[2025] EWHC 2035 (Comm)

The FSMA Claim is set out in paragraphs 4.4, 5 to 9, 11.2, 11.3, 12, 13, 16, 17, 18 and 19 of the Particulars of Claim. The claim is for damages pursuant to section 138D of FSMA.

According to its Skeleton Argument, Mode’s position is that the relevant breach is the unreasonable rejection of its claim (including by terminating or avoiding a policy) pursuant to ICOBS 8.1.1(3) R. Although no defence has currently been filed by AXA for the reasons identified, it is clear from the evidence that AXA would in due course deny that its avoidance of the Policy and/or its refusal to meet Mode’s claim constitutes a breach of ICOBS. The purported avoidance of the Policy was on 28 September 2018 which is within the six years prior to the issue of the proceedings for the purposes of section 9 of the 1980 Act and, unlike other claims, AXA does not suggest that this claim is statute-barred. It is not in dispute that AXA is an authorised person within the meaning of FSMA.

Section 138D(2) FSMA provides that:

“A contravention by an authorised person of a rule made by the FCA is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.”

The test for what constitutes “a private person” is contained in Regulation 3 of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (“the 2001 Regulations”):

“(1)

In these Regulations, “private person” means – any individual, unless he suffers the loss in question in the course of carrying on – (i) any regulated activity; or (ii) any activity which would be a regulated activity apart from any exclusion made by article 72 (overseas persons) …. of the Regulated Activities Order; any person who is not an individual, unless he suffers the loss in question in the course of carrying on business of any kind ..”

Accordingly the central question under Regulation 3 is whether Mode is a “private person” and whether Mode has a real prospect of success in arguing that Mode was not “carrying on business of any kind”.

On the second question, it is common ground that the test is an expansive one – it is the carrying on of any business rather than a business of a particular type connected to the Policy or the loss suffered – see Titan Steel Wheels Limited v The Royal Bank of Scotland [2010] EWHC 211 (Comm); [2010] 2 Lloyd’s Rep 92; Camerata Property Inc v Credit Suisse Securities (Europe) Limited [2012] EWHC 7 (Comm) per Flaux LJ at [98]; Grant Estates Ltd v Royal Bank of Scotland plc [2012] CSPH 133 and Bailey v Barclays Bank plc [2014] EWHC 2882 (QB).

So far as the evidence on this is concerned in paragraph 39(a) of his first witness statement in support of the Application is concerned Mr Abbey states that Mode “was plainly acting in the course of business in relation to the Policy”. In paragraph 39(b) of that witness statement, Mr Abbey refers to a letter from Griffin Law, on behalf of Mode, dated 26 November 2021 in which Mode has intimated a claim for the rental income it was able to collect. Mr Tregunno’s witness statement is silent on this issue.

Although Mr Chapman KC submitted that Mode was not carrying on business of any kind, for the purposes of Regulation 3, it seems to me that this was wholly untenable. I am entirely satisfied that Mode has advanced a claim not just as “property owner” but that the Property was owned and operated as a business. Part of the claim was in respect of rental income which was defined in the Policy as “money paid or payable to you for tenancies and other charges for services provided in the course of your business at the premises”. The loss which Mode has suffered as a result of the Fire was loss which it suffered in the course of carrying on business.

Regulation 6 of the 2001 Regulations provides (“Regulation 6”):

“6(1) The definition of “private person” in regulation 3 is prescribed for the purposes of section 138D(6) of the Act (and so the contravention by an authorised person of a rule is actionable at the suit of a person who falls within that definition and who suffers loss as a result of that contravention).

A case where any of the conditions specified by paragraph (3) is satisfied is prescribed for the purposes of section 138(D)(4) of the Act (and so in such a case the contravention of a rule is actionable at the suit of a person who is not a private person).

The conditions specified by this paragraph are that –(c) the action would be brought at the suit of a person (who is not a private person) acting in a fiduciary or representative capacity on behalf of a private person and any remedy would be exclusively for the benefit of that private person and could not be effected through an action brought otherwise than at the suit of the fiduciary or representative”.

Accordingly, the central questions on the application of Regulation 6 are whether Mode was acting in a “fiduciary or representative capacity on behalf of a private person” and whether the remedy sought would be “exclusively for the benefit of that private person”.

The evidence on this is as follows.

The operative provision of the deed of declaration provides:

“The Declarant hereby declares and affirms that it has at all times held the Assets as trustee subject to a trust to return the same to the trustee upon termination of the Fiduciary Services Agreement, and that the Declarant has no beneficial interest of its own for the purposes of Part 3 Finance Act 2013 and Schedule 25 Finance Act 2013”.

So far as material, the relevant part of the FSA provides:

“2.1

During the Period of Appointment the Fiduciary shall have all rights to apply and deal with the Property and the income and capital thereof and all accumulations thereto as if it were the beneficial owner thereof and the Principal shall have no right or power over the Property and the income and capital thereof and all accumulations thereto.

2.2

The Fiduciary shall be entitled to charge reasonable remuneration for its fiduciary services from time to time.”

Mr Chapman KC submitted that Mode had a reasonable prospect of being able to rely upon Regulation 6 because: (i) whether trustees are “private persons” for the purposes of s.138D FSMA has not yet been tested in any case; (ii) there is authority to say that s.138D may apply to claims made by a partnership because a partnership does not have legal existence separate from the individual partners and (iii) this raises a point of law which is of wider significance and which ought to be tested against the factual findings at trial, rather than in the context of an application for summary judgment/strike out.

I am prepared to accept for the purposes of this application that Mode has a real prospect of establishing that trustees, in general, may be “private persons” for the purposes of s.138D FSMA. However, whether that is true in any specific case is highly fact-sensitive.

The difficulty in this case is that the Particulars of Claim does not even refer to Regulation 6 and there is no application before me to amend and Mr Chapman KC accepted that the evidence on behalf of Mode is generally deficient and would require to be supplemented at trial explaining the full nature of Mode’s operations and interests. It was incumbent on Mode on the hearing of this Application at the very least to bring forward a proper explanation as to the circumstances in which the Trust was created and as to the manner and terms of its operation and it has simply failed to do so.

I also accept Mr Christie’s submission that, at least on the face of the evidence before me, regulation 6 would appear not to apply because this remains a claim under a policy of insurance between Mode and AXA and thus it cannot be said that “any remedy would be exclusively for the benefit of that private person”.

In my judgment, on the basis of the evidence, Mode does not have a real prospect of establishing that it falls within regulation 6.