FundHaven Ltd and another v The Executive Director of the Securities Commission of the Bahamas (Bahamas)

Under section 21(1) of the Court of Appeal Act of the Commonwealth of The Bahamas (“the CA Act”) a second appeal to the Court of Appeal is only permitted on “a point of law alone” and provided that “a Justice of the Supreme Court or of the court shall have certified that the point of law is one of general public importance”.

This appeal concerns the requirement of certification and in particular (i) whether the Court of Appeal was correct to conclude that the Supreme Court Justice did not certify a point of law of general public importance for the purposes of section 21(1) of the CA Act and (ii) whether the Court of Appeal was justified in refusing itself to certify such a point of law.

The second appellant, South American Investment Fund Ltd (“SAIF”), a Bahamian company, is a private investment holding vehicle for an Argentinian family.

In 2004, SAIF elected to be licensed as an investment fund under the Bahamian Investment Funds Act 2003 (“the Act”).

The respondent, The Securities Commission of The Bahamas (“the Commission”), is a statutory body responsible for the supervision and regulation of the activities of the investment funds, securities and capital markets under the Act and under the Securities Industry Act 2011 (and, before its repeal, the Securities Industry Act 1999).

Under section 2 of the Act an “investment fund” is a company, unit fund or partnership “that issues or has equity interests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits or gains arising from the acquisition, holding, management or disposal of investments”. It does not, however, include any such pooled investment funds “where the holder of an equity interest does not have the option to redeem his equity interest or require the issuer to repurchase his equity interest” - ie “closed-end” funds.

Under section 7 of the Act a company may elect to be licensed as an investment fund and is thereby deemed to be an investment fund for the purposes of the Act. Section 7(1) provides:

The Act makes provision for two categories of investment fund administrators, restricted and unrestricted. By section 13 of the Act, unrestricted fund administrators may themselves license funds under their administration as SMART funds. A SMART fund is “an investment fund established by the Commission as a Specific Mandate Alternative Regulatory Test Fund that satisfies certain prescribed parameters and requirements of a category, class or type of investment fund previously approved by the Commission”.

Section 26 of the Act requires the administrator of an investment fund to “use reasonable efforts to ensure that the investment fund does not carry on or attempt to carry on business as an investment fund contrary to provisions of this Act.”

The Investment Fund Regulations (“the Regulations”) were made in exercise of powers conferred by section 62 of the Act. Regulation 17(1)(g) requires fund administrators to “take all reasonable steps to ensure that operators are meeting their obligations and are complying with the Act and these Regulations”.

SAIF appointed Winterbotham Trust Company Ltd (“Winterbotham”) as its administrator. Winterbotham was an unrestricted investment fund administrator under the Act. On 14 December 2004, Winterbotham licensed SAIF as a SMART Fund Model 003 (SFM003). On 21 March 2006 Winterbotham resigned as SAIF’s administrator and cancelled SAIF’s SFM003 licence.

In June 2006, SAIF appointed the first appellant Accuvest Fund Services Ltd (“Accuvest”) as its administrator and informed the Commission by letter that it had done so, in succession to Winterbotham. Accuvest was licensed as a restricted investment fund administrator and therefore could not license investment funds. Its directors were Mr Jensen and Mr Nottage, who were also the directors of SAIF.

On 27 April 2007, Accuvest applied to the Commission for SAIF to be licensed as a SMART Fund Model 005 (SFM005). After a period of correspondence during which the Commission required Accuvest to provide certain information, it eventually licensed SAIF as a SFM005 on 25 June 2008.

Under section 3 of the Act, an investment fund “shall not carry on business or attempt to carry on business” unless it is licensed. The Commission formed the view: (i) that SAIF had been operating as an investment fund without a license in breach of section 3 of the Act, because it had remained active but had not been licensed between March 2006 and June 2008; and (ii) that Accuvest had acted in breach of section 26 of the Act and regulation 17(1)(g). These alleged breaches were made the subject of a formal complaint by the Commission as set out in a notice dated 8 November 2010.

There was a hearing of the complaint before the hearing panel of the Commission on 28 January 2011. At the hearing SAIF and Accuvest were represented by Mr Jensen and Mr Nottage.

