This is the judgment of the court, to which each of us has made a substantial contribution.

The appellant, Ms Angela Burns, is an experienced investment professional. Her appeal concerns events which took place in 2009 and 2010, when she was appointed (at different times) as a non-executive director of two United Kingdom mutual societies, Marine and General Mutual Life Assurance Society (“MGM”) and Teachers Provident Society Limited (“Teachers”, which traded under the name Teachers Assurance). Ms Burns also chaired the investment committees of both MGM and Teachers.

By a decision notice dated 28 November 2012 (“the Decision Notice”), the Financial Services Authority (as it was then called) imposed a financial penalty of £154,800 on Ms Burns pursuant to section 66 of the Financial Services and Markets Act 2000 (“FSMA”), and made an order pursuant to section 56 of FSMA prohibiting her from performing any function in relation to any regulated activity carried on by any authorised person, exempt person or exempt professional firm.

On 1 April 2013, the Financial Services Authority became the Financial Conduct Authority. In this judgment we will refer to it, whether before or after that date, as either “the Authority” or “the FCA”.

These sanctions were imposed on Ms Burns because, following a detailed investigation, the Authority found that she had recklessly, and in breach of her fiduciary position as a non-executive director of MGM and Teachers, failed to disclose conflicts of interest and had used her positions to further her own commercial interests, thereby breaching Statement of Principle 1 of the Statements of Principle for Approved Persons (“APER”) and showing herself to lack fitness and propriety under the “Fit and Proper” test for approved persons.

Ms Burns denied the Authority’s allegations, and exercised her right to refer the matter to the Tax and Chancery Chamber of the Upper Tribunal under section 208(4) of FSMA. Upon such a reference, the Tribunal must by virtue of section 133(5) “determine what (if any) is the appropriate action for the decision-maker to take in relation to the matter referred … to it”. In performing this function, the Tribunal “may consider any evidence relating to the subject-matter of the reference …, whether or not it was available to the decision-maker at the material time”: see section 133(4). It is clear, therefore, that the reference operates as a re-hearing and not as an appeal. When it has determined the reference, the Tribunal must remit the matter to the Authority with such directions (if any) as it considers appropriate for giving effect to its determination, and the Authority must then act in accordance with the Tribunal’s determination and directions: see section 133(6) and (7).

The hearing before the Upper Tribunal (Judge Andrew Bartlett QC, sitting with Catherine Farquharson and Mark White) took place over four days between 29 September and 2 October 2014. Ms Burns was represented by leading counsel (Guy Philipps QC), instructed by Norton Rose Fulbright LLP, while Andrew Hunter QC appeared for the FCA. By its decision released on 15 December 2014 (“the Main Decision”), the Upper Tribunal upheld four of the allegations of reckless breach of Statement of Principle 1 alleged by the FCA in its amended statement of case, but found that seven other alleged breaches had not been established on the facts. The Upper Tribunal also found that Ms Burns had failed to act with integrity in relation to the established breaches, and that she was not a fit and proper person to perform Controlled Function 2 (“CF 2”), i.e. to act as a non-executive director. The neutral citation reference of the Main Decision is [2014] UKUT 0509 (TCC).

By the date of release of the Main Decision, and indeed from before the date when the Upper Tribunal had circulated its decision as a confidential draft to the parties on 17 November 2014, Ms Burns was no longer legally represented. She has at all times since acted as a litigant in person.

In a subsequent decision, determined on the basis of written submissions and released on 14 May 2015 (“the Penalty Decision”), the Upper Tribunal decided that the appropriate action for the FCA to take, in light of the conclusions reached in the Main Decision, was to prohibit Ms Burns from carrying out a CF 2 function in relation to any regulated activity, and to impose a financial penalty of £20,000. The neutral reference of the Penalty Decision is [2015] UKUT 0252 (TCC).

In a third decision, also determined on the basis of written submissions and released on 3 November 2015 (“the Costs Decision”), the Upper Tribunal made an award of costs in favour of Ms Burns in the sum of £100,000 plus VAT. The basis of this award, stated shortly, was that in the view of the Upper Tribunal the FCA had acted unreasonably by pursuing against Ms Burns the very serious allegation that she had made a demand for corrupt payments in November 2010. The Tribunal made this award pursuant to rule 10(3)(d) of the Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008 No. 2698), which permits the Upper Tribunal to make an order in respect of costs if it “considers that a party or its representative has acted unreasonably in bringing, defending or conducting the proceedings”. The Upper Tribunal considered it appropriate to make the order, notwithstanding that it recognised that Ms Burns was overall the loser in the proceedings. The neutral citation of the Costs Decision is [2015] UKUT 0601 (TCC).

Ms Burns now appeals to this court, with permission granted by the Upper Tribunal (Judge Bartlett QC) on 13 January 2015 in relation to two only of the seven grounds which she wished to pursue. No renewed application was made by Ms Burns to this court in relation to the other five grounds. The two grounds for which Ms Burns has permission are grounds (c) and (g). In broad terms, the former ground asserts that the Upper Tribunal wrongly took into account various unpleaded matters, while Judge Bartlett identified the real point under the latter ground as being whether the Tribunal had applied the correct standard of conduct in finding that the four allegations which it upheld were made out to its satisfaction.

There is no cross-appeal by the FCA in relation to the Main Decision. The FCA does, however, appeal against the Costs Decision, with permission granted by Gloster LJ at an oral renewal hearing on 24 November 2016.

Finally, we have before us various applications made by Ms Burns seeking permission to adduce and rely upon new evidence. We said at the start of the hearing, and Ms Burns agreed, that we would not rule on these applications collectively as a preliminary issue, but would instead deal with the admissibility of any documents which Ms Burns sought to introduce by way of fresh evidence as and when it became relevant to do so in the course of her submissions.

Although unrepresented, Ms Burns presented her oral submissions to us with clarity and courtesy.

With this introduction, we will now state the relevant background facts, and refer to the relevant parts of the Main Decision, before turning to the two grounds of appeal which Ms Burns has permission to pursue and the FCA’s cross-appeal on costs.

The account which follows is based on the full and helpful findings of fact set out in the Main Decision at paragraphs [7] to [69].

Ms Burns graduated from the London School of Economics in 1984 with a first class degree in economics. The Upper Tribunal described her as “able and knowledgeable”. For many years, she has provided a range of services in the financial sector in a number of roles, including as an employee, as a non-executive director, as a trustee, and as a consultant through her investment consulting company Aktiva Limited (“Aktiva”). Her skills include investment analysis, fund management, and risk control. The central focus of her work in recent years before 2014 had been advising non-UK clients on UK market entry opportunities, regulatory requirements and product development for the UK market. The Upper Tribunal found that:

In 2006 Ms Burns, through Aktiva, was engaged to draft a report for Vanguard Asset Management Limited (“Vanguard”), a very large US asset manager which was considering the feasibility of its proposed entry into the UK investment market. Having completed her report, for a fee of £30,000, in July 2006, Ms Burns e-mailed Vanguard and asked for the opportunity to turn her proposal into a successful business in the UK. Vanguard replied that, depending on the direction it decided to take, it would be happy to discuss future steps with her. A year later, Ms Burns met James Norris, the managing director of Vanguard’s international operations, in London. Mr Norris said that Vanguard planned to enter the UK market in 2008, and Ms Burns expressed interest in possible consultancy work.

Contacts between Ms Burns and Vanguard during 2008 led to a meeting in London on 3 September 2008 between her and Vanguard’s managing director, Thomas Rampulla. After the meeting, Ms Burns sent Vanguard a detailed consultancy proposal, but it was not followed up by Vanguard.

Meanwhile, from December 2006 Ms Burns had been employed by Pearl Group Management Services Limited (“Pearl”) to provide fund structuring advice, at a salary of £100,000 per annum plus bonus. This employment ended on 17 October 2008, when she was made redundant. Under the terms of her contract with Pearl, she also had to resign as a non-executive director of certain Axial funds which formed part of the Pearl Group in Ireland. Ms Burns brought an Employment Tribunal claim against Pearl for unfair dismissal and sex discrimination, but after a contested hearing the Tribunal dismissed her claim in March 2010.

In 2008 MGM wished to recruit a non-executive director. After a competition, MGM notified Ms Burns on 9 December 2008 that it wished to appoint her to the vacancy, and also as the chair of its investment committee, and as a non-executive director of a Dublin subsidiary. MGM was aware, from her CV, of her directorships of several Axial companies, but she did not inform MGM of her employment by Pearl, or of its termination. As a condition of her engagement by MGM, she required a CF 2 approval, for which she and MGM applied to the Authority. By her signature on 16 December 2008, she confirmed that the information provided in the Authority’s completed application form was accurate and complete to the best of her knowledge and belief. The form required disclosure of her employment history for the previous five years. She did not disclose her employment by Pearl. The form also asked if she had ever been dismissed from any employment, but she did not mention the termination of her employment by Pearl on the ground of redundancy. The Upper Tribunal described these as “troubling matters”, to which they returned in their consideration of whether it was appropriate to make findings of misconduct against Ms Burns.

