UT/2023/000092 - [2024] UKUT 00035 (TCC)

Rule 5(5) of the UT Rules gives the UT the power to direct that the effect of the decision in respect of which the reference or appeal is made (in this case the giving of the SSN and FSSN) is to be suspended pending the determination of the reference. The pre-condition is expressed as follows:

“…if [the UT] is satisfied that to do so would not prejudice

(a)

the interests of any persons (whether consumers, investors or otherwise) intended to be protected by that notice;

(b)

the smooth operation or integrity of any market intended to be protected by that notice; or

(c)

the stability of the financial system of the United Kingdom”

Both parties agree subparagraph (a) to be on point (although as will be seen the Authority emphasises that, given the AML context, the scope of persons intended to be protected is broader than simply the existing and future consumers of Nvayo). The Authority also say that subparagraph b) is relevant too, putting their submission in terms of the prejudice to the “integrity of the financial system”.

There was no dispute that the relevant principles to be applied were those derived from the previous authorities as summarised by the UT in Sussex Independent Financial Advisers Limited v FCA [2019] UKUT 228 (TCC) at [14] and [15] as follows (with citations omitted):

“[14] …

(1)

The Tribunal is not concerned with the merits of the reference itself and will not carry out a full merits review but will need to be satisfied that there is a case to answer on the reference…;

(2)

The sole question is whether in all the circumstances the proposed suspension would not prejudice the interests of persons intended to be protected by the notice…;

(3)

Detriment to the applicant, such as it being deprived of its livelihood, is not relevant to this test;

(4)

The burden is on the applicant to satisfy the Tribunal that the interests of consumers will not be prejudiced…; and

(5)

So far as consumers are concerned, the type of risk the Tribunal is concerned with is a significant risk beyond the normal risk of a firm that is doing business in a broadly compliant manner…The reference to consumers should for such purposes have the same meaning as in section 1G of Financial Services Markets Act 2000 (“FSMA”) which defines consumers to mean persons who use, have used, or may use among other things regulated financial services…

[15] Additionally, as noted in the [cited] decisions, even if satisfied that granting a suspension would not prejudice the interests of consumers, the Tribunal is not obliged to grant a suspension. The use of the word ‘may’ in Rule 5(5) means that it is a matter of judicial discretion as to whether or not a suspension should be granted. It is necessary for the Tribunal to carry out a balancing exercise in the light of all relevant factors and decide whether in all the circumstances it is in the interests of justice to grant the application. The power is a case management power, which in accordance with Rule 2 (2) of the Rules must be exercised in accordance with the overriding objective to deal with the matter fairly and justly…”

Breaking that approach down further it involved, in essence, three stages. First considering whether there was a case to answer. Second (assuming stage 1 was passed) whether the tribunal could be satisfied that granting the suspension would not prejudice the persons and matters mentioned. Third, (assuming stage 2 was passed) carrying out a balancing exercise in the light of all relevant factors.

Mr Auld KC, who appeared for Nvayo, put particular emphasis on the need to carry out a balancing exercise at all stages of the analysis (including the second stage) and on the tribunal’s overriding objective to deal with cases fairly and justly, highlighting within that the need to deal with cases proportionately to their complexity, the costs and resources of the parties, with flexibility, and avoiding unnecessary formality and delay. In his submission the rule was protective: it provided a discretion to ensure that (consistent with protection of consumers’ interests) restrictions could be removed to enable a firm to continue trading successfully thus protecting staff and customers and preserving the business while at same time dealing with concerns of Authority. It would be deeply unfair if pending the substantive hearing the relevant restrictions pushed a firm into insolvency.

I agree the overriding objective of dealing with cases fairly and justly is of course relevant just as much to the consideration of prejudice in the second stage. That is clear from Rule 2(3)(b) of the UT Rules which requires the Upper Tribunal to “seek to give effect to the overriding objective when it- b) interprets any rule”. While fairness and justice of course inform the way that Rule 5(5) is interpreted, I am not persuaded Mr Auld’s submission on UT Rule 2 adds anything to the principles already apparent from the provisions as interpreted by the authorities referred to in Sussex. Considerations of fairness in respect of the firm subject to requirements is already, for instance, reflected by the acknowledgment in the principles that “the type of risk the Tribunal is concerned with is a significant risk beyond the normal risk of a firm that is doing business in a broadly compliant manner”. That does not mean, however, as Mr Auld’s submission appeared to me to suggest, that there some kind of starting presumption that the firm ought to be able to continue trading as normal. Rather, to the extent the rule embodies any presumption, it is that requirements the relevant regulator has imposed with immediate effect remain unless the tribunal can be satisfied that suspending them would not prejudice the relevant persons or matters mentioned in Rule 5(5) (and having been so satisfied that it goes on to exercise its discretion to grant to the suspension). Fairness and justice are also reflected by the fact the tribunal is not bound by the Authority’s views on prejudice and whether a significant risk arises but can, on the basis of the evidence before it, reach its own view on such issues.

Another legal point of contention concerns the extent of evidence an applicant must adduce by way of support. In Gidiplus v FCA [2022] UKUT 00043 (TCC) (at [45]) the UT pointed out that: “…for an application of this nature to have a chance of being successful the applicant must make detailed evidence available to the Tribunal as to how its business will be carried on in a broadly compliant fashion during the period up to the hearing of the appeal”. A similar point was made by the UT in Koksa (t/a Arcis) v FCA [2016] UKUT 192 (TCC) at [69]. Mr Auld argues those statements are wrong and that they ask too much in the context of an application hearing such as this. I disagree. The need for detailed evidence is entirely consistent with the tribunal’s task as set out in Rule 5(5). That plainly requires the tribunal to engage with the wider impacts on the particular persons and matters specified to be at stake before being able to accede to a suspension. It is difficult to see how a tribunal could meaningfully satisfy itself there was no prejudice to matters such as consumer protection, market integrity or financial stability without detailed evidence of matters concerning the firm’s own regulatory compliance (matters which will or ought to be within the firm’s knowledge). I therefore endorse the UT’s statements. They are meant as helpful guidance to applicants preparing their suspension application.

As to Mr Auld’s submission that the balancing exercise involves looking at all relevant factors is relevant to the second stage too, I agree with Mr Temple, for the Authority, that this argument is inconsistent with the drafting of the rule and the way it has been interpreted and applied in the authorities. As indicated in the propositions Sussex summarises above, Rule 5(5) contains a threshold condition that needs to be satisfied in relation to the relevant prejudice, before the issue of general case management discretion to suspend arises (see for instance the reference to “even if…” at Sussex [15] at [27] above). That is not to say that a variety of factors may need to be considered at that second stage, but that those must be factors relevant to the prejudice in question. To the extent the general balancing exercise (the third stage) involved the other kinds of factors Mr Auld advances, such as impacts on staff and preserving the firm’s business these would only be capable of applying once the tribunal was satisfied the second stage (prejudice) was passed.