UT-2024-000094 - [2025] UKUT 00082 (TCC)

By way of background, the Applicant is a used car dealer which focuses on providing modestly priced vehicles to consumers. The Application was made to enable the Applicant to expand its business by enabling it to offer prospective purchasers the option to finance their acquisition. We were told that the Applicant already had an agreement in principle with a motor finance provider. Motor dealers offer finance for a variety of reasons including speed (the possibility of concluding a sale without needing to wait for a buyer to go away and sort out their own finance), eligibility (some third-party financiers might be unwilling to lend to particular individuals or on particular cars) and the possibility of earning commission. Although the size of a loan might be substantial (and for some borrowers the loan might be the largest, or send largest after a mortgage, loan they take out), car dealerships which undertake credit broking and linked activities are typically authorised under the Authority’s Limited Permission regime on the basis that introducing prospective borrowers to providers of car finance is ancillary to the dealership’s main activity of selling vehicles.

We heard from two witnesses, Mr Jason Sullivan (a Manager in the Authority’s Credit & Lending Department) for the Authority, and Mr Dalipi for the Applicant. Mr Sullivan provided a witness statement and was cross-examined briefly. In particular, Mr Dalipi asked him about the meaning of “consumer”. Mr Sullivan did not have a full grasp of this at his fingertips.

Mr Dalipi did not provide a witness statement, but by agreement we took as his evidence in chief the factual material and commentary in the Applicant’s response to the Warning Notice, its reply to the Authority’s Statement of Case and form FTC3 (making the Reference to the Tribunal). Mr Dalipi was cross-examined at some length by Mr Macdonald. In addition, we had a hearing bundle containing just under 600 pages of documentary evidence.

We found both witnesses to be straightforward individuals who gave clear and credible evidence. Mr Dalipi was cross-examined extensively by Mr Macdonald and was completely transparent and candid in his replies, even when dealing with issues that were not entirely favourable to the Applicant. We have no hesitation in accepting their evidence.

Turing to that evidence, we deal first with the history of dealings between the Applicant and the Authority (in chronological order) and then with some broader issues on which Mr Macdonald questioned Mr Dalipi.

On 28 September 2023, the Applicant made the Application for permission under section 55A FSMA to carry on the following regulated activities:

On 29 September 2023, having carried out a preliminary review of the Application, the Authority requested the Applicant to provide information, which had been omitted from the Application, including a Disclosure and Barring Service (“DBS”) Certificate, financial forecasts including historic accounts, regulatory business plan, vulnerable customer policy, complaints policy, compliance monitoring plan, customer journey, and answers to additional questions including questions on regulated and unregulated activity and previous directorships. The Applicant responded to the Authority’s request and provided supporting documents on 12 October 2023. The original DBS certificate provided by the Applicant was at an incorrect level and the correct certificate was provided on 20 October 2023.

On 13 October 2023, in the course of an email exchange about the DBS certificate and explaining why he had submitted a Basic DBS check, Mr Dalipi told the Authority that “I am indeed a Sole Director of the firm”.

On 3 November 2023, the Authority’s caseworker conducted an initial call (the “Call”) with Mr Dalipi. One of the documents we reviewed were her notes of the Call. The notes of the Call record that they were written at 17:14 on 3 November 2023. According to her notes, the caseworker explained that this was a standard, unrecorded call which was an opportunity for the Authority to speak to the Applicant following an initial review of the Application. During the call, the caseworker enquired about the structure of the Applicant as, whilst the Application listed only one director and did not disclose any other controllers, a search of Companies House records had indicated that the Applicant in fact had three directors. Mr Dalipi then explained that the Applicant was jointly owned by himself and Mr Kevin Mira (“Mr Mira”) and that the third director on Companies House records, Arjan Mira, is Mr Mira’s father and was a former director of the Applicant who was removed prior to the Application. Mr Dalipi said that Mr Mira was young, currently at university and would have limited involvement. Mr Dalipi had taken the view that he was the sole director as he would be actively running the business. The Applicant was informed that a written information request together with a request for a Controllers Form for Mr Mira to complete would follow.

Mr Dalili says that the caseworker’s notes are not accurate. They do not reflect the tone of the Call, his saying that the £5,000 capital requirement does not apply to the Applicant or the caseworker testing him on what “consumer” means or discussing his connections with Albania. In response to the caseworker asking him about what “consumer” meant, Mr Dalipi (in the response to the Warning Notice) said:

“What your case officer’s notes don’t capture (unsurprisingly) is my question as-posed to her - a very simple question surrounding Consumer Credit (the definition of a Consumer) - and she did not know the answer! I was forced to do this as she had clearly adopted the strategy of trying to expose me as having too little knowledge as regards Consumer Credit.”