On 13 December 2008 Ms Burns wrote to Mr Norris and Mr Rampulla of Vanguard, informing them that she had joined the Board of MGM and asking them to let her know if she could be of any further assistance to Vanguard, either in a consulting capacity or as a non-executive director. She followed up this initiative with a further e-mail on 7 January 2009, saying:

Ms Burns was approved as a CF 2 by the Authority on 19 January 2009, and attended her first board meeting at MGM on 21 January. The version of MGM’s Approved Persons Manual then in force included wording in these, or similar, terms:

At this time, the board of MGM was contemplating the launch of a new asset-backed annuity (“ABA”) product. In early February 2009, the Financial Times ran pieces about Vanguard’s impending UK launch. This led to a conversation between MGM’s executive director, Craig Fazzini-Jones, and Ms Burns about Vanguard, and Ms Burns then arranged a meeting which took place on 19 February to explore the possibility that Vanguard would be in a position to provide investment services for MGM’s proposed launch of an ABA product in July 2009. Before the meeting, Ms Burns told Mr Fazzini-Jones that she had done work in the past for Vanguard, but that Vanguard was not a current client. The Upper Tribunal commented that “This was correct, as far as it went”. After the meeting, she e-mailed Mr Rampulla of Vanguard, saying:

In a further e-mail on 23 February 2009, to Chris Evans, the CEO of MGM, Ms Burns reported that she and Mr Fazzini-Jones had:

Pausing at this point, the Upper Tribunal summarised the position as at 23 February 2009 as follows:

Based on these findings, the Upper Tribunal considered that Ms Burns was not in breach of a duty of disclosure to MGM by reason of her contacts with Vanguard up to and including 23 February 2009. They therefore rejected one of the breaches of duty alleged against her, which was based on her e-mail of 23 February 2009.

Following the meeting with Vanguard on 19 February, Mr Rampulla sent an e-mail to Ms Burns on 23 February saying that he looked forward “to further discussions regarding the prospect of MGM and Vanguard working together in partnership”. Ms Burns replied to this e-mail on 24 February, attaching again her proposal of September 2008. It is necessary to quote this e-mail in full:

On the following day, 25 February 2009, the board of MGM (including Ms Burns) convened to consider, among other matters, the ABA project. Mr Fazzini-Jones presented a paper on it, which set out both active and passive investment options. He told the board that the passive option could be placed with Vanguard, which was itself a mutual. The board approved the business case. The Upper Tribunal found, at [23], that:

On 26 February, the day after the board meeting, Ms Burns again e-mailed Vanguard, in response to an e-mail from Mr Norris with whom she had resumed e-mail contact on 20 February. Again, this e-mail needs to be quoted in full:

The Upper Tribunal found, at [24], that in this e-mail “Ms Burns repeated her attempt to solicit a non-exec position with Vanguard by making reference to the prospect of Vanguard and MGM working together”.

On 27 February 2009, Mr Norris replied to Ms Burns’ e-mail of the previous day:

The Upper Tribunal added, at [27]:

To similar effect, after commenting on certain submissions by counsel for Ms Burns and the FCA, the Upper Tribunal said at [30]:

On 10 June 2009, MGM’s investment committee, chaired by Ms Burns, considered a paper presented by Mr Fazzini-Jones about the proposed ABA investment. Among his recommendations was that Vanguard be appointed as the product provider for the constituents of the passive fund range. His recommendations were agreed by the committee, and in due course the committee’s decision was approved by the full board of MGM.

The Upper Tribunal rejected the FCA’s allegation of culpable non-disclosure by Ms Burns at the investment committee meeting on 10 June 2009, on the basis that her solicitation of Vanguard had ceased on 27 February and by the date of the June meeting “there was nothing material to disclose”: see the Main Decision at [37] and [38]. For similar reasons, the Tribunal rejected an allegation of culpable non-disclosure at an investment committee meeting on 23 September 2009, when the committee approved a recommendation to place its £350m back-book investment mandate with Vanguard: see the Main Decision at [41].

In February 2010, Teachers recruited Ms Burns as a non-executive director. Before being interviewed for this post, Ms Burns had discussed with MGM whether taking a non-executive position with Teachers would involve a conflict of interest with her duties at MGM. The conclusion was that there would be no conflict, given that the two mutuals operated in very different market segments. As part of the recruitment process, Ms Burns again applied for and was granted CF 2 approval. As before, the application form required disclosure of her last five years’ employment history and asked whether she had ever been dismissed. As before, she made no mention of her recent employment with, or dismissal by, Pearl, even though (as the Tribunal found at [45]) the hearing of her claim against Pearl had taken place over nine days during January 2010 “so that, as she accepted in oral evidence, it must have been at the forefront of her mind”.

On 10 June 2010, Teachers confirmed Ms Burns’ appointment as a non-executive director at an annual fee of £21,500. Her appointment letter acknowledged that she had external interests and had declared any conflicts that were then apparent. In the event that she became aware of any potential conflicts of interest, she was told that “these should be disclosed to the Chairman and Company Secretary”.

Earlier in 2010, Teachers’ existing investment manager, LGIM, had notified an intention to increase its fees. Accordingly, Teachers was considering the possibility of replacing LGIM with a different manager for its entire mandate of around £750m, which included a £20m Ethical Fund. The finance director, Ian Blanchard, took the lead in this exercise. On 10 June 2010, Ms Burns suggested Vanguard as one of three possible managers to consider, and on 14 June Mr Blanchard attended an initial meeting with Vanguard to talk about the possibility of Vanguard managing Teachers’ funds. An allegation of impropriety in relation to this episode was rejected by the Upper Tribunal: see the Main Decision at [49].

In July 2010, Ms Burns was provided with copies of Teachers’ Conflicts Policy and Ethics Policy. The former of these included a statement that all staff had a responsibility to ensure that conflicts of interest did not arise, while the latter included this passage:

On 23 August 2010, Ms Burns became chair of Teachers’ investment committee. Arrangements were made for Vanguard and LGIM to make presentations to the committee on 22 November 2010. The background appeared to be that LGIM was unwilling to reduce its fees, while Vanguard’s rates were cheaper than those offered by another shortlisted candidate (BlackRock), but no solution had been found to Vanguard’s unwillingness or inability to manage the Ethical Fund. BlackRock was willing and able to manage the Ethical Fund in the way required by Teachers, and was to make a presentation on a later occasion.

On 5 November 2010, Ms Burns sent an e-mail to Mr Norris of Vanguard which the Upper Tribunal described as “the catalyst for the FSA’s investigation and ultimately for the present proceedings”. She sent the e-mail from her Aktiva account, under the subject line “New monies”. Materially, it reads as follows:

The story is then picked up by the Upper Tribunal, as follows:

After making the findings of fact which we have summarised or quoted above, and discussing the relevant duties to which Ms Burns was subject (to which we will return in our consideration of Ms Burns’ first ground of appeal), the Upper Tribunal set out at [79] the four specific allegations of misconduct against Ms Burns which remained for consideration, following their rejection, on factual grounds, of the other allegations made by the FCA. The four surviving allegations were, in short:

that Ms Burns had used her fiduciary position as a non-executive director to solicit a benefit for herself, by means of her e-mail of 24 February 2009 to Vanguard;

that she failed to disclose or declare her conflict of interest to MGM, when she participated in discussions concerning Vanguard at MGM’s board meeting on 25 February 2009;

that she used her fiduciary position to solicit a benefit for herself by means of her e-mail of 26 February 2009; and

that she used her fiduciary position to solicit a further benefit for herself when she e-mailed Vanguard on 5 November 2010. The pleaded allegation, in paragraph 5.2(2)(c) of the FCA’s amended statement of case, described this date as “a point of significant leverage”, three weeks before Vanguard was due to tender for work at Teachers. The benefit solicited from Vanguard was described as (i) the commission arrangement described in the e-mail, under which she would be paid one basis point per annum for new monies secured, including the monies already secured from MGM and, potentially from Teachers; and (ii) a non-executive directorship at Vanguard’s Dublin funds at a salary of £20,000.

The FCA’s case was that these matters constituted a failure to act with integrity, in breach of Statement of Principle 1, and that the breaches were reckless, in that Ms Burns deliberately turned a blind eye to the conflicts which were obvious having regard to:

her twenty five years’ experience in the investment industry;

the terms of MGM’s conflicts policy;

the terms of documentation provided to her by Teachers; and

the terms of APER paragraph 4.1.13E, which identifies deliberate failure to disclose the existence of a conflict of interest in connection with dealings with a client as an example of behaviour which does not comply with Statement of Principle 1.

The Upper Tribunal recorded, at [81], that the FCA also relied on Ms Burns’ failure to disclose her employment at Pearl, or its termination, to MGM or Teachers, or to the Authority when seeking CF 2 approvals, as tending to support the FCA’s case that Ms Burns lacked integrity and was not “fit and proper”. These alleged failures, it is important to note, were not pleaded in the FCA’s amended statement of case. The question whether the Tribunal was nevertheless entitled to take them into account lies at the heart of Ms Burns’ second ground of appeal.