The panel delivered its decision on 27 January 2011. It found that once Winterbotham resigned as administrator, SAIF’s licence could not subsist, and that Accuvest was therefore obliged to ensure that the required documents were submitted to the Commission to license SAIF. The panel found that SAIF had not ceased operations, and so had been operating without a licence, and therefore found the breach of section 3 of the Act to be proven. In relation to Accuvest, the panel found that it had failed to use reasonable efforts to ensure SAIF did not carry on business contrary to the Act, or to ensure that it met its obligations, and therefore found the breach of section 26 of the Act and regulation 17(1)(g) to be proven. In its final decision in March 2011, the panel imposed fines on SAIF and Accuvest totalling $81,000.

Accuvest and SAIF (“the appellants”) appealed against the panel’s decision to the Supreme Court. The appeal was heard by Hepburn J on 18 and 19 July 2011. She gave judgment on 6 January 2012, dismissing the appeal save in relation to the fines imposed, which were reduced by one third.

On 3 July 2013, the appellants filed a notice of motion in the Court of Appeal seeking the leave of the Court of Appeal to appeal out of time against the judge’s decision.

On 3 September 2013, the Court of Appeal ruled that, in accordance with section 21(1) of the CA Act, the appellants required a certificate from the judge, certifying that the point of law upon which they appealed was one of general public importance. Section 21(1) of the CA Act provides as follows:

Since there was no certificate, the Court of Appeal dismissed the application and suggested that the appellants re-file it with a certificate.

On 2 October 2013, the appellants made an application to the judge to certify their appeal as involving a point of law of general public importance. The 16 grounds of appeal were as follows:

In paragraph 12 of the appellants’ skeleton argument for the hearing, having set out the grounds of appeal, it was stated that the “central questions of law” raised by the appeal and which were “of general public importance” were as follows (“the suggested points of law”):

During the course of the hearing the judge made various references to the suggested points of law. Examples relied upon by the appellants include the following:

The judge appears nevertheless to have been troubled as to what exactly the points of law were and towards the end of the reply submissions of counsel for the appellants she sought further clarification as follows:

The judge then decided to certify that the appeal raised a point of law of general public importance, stating her conclusion and the reasons for it as follows:

By a certificate dated 2 October 2013 and signed on 6 November 2013 (“the first certificate”), the judge purported to certify the point of law in the following terms:

The appellants filed a fresh notice of motion for leave to appeal on 7 October 2013. At a hearing on 11 November 2013, the Court of Appeal (Allen P, John JA and Conteh JA) rejected the first certificate as unsatisfactory as it had not identified the points of law in question. The court stated that the point of law had to be identified in the certificate and that it was not appropriate for the court to go behind it and look at the transcripts of the hearing in order to “find” the point of law.

The appellants then drafted a new certificate (“the second certificate”) and submitted it to the judge for certification. It was in the following terms:

The second certificate, dated 12 November 2013, was eventually signed on 18 December 2015, not by the judge, who had apparently retired on 31 May 2014, but by the Deputy Registrar of the Supreme Court.

The matter then went into abeyance until mid-March 2016 when various supplemental affidavits were filed. The second notice of motion for leave to appeal out of time was re-listed and came before the court at a hearing on 16 March 2016. The Court of Appeal (Allen P, Isaac and Crane-Scott JJA) rejected the certificates as unsatisfactory and determined, from reading the transcript of the hearing before the judge on 2 October 2013, that the judge “had not properly considered the application before her, and more importantly, had not actually certified the points as required” (para 11).

In view of “the obvious difficulties which arose in relation to the certificate” (para 12) the court agreed to consider for itself whether there were on the documents before the court points of law of general public importance such as would give it jurisdiction to hear the appeal under section 21(1) of the CA Act.

In its judgment dated 22 June 2016, the Court of Appeal ruled that the appellants had not shown that any or all of their 16 grounds of appeal involved “a point of law alone” or a point of law of “general public importance” and so they declined to issue a certificate. In the result the court declined jurisdiction to hear the notice of motion for leave to appeal out of time and dismissed it with costs.