Mr Dalipi had not disclosed his involvement in companies he had been involved in previously, including one he set up when he was 18 years old. On the Application Form he answered “Yes” to the question as to whether he had held any directorships in the last 10 years, but did not go on to give the required details. The need to provide details was raised with him on the Call by the caseworker. Mr Dalipi told the caseworker that he had not put these companies on the application form as he considered they had no relevance to the regulated business. He was told that this information would be required.

Shortly after the Call on the same day, Mr Dalipi emailed the caseworker requesting a copy of the call recording. In his email he said that “If you do not [forward a copy of the call recording] – I will access it via a Subject Access Request, as well as escalating your non-compliance with the legally sound request to your Head of Department, and to the FCA Board,”

On 6 November 2023, the caseworker replied, explaining that the Call was not recorded in line with standard Authority policy and that this had been communicated during the Call.

On the same day, Mr Dalipi replied stating that the caseworker had told him that calls were recorded and requesting an email contact for the relevant Head of Department within the Authority’s Authorisations Division.

On 9 November 2023, the Authority sent the Applicant an information request addressing various issues and missing information (including a Controllers Form for Mr Mira) in the Application (the “Information Request”). The Authority provided a deadline of 10 working days for the Applicant to provide a response. No response to any of these items has been provided. Mr Dalipi said that he had a completed Controllers Form for Mr Mira at home, but he had decided not to send it in for now.

On 13 November 2023, Mr Dalipi emailed the Head of Department of the Authority’s Authorisations team (“HoD”) setting out his concerns regarding the Call. He said that, although the Call was “friendly and informal” when it started, “it turned out to be anything but” and the Call quickly escalated in tone and attitude to bellicose and belligerent. He went on to observe:

“Your caseworker was delivering a tirade of accusations about my competence and abilities – literally and blatantly drilling for trouble in my previous businesses. While you might feel within your rights to demand the information in question – the way this was done was utterly unprofessional, and actually amounted to bullying. I then sought to access the call recording from the area of the FCA that deals with that – and their story changed from ‘we record all incoming and outgoing calls’ to: ‘The Authorisations Department doesn’t record calls’!! [The caseworker] herself – in the mysteriously vanished recording – confirmed that calls are recorded ‘sort of’. In her follow-up e-mail – it was completely self-evident that she was going by detailed notes extracted from a call recording.”

Mr Dalipi said that if he did not receive the recording from the Authority, he would seek it via the ICO. He also indicated that he would refer the matter to the Authority’s Board. Finally he observed that, “Separately – I will be addressing [the caseworker’s] questions as-derived from the call recording (i.e. I will be complying with your statutory demands for further information).” Mr Macdonald pointed out that, despite this assurance, Mr Dalipi did not address the Information Request. He asked Mr Dalipi what made him decide not to cooperate, and Mr Dalipi said that it was not being given the Call recording.

On 16 November 2023, the HoD replied to the Applicant explaining the reasons for the Call, confirming that such calls were not routinely recorded, that the option to complain was available and that feedback would be provided to the caseworker. Mr Dalipi confirmed that he had not taken up the invitation to make a complaint. He thought this might be because he was too tied up in trying to get the recording.

On 22 November 2023, Mr Dalipi emailed the Authority, stating that the Applicant would cease co-operating with the Application process. The reason given was the Authority’s alleged unprofessional conduct, its failure to provide a call recording and its alleged incorrect application of the prudential resources requirements to Limited Permission firms such as the Applicant. Mr Dalipi accused the Authority of wanting “to harass me into giving up and [you] are willing to grasp at anything to do this - including misrepresenting FSMA 2000 and the Consumer Credit regime to me - to further emburden (sic) me with non-existent financiel (sic) burdens.” He described their behaviour as “bullying, unprofessional conduct and at best misapplication of the law (at worst – lies …)”. He requested the case go through the refusal process and said that he would not respond to the Information Request. Although this email was addressed to the caseworker and the HoD, in cross examination Mr Dalipi accepted that he did not think that the HoD’s communications had been unreasonable.

On 18 January 2024, the Authority emailed the Applicant with a minded to refuse letter which repeated the Information Request.

In light of all this, Mr Sullivan’s team recommended to the Authority’s Executive Decision Maker to refuse the Application because they did not consider that the Applicant satisfied or would continue to satisfy the Threshold Conditions. Mr Sullivan explained that the Application was refused because. the Applicant had failed to demonstrate the level of cooperation and engagement expected of a regulated firm. The Applicant had refused to provide information when asked to do so by the Authority as part of the Authorisation process and had been unable and / or unwilling to demonstrate that it could comply with applicable requirements. These concerns led the Authority to decide that it could not ensure that the Applicant would meet or continue to meet the Threshold Conditions, specifically the Effective Supervision, Appropriate Resources and Suitability Threshold Conditions.