In the next section of the Main Decision, running from paragraphs [84] to [108], the Upper Tribunal considered Ms Burns’ evidence, and whether what she did amounted to misconduct. The Tribunal described Ms Burns, at [84], as “clearly hard-working, intelligent, able and experienced”, but it found her evidence to be “unsatisfactory in a number of respects” which were then set out in detail under five sub-paragraphs. It is unnecessary for us at this stage to set out any of these matters, from which there is no appeal. The Tribunal concluded, at [85], that Ms Burns “was not a reliably trustworthy witness on critical matters.” The Tribunal then turned to consider her further evidence on the specific allegations.

At [86], the Tribunal recorded Ms Burns’ submission that the nature of her business was well known to MGM and Teachers when she joined them, and that a material conflict of interest would only have arisen if and when Vanguard had responded with an expression of interest in her proposals. The Tribunal did not accept this argument, saying:

With regard to the February 2009 e-mails, Ms Burns accepted that she did not tell MGM about them at the time. She argued that no engagement between MGM and Vanguard had yet arisen, and there was a very real possibility that such an engagement would never arise, because she could not be confident that Vanguard would receive its UK authorisation in time to dovetail with the launch of MGM’s ABA product. The Tribunal commented, at [87]:

With regard to a further argument by Ms Burns, to the effect that the areas of the market in which she was offering to act as an advocate for Vanguard did not overlap with the business of MGM, the Tribunal said at [88]:

The Upper Tribunal then continued:

For these reasons, the Tribunal upheld the allegation of culpable non-disclosure by Ms Burns to MGM of the fact that she was concurrently soliciting a non-executive position and consulting work with Vanguard.

The other live allegations concerning Ms Burns’ conduct at MGM concerned misuse of her fiduciary position to solicit a benefit for herself, by her e-mails of 24 and 26 February 2009. After recording the submissions of Mr Philipps QC on this issue, the Tribunal said at [93]:

The Tribunal then considered Ms Burns’ e-mail of 5 November 2010. At [95], they thought it clear from the terms of the e-mail itself that “it was intended as a sales pitch. She was making another attempt to interest Vanguard in retaining her services (personally and as Aktiva Ltd).” At [96], the Tribunal rejected Ms Burns’ evidence that the first paragraph of the e-mail was intended to avoid ambiguity by making clear her two roles with MGM and Teachers. The Tribunal said:

With regard to the new proposal put forward by Ms Burns, the Tribunal commented on her “boldness in reprising a commercial proposal which Vanguard had rejected in February 2009”. The reference to previous discussions with Vanguard was “salesperson’s spin”, because they had only “discussed” it in the sense that she had put these two proposals forward and Vanguard had shown no interest in them: paragraph [99].

The Tribunal then said that, read literally, the next sentence (“The MGM Advantage mandate would amount to £35k pa, with the TA mandate taking it to £110k pa”) would be shocking, and that Mr Norris and Mr Rampulla were indeed shocked to read it. At first sight, it appeared to mean that Ms Burns was asking for an annual payment in return for having used her non-executive position at MGM to secure the MGM mandate for Vanguard, and she was asking for a further annual payment on the basis that she would use her position at Teachers at the forthcoming meeting in order to secure the Teachers mandate for Vanguard too. In other words, a literal reading indicated that Vanguard had discussed with her the making of corrupt payments of that kind. The Tribunal regarded the initial reaction of Mr Norris and Mr Rampulla as understandable, but nevertheless came to the firm conclusion that Ms Burns had not intended to solicit a corrupt payment. They said at [103]:

Nevertheless, while accepting that Ms Burns did not intend to seek corrupt payments, the Tribunal considered the e-mail to be improper for much the same reasons as the emails of 24 and 26 February 2009 had been improper. As they said, at [108]:

The Upper Tribunal then proceeded to consider the issues of lack of integrity, and whether Ms Burns was a fit and proper person to perform the CF 2 function. They decided both these issues adversely to Ms Burns, for the reasons which they gave at [109] to [122]. By way of summary, the Tribunal said in paragraph [122(f)] that:

The final substantive section of the Main Decision consists of a “Postscript regarding matters arising after the hearing”, in which the Upper Tribunal dealt with various matters raised by Ms Burns (now acting in person) after the draft decision had been circulated to the parties on 17 November 2014. One of Ms Burns’ principal complaints was that she had been deprived of the opportunity to deal adequately with non-pleaded allegations relied on by the FCA at the hearing. Those allegations related, in particular, to her applications for her CF 2 authorisations, and her failure to disclose her employment by the Pearl Group and its termination when she was made redundant. None of those matters formed part of the specific allegations of misconduct pleaded against Ms Burns, but they had been taken into account by the Upper Tribunal in reaching its conclusion. For these reasons, the Tribunal decided to deal briefly with the points which Ms Burns had raised, and also gave the FCA the opportunity to comment on them. After setting out Ms Burns’ main additional submissions at [127], and stating their view on them at [128], the Tribunal said at [129]:

Since these additional matters are of central relevance to the second ground of appeal which Ms Burns has permission to pursue, we will say no more about them at this stage and return to them when we come to consider that ground.

We now turn to the first substantive issue which we have to consider. As we have explained, the Upper Tribunal identified the “real point” under Ms Burns’ proposed ground (g) as being whether the Tribunal had applied the correct standard of conduct in finding that Ms Burns had breached the duties which she owed as a non-executive director to MGM and Teachers. In his ruling on Ms Burns’ application for permission to appeal, Judge Bartlett said at paragraph 13:

It is convenient to begin by setting out paragraph [76] of the Main Decision, where the Tribunal stated the principles which it proposed to apply:

The general duties of a director of a company incorporated under the Companies Acts are now codified in Chapter 2 of Part 10 of the Companies Act 2006. MGM is such a company, so Ms Burns was subject to the general duties contained in Chapter 2 at the time of the alleged breaches in February 2009. Teachers, however, was incorporated under the Friendly Societies Act 1992, which (by virtue of schedule 11, Part II, paragraph 9(1)(b)) incorporated section 63 of the Building Societies Act 1986, which is headed “Directors to disclose interests in contracts and other transactions”, as if the references therein to a director of a building society included a reference to a member of the committee of management of a friendly society, and with the substitution of a reference to a friendly society for every reference to a building society. It is therefore necessary to consider separately the duties which Ms Burns owed to MGM, and those which she owed to Teachers. We will take first the duties which she owed to MGM.

Section 170 of the 2006 Act is headed “Scope and nature of general duties”. For present purposes, the following provisions of section 170 are relevant:

It can be seen, therefore, that the statutory general duties set out in sections 171 to 177 replace the common law rules and equitable principles upon which they are based, but are nevertheless to be interpreted and applied in the same way as those rules or principles. It follows that the substantial body of existing case law in which those rules and principles have been stated, developed and refined continue to apply with undiminished authority in relation to the interpretation and application of the statutory duties.

The relevant general duties are those in sections 175 and 177, which so far as material read as follows:

if the situation cannot be reasonably be regarded as likely to give rise to a conflict of interest; or

if the matter has been authorised by the directors.

Duty to declare interest in proposed transaction or arrangement

It will be noted that the duty to avoid conflicts of interest, as formulated in section 175(1), does not apply, by virtue of sub-section (3), “to a conflict of interest arising in relation to a transaction or arrangement with the company”. On a literal reading, therefore, it would seem that the section 175 duty did not apply in relation to any conflict of interest to which Ms Burns may have been subject in relation to the proposed transaction or arrangement between MGM and Vanguard. Before the Tribunal, the FCA argued that the exception created by section 175(3) was only relevant where the proposed transaction was a transaction between the company and the director. But that is not what section 175(3) says, and before us Mr Vineall QC was content to proceed on the basis that section 175(3) operates so as to exclude even a case like this one, in which the director not only knows about, but is actively encouraging, the third party to try to contract with the company, at the same time as seeking employment or a position with that third party. The Tribunal also rejected Mr Hunter’s submission for the FCA, although the reason which it gave for doing so at [75], namely that “where the director in fact has a conflicting interest in relation to a transaction with the company (which may be a transaction by the director or a transaction by a third party), the director cannot comply with s 175”, is admittedly rather puzzling, and Mr Vineall did not seek to support it.

It is unnecessary for us to express a concluded view on the precise scope and purpose of the exception in section 175(3), and not having heard full argument on the question, we prefer to leave it open. It is enough that on any view, and as Mr Philipps QC expressly accepted for Ms Burns before the Tribunal, the duty in section 177 of the 2006 Act was clearly in play. That duty applies where a director “is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company”. If that condition is satisfied, the director must then declare the nature and extent of that interest to the other directors. The duty of disclosure is, however, excluded if the interest in question “cannot reasonably be regarded as likely to give rise to a conflict of interest”: see sub-section (6)(a).

The 2006 Act contains no definition of “interest”, or what constitutes being “interested in” a proposed transaction. The question therefore has to be answered by reference to the case law. We agree with Mr Vineall that the question, in the particular circumstances of this case, is whether the Tribunal was correct in law to conclude that, by virtue of the fact that Ms Burns was, at the very time the proposed transaction was being considered by her investment committee, soliciting Vanguard for employment or appointment, she was “in any way, directly or indirectly interested” in the proposed transaction between MGM and Vanguard.