The Court of Appeal dismissed the appellants’ application for conditional leave to appeal to the Privy Council on 1 March 2017. On 11 October 2017 the Privy Council granted permission to appeal. The matter was due to be heard on 19 March 2020 but was adjourned at the parties’ request due to logistical difficulties raised by the Covid-19 pandemic and consequent government- imposed restrictions.

The issue on the appeal was agreed between the parties in the following terms:

This issue raises a prior question of whether the judge issued a proper certificate. If not, the further issue arises as to whether the Court of Appeal was justified in refusing to certify a point law.

In the view of the Board the essential issues on the appeal may therefore be stated as follows:

Did the judge certify a point of law of general public importance for the purposes of section 21(1) of the CA Act?

If not, was the Court of Appeal justified in refusing to certify such a point of law?

For completeness, it should be noted that, at the permission to appeal stage, the Commission contended that there was no jurisdiction to appeal to the Privy Council under section 23 of the CA Act because the decision of the Court of Appeal was not a decision on appeal. This point has not been pursued or argued before us and so the Board will proceed on the assumed basis that it has jurisdiction.

The appellants’ first contention is that the judge’s first certificate was a valid certificate. They accept that it might be said that, in respect of section 21(1), if no point of law is identified, then no point of law has been certified. They also accept that the certificate did not expressly identify the points of law of general public importance. They submit, however, that the certificate did impliedly identify the suggested points of law; or that the points of law the judge had in mind could be identified with reasonable certainty.

They submit that the judge was impliedly stating that the appeal raised the suggested points of law, as identified at para 12 of the appellants’ skeleton argument. Those were the two points put to her by the appellants in their application and the judge acceded to that application. They contend that the extracts from the transcript cited at para 23 above show that the judge repeatedly identified the points of law by reference to para 12 of the appellants’ skeleton argument, and concisely restated their effect.

It is the view of the Board that a certificate purportedly issued under section 21(1) must identify and state what the point or points of law of general public importance are. The process of certification enables the point of law to be identified without the need for further inquiry. All the appeal court should need to consider is the certificate. It should not be necessary and is not appropriate for the Court of Appeal to trawl through the transcripts and the parties’ written and oral submissions seeking to “find” the point of law. The point of law must be stated in the certificate itself.

The appellants rightly accept that the first certificate does not “expressly” identify the points of law. The certificate simply stated that the grounds of appeal “involve a point of law which is of public importance”. Assuming that this is sufficient to incorporate by reference into the certificate the grounds of appeal, and that it is appropriate to have regard to such an incorporated document, that does not assist in identifying any point or points of law. The grounds of appeal largely consist of alleged errors of the judge in what she found (“erred in finding”) or failed to find (“erred in failing to find”) - ie errors in fact finding or, at best, in making findings of mixed fact and law. Although grounds 12 to 15 allege a failure “to appreciate”, even these do not assert an error of law. Moreover, the 16 grounds of appeal taken together do not set out or constitute a point or points of law and there is no basis for seeking to rely on some individual grounds of appeal separately, as it is the grounds of appeal as a whole which were purportedly being certified.

Indeed, the appellants acknowledged before the judge that the grounds of appeal did not identify the suggested points of law. That is why they considered it necessary to seek to set out those points separately in their skeleton argument and in oral argument.

It is no answer for the appellants to say that the suggested points of law can be inferred or implied from a consideration of other documents, such as their skeleton argument and the transcripts. The Court of Appeal should be able to tell from the certificate itself whether a point or points of law have been certified and, if so, what they are. That is not possible in this case, as the court rightly held.

The appellants’ second contention is that the judge’s ruling at the hearing was a sufficient certification for the purposes of section 21(1). It is submitted that there is no express requirement for a written certificate and that a judge may certify orally. It is said that the judge did so when she decided, at the hearing on 2 October 2013, that the appellants’ grounds of appeal raised points of law of general public importance and agreed to certify. By so doing she “impliedly” identified the suggested points of law identified by the appellants in para 12 of their skeleton argument.

