the assertion that there was an earlier meeting between the Surrey police and the FSA on 5 August 2008 and he understood that Mr Jeffery’s point about the alleged contact between the policemen and the FSA was related to the raising by Mr Jeffery of a limitation point in connection with the making of the July 2010 decision and/or to manifest some alleged but unspecified abuse of process on the part of the FSA in relation to its making.

So far as the limitation point is concerned, that finds its basis in s.66 of the Act, of which subsections (4) and (5) provide as follows:

“(4)

The Authority may not take action under this section after the end of the period of three years beginning with the first day on which the Authority knew of the misconduct, unless proceedings in respect of it against the person concerned were begun before the end of that period.

(5)

For the purposes of subsection (4)—

(a)

the Authority is to be treated as knowing of misconduct if it has information from which the misconduct can reasonably be inferred; and

(b)

proceedings against a person in respect of misconduct are to be treated as begun when a warning notice is given to him under section 67(1).”

The period of three years specified in s.66(4) was changed from two years by the Financial Services Act 2010 with effect from 8 June 2010. Miss Clarke explained to us that the effect of that amendment is that, if the FSA had the relevant subsection (5) knowledge prior to 8 June 2008, then the two-year limitation period for the service of a warning notice would apply, whereas if it only had such knowledge after 8 June 2008, the new three-year period for such service would apply. The warning notice in this case was dated 28 May 2010.

Before coming to the substance of the limitation point, I should record that Miss Clarke acknowledged that, whilst Mr Jeffery did not in terms refer to such point in the course of the hearing before Sir Stephen Oliver QC, it was apparent from his response that this was part of his case. She very fairly recognised that he could be regarded as relying on it in support of his application for the issue of the summonses against the two police officers. Nevertheless, Sir Stephen made no reference to it in his reserved judgment and, on the face of that judgment, had not addressed his mind to it. It is, however, at the heart of Mr Jeffery’s application for permission.

Miss Clarke submitted by way of a preliminary point that it is not in fact open to us to entertain this application. She rightly pointed out that s.13(1) of the Tribunals, Courts and Enforcement Act 2007 confines any appeal to the Court of Appeal from the Upper Tribunal to an appeal on a point of law and she submitted that, in this case, Sir Stephen’s decision was essentially a fact-based one formed by reference to an exercise of judgment as to whether the summonses that were asked for should be issued. I agree that Sir Stephen’s disposition to the particular issues concerning the two policemen was apparently so fact-based.

The error of law, however, was in his failure to address the merits of the application in relation to the limitation issues. Accepting as Miss Clarke does that that issue was, even if less clearly than it might have been, before the Upper Tribunal for consideration on Mr Jeffery’s application, it was in my view an error of law for the Tribunal not to deal with it. I would not, therefore, accept that the court cannot entertain Mr Jeffery’s application for permission to appeal.

Moving now to more substantive matters, and by reference to the five numbered grounds that I have explained form the basis of the July 2010 decision, there is no basis for any limitation point in relation to ground (3), which relates to matters subsequent to 25 January 2009; or to ground (4) which relates to a lack of cooperation during the FSA investigation (see paragraph 43 and following of the FSA’s statement of case); or to ground (5), which also relates to an alleged 2009 event (see paragraph 69).

So far as concerns the other two grounds, namely ground (1), recklessly failing to effect insurance for clients or failing to inform clients of the identity of their insurers, and ground (2), forging documentation and correspondence in the names of clients potentially to mislead insurance companies, the position is different. The FSA’s case is that it only became aware of these allegations in general terms at the meeting with the Surrey police on 8 November 2008 and that its knowledge of the specifics only emerged during the subsequent investigation. That, as Miss Clarke emphasised, is the evidence of Mr Baum, the solicitor in the Enforcement and Financial Crime Division of the FSA, who was one of the investigators into Mr Jeffery’s affairs. Miss Clarke submitted that Mr Baum’s evidence in that respect ought to be taken as conclusive on the point for the purposes of the limitation issue that was before the Upper Tribunal. She acknowledged that, in relation to certain of the grounds (1) and (2) allegations, the FSA could in theory have acquired the s66(5) knowledge more than two years before the warning notice it served in 2010, but she said, in effect, that this court should not concern itself with that. She said that Mr Jeffery would be entitled to cross-examine Mr Baum and other witnesses, including insurers and clients, as to the timing and the source of the FSA’s knowledge as to relevant matters. But, she said, he should not be entitled to call for the attendance of the police officers at trial for the purpose, as Mr Jeffery hopes, of putting positive evidence before the court as to such timing and source.

Mr Jeffery, for his part, regards that as profoundly unfair, since he roundly disputes that the FSA only acquired its relevant knowledge into all the ingredients of grounds (1) and (2) in 2009. The FSA does not dispute that it had contact with the police prior to November 2008 and Mr Jeffery has put before us documents showing that the FSA had information from the police as early as April 2004. In particular, there was a meeting in 12 February 2006, which followed Mr Jeffery’s arrest. A note of that meeting reflects that a spreadsheet of 43 potential charges was produced which, as the note records, “identified that Mr Jeffery may have taken up to £131,700 in premiums which had not subsequently been passed to an insurer”. Allegations of that nature form the basis of the allegations against him in ground 1 of the FSA’s decision.

In my view, this document alone raises a real question at least as to when the FSA first knew about its ground (1) allegations, or as to how it came to know about them. It would of course, as Miss Clarke submits, be open to Mr Jeffery to cross-examine the FSA witnesses about this, but his case on limitation will or may be materially weakened if he is not also able to advance positive evidence as to what the Surrey police told the FSA and when. His case is that the two key policemen involved are DC Bennett and DS Lambert, of whom at least the former is said to have been at the meeting in February 2006. In my judgment, a fair trial of the FSA’s case against Mr Jeffery requires that he should be entitled to require those policemen to attend at trial and give oral evidence.

I would accordingly set aside the Upper Tribunal’s decision in respect of DC Bennett and DS Lambert as regards the giving of oral evidence at the forthcoming trial. I would, pursuant to s.14(2) of the 2007 Act, re-make the decision by requiring the issue by the Upper Tribunal of summonses pursuant to Rule 16 requiring DC Bennett and DS Lambert to attend the trial at a time and date to be specified and to answer any questions which relate to any issue in the proceedings. The summonses must make provision for their respective necessary expenses of attendance and state who is to pay them.

It follows that I would therefore give Mr Jeffery permission to appeal on the single issue that has been adjourned to us, allow the appeal and make an order along the lines I have just proposed.

I agree.

I also agree.