The FCA submits that the answer to this question is obvious: Ms Burns plainly had an interest. She must have believed that a favourable outcome of the proposed deal between MGM and Vanguard would improve her prospects of securing the employment and/or directorship with Vanguard which she sought.

As regards the authorities, we can begin with the very well-known statement of principle by Lord Cranworth LC in Aberdeen Railway Co v Blaikie (1854) 1 Macq. 461 at 471:

In Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2QB 606, Upjohn LJ cited Lord Cranworth’s statement of principle at 635, commenting that although the Aberdeen Railway case was a Scottish one, it was “clear that in this respect the law of Scotland and of England is the same.” Upjohn LJ added that the principle was “one of the most firmly established in our law of equity”, and it had been repeatedly recognised and applied. The rule “extends to all manner of relationships” but “[l]ike all rules of equity, it is flexible, in the sense that it develops to meet the changing situations and conditions of the time” (p 636).

Upjohn LJ then made the important point that:

This passage brings home the critical point that the duty owed by Ms Burns was one for the protection of MGM, which was entitled to her undivided loyalty. The duty could, of course, be relaxed by MGM, but only after full disclosure of any actual or potential conflicting interest.

These points were again emphasised by Lord Upjohn, as he had by then become, in Boardman v Phipps [1967] 2 AC 46 at 123-124. Referring to Lord Cranworth’s statement of principle in Aberdeen Railway, Lord Upjohn said at 124B:

In our view it is unnecessary to take the citation of authority any further, although we should record that Mr Vineall also referred us to the helpful observations of Rix LJ in Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200, [2007] Bus LR 1565, at [76], where he emphasised the highly fact-sensitive nature of the enquiry. In our judgment, application of these familiar and well-established principles clearly entitled the Upper Tribunal to find that Ms Burns had placed herself in a position of conflict of interest when she sent the relevant e-mails to Vanguard on 24 and 26 February 2009. She was actively soliciting a remunerative relationship with Vanguard, for her own personal benefit, at the very same time as she owed an undivided duty of loyalty to MGM to consider Vanguard’s possible future business relationship with MGM dispassionately and with her mind unclouded by any potential conflict of interest. In our view there was clearly a sufficient likelihood of a conflict of interest, viewed objectively, to engage the duty of disclosure under section 177(1), and to render the exception in sub-section (6) inapplicable. We consider that the relevant principles were in substance correctly stated by the Upper Tribunal in paragraph [76] of the Main Decision, and that their analysis betrays no error of law.

In her oral submissions to us, Ms Burns sought to escape from this conclusion in various ways. She submitted that matters were still at a very preliminary stage in February 2009, and Vanguard’s candidacy was not considered by the investment committee before the meeting on 10 June 2009. The committee’s recommendation of Vanguard was then considered by the main board of MGM later in June, when the decision to appoint Vanguard was formally taken. Ms Burns said that this outcome was no more than a wholly speculative prospect in February, when Vanguard was merely a possible future candidate in a tendering process. She referred us in this connection to the observations of Knox J in Re Dominion International Group Plc (No.2) [1996] 1 BCLC 572 at 597, where in considering the duty of a director to make disclosure under section 317(1) of the Companies Act 1985 (which was in materially similar terms to section 377(1) of the 2006 Act), he said:

Furthermore, Ms Burns’ submissions to the effect that the possibility of appointing Vanguard was merely speculative in February 2009 cannot be reconciled with the fact that the full board of MGM considered Mr Fazzini-Jones’ paper on the ABA project on 25 February, when he told the board that the passive option could be placed with Vanguard and the board approved the business case. Plainly, Vanguard was by this stage a serious potential contender for at least part of the ABA project, but Ms Burns, who was present at the board meeting, made no disclosure of her current attempts to secure work from Vanguard. Nor does it assist Ms Burns’ case to submit, as she did, that she did nothing to interfere with the tender process, or seek to influence the other board members in reaching what was eventually a unanimous decision to appoint Vanguard. The point was not whether she actively favoured Vanguard in the competitive process, but whether MGM could count on her undivided loyalty at a time when she was making undisclosed overtures to Vanguard for her own benefit.

Finally, Ms Burns sought to place before us, by way of fresh evidence, certain documents tending to show that in other business contexts she had been fully alive to the need for disclosure of conflicts of interest, or that other members of the MGM board may have had some knowledge of her discussions with Vanguard. In our view none of this material, even assuming it to be admissible, could provide any real support for Ms Burns’ case. The issue turns upon an objective appraisal of what actually happened in the present case, so testimonials about Ms Burns’ conduct in different business relationships could be of no more than marginal relevance. Similarly, even if one or more other board members may have had some informal knowledge of Ms Burns’ overtures to Vanguard, this could not provide an adequate substitute for proper disclosure to the board as required by section 177(2) of the 2006 Act.

We now turn to Ms Burns’ position with Teachers, and her e-mail of 5 November 2010 to Vanguard.

Section 63 of the Building Societies Act 1986, as applied to a friendly society, provides as follows:

It is the duty of a director of a [friendly] society who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the society to declare the nature of his interest to the board of directors of the society in accordance with this section.

The duty of disclosure under section 63(1), as it applies to a friendly society such as Teachers, is clearly very similar to the duty of disclosure which applies to directors under section 177(1) of the 2006 Act. In addition, Ms Burns was contractually bound by the terms of her appointment letter to disclose any potential conflicts of interest of which she became aware to the Chairman and Company Secretary. In breach of these requirements, Ms Burns failed to make disclosure of her e-mail contact with Vanguard on 5 November 2010, either to the Chairman or to the Company Secretary. Nor did she make disclosure at the investment committee meeting on 22 November 2010, or at the full board meeting on 23 November. As the Upper Tribunal expressly found, in one of the sub-paragraphs detailing the unsatisfactory nature of some of her evidence, her statements that she had disclosed to Teachers that she and Vanguard were in business discussions in the days immediately preceding Vanguard’s intended presentation on 22 November 2010 were untrue: “She made no disclosure to Teachers of her approach to Vanguard contained in her e-mail of 5 November”, nor did the minutes of the investment committee meeting on 22 November, or of the board meeting on 23 November, contain any record of such disclosure by her.

Although the Tribunal acquitted Ms Burns of any intention to obtain a corrupt payment when she sent the e-mail of 5 November, the fact remains that she was clearly soliciting Vanguard for paid work at a time when Vanguard was about to tender for a valuable contract with Teachers. As Mr Vineall submits in his skeleton argument, the solicitation of non-corrupt benefits needs to be disclosed when those benefits would create a potential conflict. In terms of section 63(1) of the 1986 Act, it seems clear to us that Ms Burns was indirectly interested in a proposed contract or arrangement between Vanguard and Teachers, with the consequence that it was her duty to declare the nature of her interest to the board. This she failed to do, and the Tribunal were therefore fully justified in finding that she had breached her duties to Teachers.

Ms Burns’ submissions to us on this part of the case echoed her submissions in relation to the earlier transactions in February 2009. She submitted that the involvement of Vanguard was still wholly speculative, and that the presentation due to be made by Vanguard on 22 November 2010 would have been no more than a preliminary “show and tell” pitch. We reject these submissions, for the reasons we have already given in relation to the February 2009 transactions. As the Tribunal rightly said at [106], there were still a number of uncertainties, but Vanguard was clearly “live” in the selection process, and that was the reason why they were coming to make a presentation to the investment committee on 22 November. In that context, Ms Burns’ duty of undivided loyalty to Teachers required that she should have no undisclosed interest in Vanguard, yet by her e-mail of 5 November she actively sought to bring about a situation where she would have such an interest. In our view the act of solicitation itself, against this background, was sufficient to give Ms Burns an indirect interest within the meaning of section 63(1), and also within the scope of the underlying equitable principle (which is not supplanted by section 63, in contrast to the position under the 2006 Act).

Having now considered the position of Ms Burns in relation to both MGM and Teachers, we conclude that there was no error of law in the standard of conduct which the Tribunal applied when making its findings of breach of duty against her. It follows that Ms Burns’ appeal on this ground must be dismissed.

In giving permission to appeal on this ground, the Upper Tribunal considered that Ms Burns had a fair opportunity of dealing with these “unpleaded” matters but if, as she asserted in applying for permission to appeal, there was substantial additional material which would have addressed the unpleaded matters, and which on advice was removed from her evidence because of the scope of the pleadings, it was considered “just possible” that she might have a reasonably arguable ground of appeal on a point of law. The Upper Tribunal added:

There can be no doubt that the Upper Tribunal attached some significant weight to the omission of any reference by Ms Burns to her employment by Pearl in her applications to the Authority for CF2 approval and in her CVs provided to MGM and Teachers. In the Main Decision at [12] the Tribunal said: "These are troubling matters, which we return to below in our consideration of whether it is appropriate for us to make certain findings of misconduct".