In the Board’s view, it is clear that section 21(1) is contemplating written documents. The context is an appeal and the setting out of grounds of appeal which involve a point of law alone. That is a documentary process. Certifying the point of law is a necessary part of that process and is equally contemplated as being in writing. It is a formal requirement. It needs to be in writing for the Court of Appeal to be able to tell from the certifying document, rather than from any other documents, what the point of law is. In any event, even if it was possible to certify orally, that would be of no assistance to the appellants in this case since a certificate was purportedly issued. As such, it is that document that has to be considered in relation to certification. Yet further, the judge’s ruling is unclear since it refers to certifying “the appeal” rather than a point of law. In her ruling she says that “the appeal ought to be certified” and that “I’m going to certify the appeal”. This would appear to reflect the judge’s continuing uncertainty as to what the point of law was, as exemplified in the exchange cited at para 24 above.

The appellants’ third contention is that the second certificate was a valid certificate. It is pointed out that in oral argument on 16 March 2016 the President and Isaacs JA both accepted that the Registrar could sign a certificate arising out of a judge’s ruling, notwithstanding that the judge had demitted office, and that that was a correct statement of the law in The Bahamas. It is submitted that the Registrar has properly considered from a review of the court file “what was the effect of the judge’s decision” and was entitled to sign the certificate accordingly.

It may well be that the Registrar is entitled to set out in a court document an order which has been made previously by a judge, since that is an essentially ministerial matter. It is not, however, for the Registrar to determine the terms of an order. In the present case the judge had set out the appropriate terms of the certificate to be issued in the first certificate. She never reconsidered or amended those terms. The points of law set out in the second certificate were put forward by the appellants. They were not suggested or endorsed by the judge. They reflected the appellants’ view of what the judge intended to be done. They did not reflect any decision by the judge or any other judge on certification. The resulting certificate did not involve certification by a “Justice of the Supreme Court”.

For all these reasons the Board considers that the Court of Appeal was correct to conclude that the judge did not certify a point of law of general public importance for the purposes of section 21(1). It follows that the question of whether the Court of Appeal was entitled to discharge such a certificate does not arise. There was no certificate to be discharged.

Section 21(1) of the CA Act provides that certification may be made by a Justice of the Supreme Court “or of the court” - ie the Court of Appeal. The Court of Appeal was therefore entitled to consider the issue of certification for itself.

The Court of Appeal first considered the requirement under section 21(1) that the appeal must relate to a “point of law alone”. In answering that question, the Court of Appeal correctly focused on the grounds of appeal since they formally set out the proposed basis of the appeal. In the Board’s view the Court of Appeal was justified in concluding that the 16 grounds of appeal raised points of fact or mixed fact and law rather than points of law alone.

The same conclusion follows if one has regard to the suggested points of law, even though they are not set out in the grounds of appeal.

The first suggested point of law depends upon the factual assertion that SAIF was not carrying on business as an investment fund within the meaning of the Act. This was not, however, the case which was advanced before the panel. Before the judge the appellants sought to adduce fresh evidence to that effect in the form of an affidavit of Mr Nottage, but the judge refused to admit that evidence. In those circumstances the appellants were not able to make good that assertion, as the judge held at para 60 of her judgment:

The second suggested point of law assumes that the only basis upon which SAIF could be regarded as an investment fund for the purpose of the Act was the deeming provision in section 7(1) of the Act. The judge found, however, that there was evidence upon which it could properly be inferred that SAIF was carrying on business as an investment fund, including its decision to apply for a licence to operate as such a fund and then to seek to be re-licensed. The natural inference would be that this was done because SAIF wished to operate as an investment fund, and there was no other explanation in evidence. As the judge found at para 63:

On the facts as found in the present case, the suggested points of law are therefore not points of law “alone”.

The Court of Appeal then considered whether the suggested points of law were of general public importance and concluded that they were not. The Court of Appeal correctly observed that, as explained above, both points depended on matters of fact and that meant that it was difficult to see how they “transcend the circumstances of the parties and are of great public importance to The Bahamas' financial sector and to the public generally” (para 39). The Court of Appeal further pointed out at para 42 that:

These considerations amply justify the conclusion reached by the Court of Appeal. In any event, the general importance of a point of law is very much a matter for the local court to consider and determine rather than the Board and considerable deference will be given to views of the Court of Appeal on such a matter.

For the reasons set out above the Board will humbly advise Her Majesty that the appeal should be dismissed.