At [84], under a heading "Ms Burns' evidence, and whether what she did amounted to misconduct", the Tribunal said that they "found her evidence unsatisfactory in a number of respects", the first of which was that she had "no convincing explanation" for the omission of any reference to her employment with Pearl in her application forms to the FCA and in her CVs. Her evidence that she had told the chief executive of MGM that she had been employed by Pearl, contrary to his unchallenged evidence, was not credible.

The remainder of that section of the Decision, from [85] to [108], is concerned with the pleaded case against her.

Paragraphs [109] to [116] are headed “Lack of Integrity?” and are again concerned only with the pleaded case.

The final section is headed “Fit and proper?”. At [118], the Tribunal identified the relevant question as whether Ms Burns was fit and proper for the CF2 function at firms such as MGM and Teachers. At [119], they said: “In considering this question we are entitled to take into consideration our finding that she was not a trustworthy witness on some critical matters” and, after making due allowance for the pressures of giving evidence, they concluded that “some of her answers were in our view deliberately untruthful, which shows moral weakness under pressure”.

At [120], the Tribunal went further:

At [121], the Tribunal said the critical point in considering whether Ms Burns was fit and proper for the CF2 function was her “disregard of the standards to be expected of a non-exec”. They continued:

At [122] the Tribunal summarised their principal conclusions, rejecting some of the pleaded allegations and accepting others: sub-paragraphs (a) and (c) to (f). In sub-paragraph (b) they repeated that her evidence had been unsatisfactory in a number of respects, but no reference was in terms made to the non-disclosure of her employment by Pearl. They concluded at sub-paragraph (g): “Having regard to the above matters, we conclude that she is not fit and proper for the CF2 function”.

As mentioned earlier, the Tribunal added a postscript to their Decision, as a result of Ms Burns’ complaint that she had not had an adequate opportunity to deal with the allegations concerning her employment with Pearl and as a result of the provision by her of additional evidence and submissions. The Tribunal acknowledged that these allegations had not formed part of the specific allegations of misconduct but were “directly material”. They concluded at [128] that the omission of her employment by Pearl from her FCA application form was “highly material to our deliberations, because she signed an untrue declaration that information was true and complete” and their final decision did not change on account of her further evidence and submissions.

It can therefore be seen that the issue of Ms Burns’ employment by Pearl and its non-disclosure was important in the Tribunal’s reasons for their decision in two respects. First, her evidence to the Tribunal on this subject had been in some respects deliberately untruthful. Second, the non-disclosure was itself “highly material” to whether she was fit and proper for the CF2 function. It may be thought that the materiality was all the greater because the Tribunal had rejected a number of the FCA’s allegations, including the most serious, of soliciting a corrupt payment.

When the Tribunal came to consider the appropriate financial penalty, they expressly disregarded both the allegations of non-disclosure and her untruthful evidence in respect of them, explaining in the Penalty Decision at [15(c)]:

By way of explanation of this difference in approach, it is useful to refer briefly to the relevant statutory framework.

The FCA must be satisfied that a person is fit and proper to be authorised under FSMA to exercise particular functions. If it appears to the FCA that an authorised person is not a fit and proper person in relation to a regulated activity, it may make an order prohibiting that person from performing either specified functions or any function: section 56 FSMA. In reaching its conclusion, the FCA has regard to a number of factors, including the person’s honesty and integrity.

Under section 66 FSMA, the FCA may take action, including the imposition of a financial penalty, against a person if that person is guilty of misconduct. A person is guilty of misconduct if, while an approved person, they have failed to comply with a statement of principle issued by the FCA under section 64(2). Statement of Principle 1 was relied on in Ms Burns’ case. It required at the relevant time that an approved person “must act with integrity in carrying out his controlled function”.

The point being made by the Tribunal in the Penalty Decision was that, while the non-disclosure by Ms Burns of her employment by Pearl and her untruthful evidence about it to the Tribunal were relevant to whether she was a fit and proper person, they could not constitute misconduct under Statement of Principle 1 nor were they alleged to do so in the FCA’s case against her.

Before coming to the detail of Ms Burns’ challenge under her second ground of appeal, it is relevant to refer to the principles and rules governing proceedings before the Tribunal on a reference under FSMA. The Tribunal means the Upper Tribunal, which is of course wholly independent of the FCA and other regulators. It is a judicial body, performing judicial functions.

In the case of a prohibition order or penalty, a reference may only be made by the person who is the subject of the order or penalty. It is not an appeal against the FCA’s decision but a fresh hearing. The “subject-matter” of the reference has been widely construed in the authorities. Further, section 33(4) provides that the Tribunal “may consider any evidence relating to the subject-matter of the reference or appeal, whether or not it was available to the decision-maker at the material time”. In the case of a reference in relation to a prohibition order, it is the duty of the Tribunal to determine the reference by either dismissing it or remitting the matter to the FCA with such directions (if any) as the Tribunal considers appropriate for giving effect to its decision: section 33(6). In the case of a reference in relation to a penalty, it is the duty of the Tribunal to decide the appropriate action (if any) for the FCA to take and to remit the matter to the FCA with such directions (if any) as are appropriate: section 33(5). In either case, it is the FCA’s duty to give effect to the Tribunal’s determination and directions: section 33(7).

The proceedings before the Tribunal are governed by the Tribunal Procedure (Upper Tribunal) Rules 2008, as amended (the Rules). The Rules govern proceedings in all the Chambers of the Upper Tribunal. Some rules apply to all proceedings, while others apply specifically to particular types of proceedings.

The overriding objective of the Rules is “to enable the Upper Tribunal to deal with cases fairly and justly”: Rule 2(1).

Schedule 3 to the Rules contains provisions for “financial services cases” which include references in respect of decisions of the FCA. The person making the reference is defined as the applicant, and the FCA is the respondent. Notwithstanding these terms, it is for the FCA to make its case in support of the order or penalty which has been referred but it is not confined, in doing so, to the matters that were relied on in making its decision.

Schedule 3 makes provision for statements of case. It is for the FCA to deliver the first statement “in support of the referred action”: para. 4(1). Its statement must “state the reasons for the referred action” and “set out all the matters and facts upon which the respondent relies to support the referred action”: para. 4(2). The respondent is required to provide with its statement of case any documents on which it relies and any further material which in its opinion might undermine its decision.

Paragraph 5 provides for the applicant’s reply. It must state the grounds on which the applicant relies in the reference, identify all matters contained in the respondent’s statement which are disputed by the applicant and state the applicant’s reasons for disputing them. The applicant must send a list of all the documents on which he relies.

Rule 5(3), which is generally applicable to Upper Tribunal proceedings, empowers the Tribunal to permit or require a party to amend a document. Paragraph 5(1) provides for service of a reply if the respondent amends its statement of case.

It is clear from these provisions that the statements of case perform the vital function of informing each party, and the Tribunal, of the other party’s case, thereby enabling them to direct their evidence and submissions to the issues identified by the statements. In particular, the respondent’s statement informs the applicant of the case that he has to meet. The power of the Tribunal to permit the amendment of statements shows that a party is not irrevocably bound by its original statement but equally demonstrates the importance attached to them as the documents that define each party’s case.

The importance of statements of case has been recognised in a number of financial cases in the Upper Tribunal or its predecessor. In Legal & General Assurance Society Ltd v FSA (2005), the Financial Services and Markets Tribunal said: “…it seems to us that FSA, having set out its position in the Statement of Case, should usually be confined to the charges contained in it, perhaps refined as the case moves forward.” The Authority’s statement of case was “designed to ensure that the Applicant knows the charges it faces and that neither party ambushes the other or unfairly takes it by surprise”. The first of these passages was cited with approval by the Upper Tribunal in Allen v FSA (2013) on an application by the Authority to amend its statement of case, but with the qualification that the Authority will not be confined to its original case “where important new evidence unexpectedly comes to light or there are other special circumstances”. In that case, permission was given to the Authority for its case to be re-cast in an amended statement of case. In Carrimjee v FCA [2016] UKUT 447 (TCC), the Tribunal said that “the extent of what the Tribunal may examine in considering the matter referred will be prescribed by the issues raised in the pleadings and the evidence sought to support the competing contentions made by the parties in those proceedings”.

This approach to the purpose and significance of statements of case is not essentially different to that taken in court proceedings. They define the issues and, in that way, assist in achieving a fair and efficient disposal of the case.

Ms Burns reminded us of a leading modern explanation of the significance of statements of case, that of Lawton LJ in this court in Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] Ch 246 at 309-10:

This approach to pleadings and statements of case holds good since the introduction of the Civil Procedure Rules: see Prudential Assurance Co Ltd v HMRC [2016] EWCA Civ 376; [2017] 1 WLR 4031.

In In re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164, this court considered the approach to be taken to late changes or additions to a pleaded case in proceedings comparable to the present proceedings, under the Company Directors Disqualification Act 1986. Under that Act, the official receiver or the secretary of state may bring proceedings against a director or former director for an order prohibiting them from being a director or concerned in the management of a company for a period of up to fifteen years. Clarity as to the grounds on which the application is made is achieved by the requirement that the official receiver’s report or the evidence filed by the secretary of state includes “a statement by reference to which the defendant is alleged to be unfit to be concerned in the management of a company” (para. 3(3) of the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987).

At p.177, having referred to para. 3(3) of the Rules and to the observation of Sir Nicolas Browne-Wilkinson V-C in In re Lo-Line Electric Motors Ltd [1988] Ch 477 at 486 that the summary of allegations was “plainly both desirable and necessary”, Dillon LJ said:

In our view, a similar approach should guide the Upper Tribunal in considering whether to permit the FCA to rely on allegations not contained in its statement of case.

Turning to the particular circumstances of Ms Burns’ case, it is necessary to see how the case against her developed.

When, in November 2012, the Authority (then the FSA) issued its decision notice, making a prohibition order against Ms Burns and imposing a financial penalty, it did not know that she had been employed by Pearl and could not therefore know of her non-disclosure to MGM, Teachers or, above all, the Authority itself. Nor did the Authority know of her employment when Ms Burns referred the matter to the Tribunal in December 2012 or when the Authority first filed its statement of case in February 2013.

The FCA became aware of Ms Burns’ employment by Pearl in July 2013, when one of its witnesses, Mr Evans of MGM, provided it with a copy of the Employment Tribunal’s judgment ruling on her claim against Pearl. The FCA identified from it conduct at Pearl that it considered consistent with her conduct at MGM and Teachers. This included, as it thought (in the event, wrongly), attempts to persuade senior executives to use an organisation called Wisdom Tree without declaring that she had a personal interest in it. In October 2013, it applied to amend its statement of case to include, among other changes, this allegation. Permission to amend was given by a direction dated 4 March 2014.

As part of its evidence, the FCA produced a witness statement dated 14 June 2014 by Maria Gouvas, a solicitor and investigator in the enforcement division of the FCA who had been involved with Ms Burns’ case since January 2011. She explained how the Authority had become aware of Ms Burns’ employment by Pearl. At paragraph 18, she referred to Ms Burns’ applications to the Authority for her various controlled functions after her employment by Pearl and said that she had not disclosed that employment in any of those applications. Ms Gouvas went on to refer to the allegation about Wisdom Tree.

What is notable at this stage is that the FCA had included in its statement of case an allegation against Ms Burns in relation to Wisdom Tree but had not included any allegation about her non-disclosure of her employment by Pearl. It did not feature at all in the statement of case.

Ms Burns responded to the FCA’s evidence. Dealing with Ms Gouvas’ witness statement, she said that she had disclosed her interest in Wisdom Tree. This prompted the FCA to make enquiries of Pearl, leading it to abandon this allegation, as Ms Gouvas explained in a further statement dated 4 September 2014. She added at paragraph 6 of the statement:

Nonetheless, there was no attempt by the FCA to include in its statement of case any allegation of non-disclosure by Ms Burns of her employment by Pearl. It was not advanced as a ground for alleging either misconduct or a lack of integrity or for alleging that she was not a fit and proper person.

The nature of the FCA’s case as set out in its statement of case, under the heading “Summary of the Authority’s case”, was clear. It alleged that Ms Burns failed to disclose to MGM and Teachers her conflict of interest arising from her dealings with Vanguard, and that she used her positions as a non-executive director of MGM and Teachers to solicit a similar position at Vanguard and consulting work with it. The statement of case continued: “On this basis, Ms Burns breached the Authority’s Statement of Principle 1…and lacks fitness and propriety”.

This accurately summarised the FCA’s case as set out in detail in the remainder of its statement of case. Paragraphs 5.1 to 5.3 contained a detailed statement of the case that Ms Burns had breached Statement of Principle 1. Importantly, paragraph 5.4 stated that “Ms Burns lacks integrity for the reasons given above. By reason of her lack of integrity, Ms Burns lacks fitness and propriety pursuant to FIT 1.3.1G”. On that basis, the prohibition order was justified.

It is abundantly clear that the entirety of the FCA’s case that Ms Burns was not a fit and proper person for CF2 functions, as well as its case that she had breached Statement of Principle 1 and lacked integrity, was based on her conduct as a non-executive director of MGM and Teachers.

The non-disclosure of Ms Burns’ employment by Pearl was mentioned by Mr Hunter QC, counsel for the FCA, in his written opening submissions, but not as in any way forming part of the FCA’s case on misconduct, integrity or fit and proper person. Consistently with its statement of case, the FCA’s case was based exclusively on the allegations concerning Ms Burns’ conduct while a director of MGM and Teachers.

In assembling the evidence to meet the case against her, Ms Burns was entitled to proceed on the basis that non-disclosure of her employment by Pearl did not form part of the FCA’s case, as also was her counsel in conducting his cross-examination of the FCA’s witnesses.

When it came to cross-examination of Ms Burns, Mr Hunter QC spent a considerable amount of time on this non-disclosure and related matters. It occupies some 27 pages of transcript. This might be an indication that the FCA was making it a ground for their case on integrity or fit and proper person, but this was not the case. In the skeleton argument of Mr Vineall QC on behalf of the FCA for this appeal, he makes clear that the cross-examination was conducted on the basis that it went to general credibility. The point is made that Ms Burns’ counsel did not object but it was a permissible line of cross-examination as to credibility, as her counsel no doubt realised. If, however, he had challenged it and demanded to know the issues to which it went, the answer would have been that it did not go to any issue in the case, but only to credibility.

The position changed in the closing speech of Mr Hunter QC. At an early stage in his closing speech, Mr Hunter addressed Ms Burns’ evidence “at a high level”. He said:

Subsequently, Mr Hunter QC invited the Tribunal to find that Ms Burns deliberately omitted to disclose her employment by Pearl from her applications to the Authority and from her CVs provided to MGM and Teachers.

Clearly the FCA’s position had now changed. The non-disclosure was no longer just a matter of credibility, a factor to be weighed by the Tribunal in making its findings on Ms Burns’ evidence on the issues in the case. It was now itself an issue, forming a ground for the FCA’s case that she lacked integrity and was a not a fit and proper person. It did not, however, apply to amend its statement of case.

At this point, it would have been open to Ms Burns and her legal team to challenge this change in the FCA’s case. In deciding the proper course, the Tribunal would have considered a variety of factors, of which prejudice to Ms Burns would have been the most important. Other factors would have included the very late stage at which this change in the case was being made and the delay on the part of the FCA, which had for some considerable time known, or had available to it, the relevant information.

Counsel for Ms Burns addressed the non-disclosure matters at the end of his closing speech. He dealt with their relevance to Ms Burns’ credibility as a witness. He then made this submission:

As earlier described, the Tribunal permitted Ms Burns to put forward additional evidence and submissions on the non-disclosure after their Decision in draft was circulated.

We will express in due course our views on the way in which the FCA’s case developed, but the issue on this part of Ms Burns’ appeal is whether the legal requirements of procedural fairness were met. If they were not, and given the significance attached to the allegations of non-disclosure by the Tribunal, we would have no choice but to remit the case to the Tribunal on the issue whether she was a fit and proper person and therefore whether the prohibition notice should stand.

There are a number of strands to this question.

First, counsel for Ms Burns correctly accepted in his closing speech that the Tribunal was entitled to take account of her non-disclosure and her evidence on that matter in assessing the credibility of her evidence on those issues which clearly did form part of the FCA’s case.

Second, the Tribunal was entitled to take account of her deliberately untruthful evidence to the Tribunal in reaching its conclusion on whether she was a fit and proper person. In Hobbs v FCA [2013] EWCA Civ 918; [2013] Bus LR 1290, the FCA appealed against a decision of the Upper Tribunal. The FCA’s case that the applicant was not a fit and proper person was based on allegations that he had engaged in market abuse and that he had lied to the FCA in the course of their investigations. The Tribunal treated this as a composite ground for the prohibition notice and, as it held that the allegation of market abuse failed, it followed that the notice could not be supported on the ground that the applicant had lied to the FCA. The Tribunal found that he had lied to the FCA and, further, that he had lied in his evidence to the tribunal.

This court held that the applicant’s lies to the FCA represented a separate ground which the Tribunal should have considered on its own merits. Further, the Tribunal should have taken account of the applicant’s lies in his evidence. The case was remitted to the Tribunal to determine whether, having regard to those matters, the applicant was a fit and proper person.

In a passage on which Mr Vineall relied, Sir Stanley Burnton (with whom Rimer and Ryder LJJ agreed) said at [38]:

As lying to the FCA was a ground of the case against the applicant, it would be distinctly odd if lying to the Tribunal was excluded from its consideration of whether he was a fit and proper person. But I would agree that it is not only in such cases that the Tribunal should have regard to deliberately untruthful evidence given to it. It cannot, of course, form part of the FCA’s pleaded case but it would be perverse to ignore it.

Third, Mr Vineall made a wider submission that, in considering whether an applicant is a fit and proper person, the Tribunal should consider all matters arising out of the evidence before it, irrespective (as we understood his submission) of whether it formed part of the FCA’s pleaded case.

We do not accept this submission. While the Tribunal is the decision-maker on a reference, supplanting in those circumstances the FCA, it is a judicial body whose function is to adjudicate in adversarial proceedings between the cases advanced by the FCA and the applicant. The onus to establish misconduct and lack of integrity on the part of the applicant, and to establish that the applicant is not a fit and proper person, rests firmly on the FCA. The essential elements of the parties’ cases are to be set out in their statements of case, for the reasons already given and as required by the Rules. We do not see anything in the passage cited above from Hobbs to suggest otherwise. In stating that the Tribunal’s consideration of a reference is not ordinary civil litigation and that there is a public interest in precluding persons who are not fit and proper from performing regulated functions, Sir Stanley Burnton was not suggesting that the role of the Tribunal was essentially different from courts and tribunals engaged in analogous proceedings, such as directors’ disqualification proceedings. As Rule 2(1) states, the overriding objective is to deal with cases fairly and justly.

The question is whether the FCA had sought to make the issue in question part of its case and whether, consistently with fairness, the public interest to which Sir Stanley referred and the efficient conduct of the proceedings, the FCA should have been permitted to do so.

As we have earlier said, it became clear in the closing speech of counsel for the FCA that the allegations of non-disclosure had become a substantive part of its case. The Tribunal was entitled to permit this, provided it was fair to do so.

Two matters persuade us that it was fair for the allegations of non-disclosure to form part of the case to be decided by the Tribunal.

First, Ms Burns and her legal team could have challenged the late change to the FCA’s case, but for the reasons explained by her counsel in his closing speech chose not to do so. There are many reasons why decisions are taken in the course of proceedings to challenge or not challenge steps taken by the other party and, unless there are good reasons for permitting a party to go back on those decisions, they will bind that party. The fair and efficient conduct of proceedings would otherwise be seriously undermined. We see no good reasons for permitting Ms Burns to go back on the decision not to challenge the FCA on this point.

Second, and in any event, Ms Burns was given the opportunity, which she took, to adduce new evidence and to advance new submissions on the non-disclosure. The Tribunal was entitled to take the view that the further evidence and submissions did not undermine the FCA’s case.

Ms Burns has submitted further documents to this court which, she maintained, could have had an impact on the Tribunal’s decision on the non-disclosure of her Pearl employment. She said that these documents would have been placed before the Tribunal if she had known that the FCA was relying on the non-disclosure as a ground for its case that she was not a fit and proper person.

We have looked at these documents but have concluded, without difficulty, that they do not provide any assistance to Ms Burns. An email from Mr Evans to Ms Burns at her address “@plg.com” is said to show that he knew that she had been employed by Pearl. We regard this as fanciful and, in any event, it would not deal with the more serious allegation that she deliberately failed to disclose her employment on her applications to the FCA. A prospectus which refers to her employment by Pearl and was, she says, provided to MGM was one of the documents put before the Tribunal and dealt with in the postscript to their Decision. Some references from colleagues at Pearl or its associated companies were obtained by Ms Burns for the purpose of this appeal to demonstrate that she had no reason to suppress the fact of her employment by Pearl. The fact is that she brought proceedings against Pearl in the Employment Tribunal and the motive suggested by the Tribunal for her non-disclosure was a desire to conceal that she had been in dispute with Pearl. The references do not affect that finding.

Finally, Ms Burns submits that if she had known that the non-disclosure formed part of the FCA’s case, she would have dealt with it in her witness statements and indeed, she submitted, extensive material about it had been removed from the draft of her principal statement. To make this good, she produced to us a draft of her third witness statement. It does contain references to her employment with Pearl, some of which were removed, but none of it deals with the non-disclosure question. This is not surprising. The final version of her statement was signed by her on 4 June 2014, but no reference was made to non-disclosure by the FCA until the first statement of Ms Gouvas, which was not signed until 6 June 2014. What has been conspicuously absent is any plausible explanation by Ms Burns for the non-disclosure in the FCA forms. She could have provided to the Tribunal, as part of her additional material, or even to this Court the explanation that she would have given if the non-disclosure had clearly been part of the FCA’s case. The only explanation proffered has been that she thought that disclosure was required only of employment in regulated positions, an explanation that is impossible to reconcile with the clear terms of the form.

Ms Burns failed to provide any significant material, by way of evidence or submissions, to the Tribunal or to us that indicated any defence to the allegation of deliberate non-disclosure.

We therefore conclude that this ground of appeal also fails.

We do, however, take the view that the way in which the FCA presented its case on the non-disclosure was not satisfactory. Having received the Employment Tribunal decision in July 2013, it knew that Ms Burns had been employed by Pearl. It could have applied to amend its statement of case to include the non-disclosure as a substantive part of its case, just as it in fact successfully applied to include other allegations concerning Ms Burns’ employment with Pearl. Mr Vineall told us that it was not until later that the FCA looked at the application forms, but they had done so and realised that the employment had not been disclosed in them by the time Ms Gouvas made her witness statement on 6 June 2014.

It is not satisfactory that the non-disclosure was treated as going only to credit and then, only after the evidence had closed, to treat it as a substantive allegation, without applying to amend the FCA’s statement of case to include it. The onus lay on the FCA to take that step, so that the matter could be properly argued and considered, including consideration whether the hearing should be adjourned if permission were given for the amendment.

Mr Vineall told us that it has always been the practice of the FCA to plead the substantive matters on which it proposes to rely and, on instructions, confirmed that this remained the policy of the FCA. We are grateful to hear that, but would only observe that it is no more than the law requires.

Having said that, we are satisfied for the reasons already given that in this case there was no injustice or unfairness to Ms Burns.

The third substantive issue before us concerns the decision by the Upper Tribunal to award Ms Burns the sum of £120,000 including VAT in respect of her legal costs on the basis that the FCA acted unreasonably in introducing into the proceedings an allegation that Ms Burns’ email of 5 November 2010 constituted a proposal to Vanguard that they should make corrupt payments to her for securing the MGM and Teachers mandates.

The FCA contends that this award was highly unusual and wrong. It was highly unusual because Ms Burns was awarded costs despite being the losing party and despite having been found guilty of serious misconduct, prohibited from carrying out a CF2 function and fined. It was wrong because it was based on an erroneous approach to rule 10(3)(d) of the Rules. In particular, contends the FCA, the Upper Tribunal wrongly applied a gloss to the statutory test and directed itself that the FCA required a cogent basis for differing from the position taken by the FCA’s Regulatory Decisions Committee (“the RDC”). It continues that there is no such requirement for cogency and the Tribunal was wrong to apply this gloss, and consequently it fell into error in making the award of costs.

We have no difficulty accepting that the award of costs made by the Upper Tribunal was unusual, and particularly so where, as here, the party in whose favour the award was made had been found guilty of wrongdoing. However, it is upon the second contention that FCA’s cross-appeal depends. Before addressing that contention and the FCA’s submissions in relation to it, we must outline the circumstances in which the corrupt payment allegation came to be introduced into the proceedings and summarise the reasoning of the Tribunal.

Much of the relevant background is helpfully set out in Mr Vineall’s skeleton argument on behalf of the FCA. On 25 May 2012, the RDC issued a warning notice stating that it proposed to take action against Ms Burns because she had breached Statement of Principle 1 of the APER which requires an approved person to act with integrity in carrying out his or her controlled function. The various breaches of that principle were set out in section 5 of the notice and included, at 5.3, the following:

As the FCA fairly points out, the decision to issue the notice was based upon the documents before the RDC, including the 5 November 2010 email, and notwithstanding representations by Ms Burns to the effect that it was not her intention to solicit a benefit.

On 28 November 2012 and following further representations by Ms Burns, the RDC issued a decision notice in which it reached this rather different conclusion about the 5 November 2010 email at [7.9]:

On 20 December 2012, Ms Burns referred the matter to the Upper Tribunal and on 19 February 2013, the FCA served a statement of case. It contained no assertion that the 5 November email constituted a demand for money because at that time the FCA was of the view that it had no reason to doubt the evidence that Ms Burns had given about it.

Not long thereafter, two matters caused the FCA to change its position. First, in March 2013, Ms Burns made an application in the Upper Tribunal for an order that the details of her case should remain private. Ms Burns gave evidence in support of that application and the FCA concluded that the quality of that evidence and her conduct in the application were such as to give rise to substantial doubts as to her credibility.

Secondly, on 10 July 2013, the FCA came into possession of the judgment of the Employment Tribunal dated 29 March 2010 in the claim made by Ms Burns against her former employer, Pearl, for unfair dismissal and sex discrimination. The Employment Tribunal dismissed Ms Burns’ claim. The FCA considered that its judgment gave rise to yet further grounds for doubting Ms Burns’ credibility.

In the light of these two matters the FCA decided to seek permission to amend its statement of case to introduce the allegation that in the 5 November email Ms Burns was soliciting from Vanguard a commission arrangement and a non-executive director role in return for her using her fiduciary positions at MGM and Teachers to facilitate the placement of investment mandates from those firms with Vanguard. Ms Burns originally resisted the FCA’s application to amend its statement of case but withdrew her opposition at a late stage. Accordingly, on 22 November 2013, the FCA was given the permission to amend that it sought.

The Upper Tribunal began by reminding itself that rule 10(3) provides, so far as relevant:

Ms Burns argued that the FCA had been unreasonable in bringing and pursuing the corrupt payment allegation for the following reasons. First, the RDC had fully considered the allegation and rejected it in the course of the process leading up to the issuing of the decision notice. Secondly, this was the only outcome consistent with common sense because it was highly improbable that the email was ever intended as a demand for corrupt payments having regard to the request it contained for the matter to be placed before the company lawyer in order to be progressed. Thirdly, it is a serious step for the FCA to reintroduce an allegation of serious wrongdoing which the RDC has rejected. It ought to have cogent reasons for doing so and there were no such reasons here. Fourthly, this allegation was of an altogether more serious nature than the other allegations made against her and accordingly the FCA needed a particularly good reason to justify its introduction.

The FCA sought to meet these submissions in a number of ways, none of which the Tribunal found to be persuasive. It contended first, that, on a literal reading, the email appeared to be a demand for corrupt payments and that this was how Vanguard had read it.

The Tribunal considered this contention did not meet the substance of Ms Burns’ submissions for what was important to ascertain was Ms Burns’ intention in writing it. The RDC, having investigated the matter, did not accept that Ms Burns had any such corrupt intention.

The FCA argued next that the RDC had rejected the allegation without Ms Burns’ evidence or explanation being tested in cross-examination and, given the clear terms of the email, it was not unreasonable for it to take the view that Ms Burns’ explanation might not be accepted when tested at a full hearing.

The Tribunal was not impressed by this argument either. It reasoned at [51]:

The FCA also relied upon the deficiencies in Ms Burns’ evidence highlighted during the course of her privacy application and in the decision of the Employment Tribunal, both of which, it contended, undermined Ms Burns’ credibility and her explanation of events, including her explanation of the 5 November 2010 email.

The Tribunal considered that these points did not improve the FCA’s case in any material way. Indeed, if anything, they weighed against it:

Finally, the FCA contended that its position was based upon a reasonable interpretation of events and the fact that the Tribunal came to a different conclusion on the basis of all the evidence did not render its position unreasonable.

The Tribunal rejected this argument in these terms:

The Tribunal then proceeded to assess the costs attributable to the reinstatement of this allegation. It observed that it was the most serious allegation in issue but it also had in mind that, had the allegation not been reintroduced, the matter would still have proceeded to a full hearing on the other allegations against Ms Burns which were very serious and, if established, would have important consequences. Having regard to these matters, its knowledge of the case and its experience of how such cases are run, it came to the conclusion that it was proper and appropriate to award Ms Burns the sum of £120,000 (including VAT) by way of costs.

Mr Vineall submits that it is clear from paragraph [53] of the decision that the Upper Tribunal directed itself that any decision to reintroduce into proceedings an allegation rejected by the RDC should be based upon cogent evidence, or at least on cogent reasons, capable of demonstrating that the RDC, in rejecting the allegation, misapprehended the true position. In other words, continues Mr Vineall, the Tribunal directed itself that unless the subsequent evidence on its own could be considered sufficiently cogent to demonstrate that the RDC, in rejecting the allegation, misapprehended the true position, then the FCA would be acting unreasonably. Moreover, argues Mr Vineall, the Tribunal’s overall conclusion regarding unreasonableness, as expressed in paragraphs [57] and [66] of the decision, show that this direction was the determinative, indeed the sole factor in its overall conclusion.

Mr Vineall contends this approach was wrong in law for there is no requirement of cogent further evidence or reasons to demonstrate that the RDC has fallen into error and that it is contrary both to principle and to the Upper Tribunal case law to introduce one. Where, as here, the impugned conduct of the FCA is its decision as to which misconduct allegations to plead in a statement of case before the Tribunal, the correct approach as a matter of law is as follows. First, it is necessary to have well in mind that the hearing before the Tribunal is de novo in nature. Neither party has to show that the RDC has erred in law; and the Tribunal may properly reach a conclusion different from that of the RDC, even on the same evidence. Secondly, the FCA is entitled to plead allegations which are reasonably arguable and are within the scope of the facts and matters considered by the RDC, whether or not the RDC has upheld those allegations. Thirdly, it is a matter for the FCA which reasonably arguable allegations to advance. If there is any requirement of cogency, then it goes no further than the general requirement that there should be a proper basis for any serious allegation. But that general requirement applies to the whole of the material supporting the case. Further, it is a requirement as to the arguability of the case and not a requirement to demonstrate that the RDC, in rejecting the allegation, misapprehended the true position.

Finally, submits Mr Vineall, the Tribunal’s misdirection was self-evidently material to its decision. If, on the other hand, the Tribunal had asked itself the correct question, namely whether the original solicitation allegation was reasonably arguable in a de novo hearing, then it would have been bound to conclude that it was. This was the original view of the RDC based principally on the wording of the email itself; it was plainly a reasonable view for it to take; and it was how Vanguard understood the email at the time. Further, Ms Burns’ explanations of her intentions in sending the email and the credibility of those explanations were relevant, indeed they made the difference between the RDC’s original view and its subsequent view. Accordingly, material showing a general lack of credibility on her part plainly provided further support to the case. In all these circumstances, the Tribunal’s decision that the FCA’s conduct in reintroducing the original allegation was unreasonable was based upon an error of law and the decision should therefore be set aside.

We accept that a hearing before the Upper Tribunal is de novo in nature and that neither party has to show that the RDC has erred in reaching its decision. We would also make clear that the FCA is entitled to plead any allegation which has a real prospect of success and lies within the scope of the facts and matters considered by the RDC. Nevertheless, it is inherent in that proposition that the FCA must have a proper basis for making any allegation and, in so far as the FCA intends to advance an allegation of a particularly serious nature, such as an intention to solicit a corrupt payment, then the strength and quality of the evidence available in support of it must be such that there is a real prospect that it will be established. Moreover, it is a matter for the FCA to assess and decide which allegations to advance and in carrying out that assessment and making that decision it must have regard to all of the circumstances and available evidence. If the RDC has rejected an allegation of a particularly serious nature then the FCA should consider with care whether it has a proper basis for advancing it all over again. In all cases the FCA must make a careful assessment having regard to all of the evidence and all of the material circumstances whether each of the allegations it chooses to advance is properly arguable.

We have given anxious consideration to the decision of the Upper Tribunal in this case including, in particular, paragraph [53] but are not persuaded that, read in context, it contains a material misdirection of the kind for which Mr Vineall contends. The Tribunal was acutely conscious of the very serious nature of the allegation of corrupt intent that the FCA chose to introduce and that to make it good would require cogent evidence and necessarily involve a careful if not critical examination of the facts. It was of course true that Vanguard’s first reaction provided it with some support but, as the Tribunal fairly pointed out, by the summer of 2013 this was largely water under the bridge. The RDC had carried out a careful consideration of the contents of the email with the benefit of Ms Burns’ written and oral representations. Against this background, we think the approach of the Tribunal as expressed in its decision at paragraph [53] is readily understandable. We do not understand it to have been purporting to lay down any new rule of general application but merely to have been making a parenthetical observation that, the more serious the allegation, the more cogent the evidence must be to overcome the inherent improbability that it occurred. Where, as here, the allegation is of a particularly serious nature, the FCA must well know that it will require evidence of commensurate cogency to make it good. It should consider with great care whether it is appropriate to advance such an allegation, and particularly so in circumstances where it has been considered and rejected by the RDC.

Moreover, we are entirely satisfied that the Upper Tribunal made no error in arriving at its conclusion in the present case. It was highly improbable that Ms Burns was ever intending to seek a corrupt payment. As the Tribunal explained, putting such a case in cross-examination would always face the obstacle that someone acting with corrupt intent would hardly request that the matter be placed before the company lawyer. In these circumstances it was indeed incumbent upon the FCA to consider with the greatest of care whether it had available to it any evidence which would support an allegation that Ms Burns did, despite the terms of the email, have a corrupt intention. There was no such evidence before the RDC and accordingly the FCA needed to assess whether or not the further evidence available to it provided a sound basis for coming to a conclusion different from that of the RDC. We recognise that the FCA had found evidence raising wider concerns about Ms Burns’ integrity and the credibility of her evidence but we believe that the Tribunal was entitled to find that these matters were not capable of providing a sound basis for reading the email in a way that would flout common sense.

In our judgment the Upper Tribunal was entitled to find that, in light of the foregoing, the FCA acted unreasonably in introducing the corrupt payment allegation into the proceedings and that this unreasonably increased their gravity and Ms Burns’ legal costs. For all of these reasons we have come to the conclusion that the FCA’s appeal must be dismissed.

For all of the reasons we have given:

the appeal by Ms Burns against the decision of the Upper Tribunal released on 15 December 2014 is dismissed;

the appeal by the FCA against the decision of the Upper Tribunal released on 5 November 2015 is dismissed;

the applications by Ms Burns for permission to adduce fresh evidence are dismissed.