On 24 April 2024, the Authority issued a warning notice to the Applicant (the “Warning Notice”) and the Applicant provided representations on the Warning Notice by way of an email on 8 May 2024.

On 26 June 2024, the Authority issued the Decision Notice to the Applicant.

It is clear from the passages we have extracted from the documents above and from Mr Dalipi’s evidence that he was greatly upset by the Call. He repeatedly said that the caseworker’s tone had been belittling and he was being treated unfairly. He was asked about his non-disclosure of Mr Mira’s directorship and his involvement with other companies. The caseworker asked him what “consumer” meant and said that the Applicant would need to meet the £5,000 capital requirement.

Pressed by Mr Macdonald, Mr Dalipi said that he understood why the Authority was asking about Mr Mira and his own previous businesses. He accepted that, after he halted the Application process, the Authority did not have all the information it needed to deal with the Application. He agreed that the Authority would be expected to ask about these matters but objected to the belittling nature of the questioning and to the way his nationality was raised. Mr Dalipi is Albanian and he told us that the caseworker asked him personal questions about his family in Albania and how much time he spends there. He accepts that Albania is a “high risk” jurisdiction and so it is reasonable to ask questions about it, but he does not see why the Authority needs to know about his relationship with his grandparents and how often he visits them.

Mr Dalipi accepted that being authorised was a privilege and something that would be a boost to his business. He says he is aware of the need to follow the Authority’s rules and to make it easy for the Authority to supervise him. He just wants the Authority to give him a fair hearing.

When pressed about what in the call had been concerning or upsetting, Mr Dalipi said that it was “a feeling” and that, given the passage of time, he could not point to anything particular that was said. He recalled that the questions were accusing in tone. He had been asked how often he went to Albania and why he had neither disclosed that Mr Mira was a director of the Applicant nor provided information regarding his earlier directorships of now dissolved companies. It was the way the questions were asked, not what the caseworker was asking about, that worried him. He feels very strongly about this; he says that, if he thought he had been treated fairly, he would have taken a rejection and reapplied. Mr Macdonald asked, just accepting that the call had a negative tone, why he did not hold on and try to get authorised. Mr Dalipi said that the process was not fair; others he spoke to said they had not been treated in the same way and he was convinced the Application would fail.

Looking at the Information Request, Mr Dalipi agreed with Mr Macdonald that the tone is helpful and polite (asking questions and indicating where more information was needed) and suggests that the Authority was happy to keep working with him. Question 8 (for example) began “Please would you kindly revisit the compliance monitoring plan paying attention to the following …”.

The Applicant’s Reply to the Authority’s Statement of Case is largely given over to the Authority’s requirement that the Applicant show a minimum capital of £5,000. It makes two specific points. Firstly, it asserts that the Authority has inferred from the “general solvency requirement” a minimum capital requirement. Secondly, it asks why, if a Limited Permission firm is classed as a debt management firm, it is not subject to the Authority’s debt management / prudential regulatory reporting standards.

We spent some time going through the relevant provisions. Dealing with the Applicant’s first point, the “Consumer Credit” sourcebook (or ‘CONC’) in the Authority’s Handbook is the specialist sourcebook for credit-related regulated activities.

Mr Macdonald took Mr Dalipi to some guidance (in the hearing bundle) produced by the Authority dealing with “some typical misconceptions about the way we authorise firms engaged in debt management activity”. This makes it clear that a motor dealer could be carrying on debt management activity, even if it does not offer debt management plans, and would be subject to the Authority’s prudential and client money rules. Mr Dalipi said that he had not seen this guidance before.

Pausing here, it is clear to us that a debt management firm (which can include a motor dealer) is subject to two, quite distinct requirements: a general solvency requirement (CONC 10.2.1R) and a prudential resources requirement (CONC 10.2.2R).

Turning to the second point (which Mr Macdonald described as a “reasonable question”), Mr Macdonald took Mr Dalipi to the chapter in the Authority’s Handbook dealing with reporting requirements. SUP 16.12.1 provides that that section applies to every firm carrying on a business in column (1) of SUP16.12.4R. SUP16.12.4R lists regulated activities and groups them into regulated activity groups (or “RAG”). RAG12 covers “credit regulated activity”. SUP16.12.29B sets out the reporting requirements for RAG12. A debt management firm is required to file a debt management regulatory return annually or six-monthly (depending on its revenue) unless (per Note 6) it is a Limited Permission firm. That is why a Limited Permission firm (such as the Applicant was seeking to be) is not required to file a debt management regulatory return; it only has to file a key data form once a year. Mr Dalipi said that he had not looked at this text previously, which Mr Macdonald said he was surprised by, given that Mr Dalipi was asserting that the Authority had got their approach to debt management firms wrong. He asked why Mr Dalipi did not seek help on this point from the Authority and Mr Dalipi again said he was deterred by the tone and negativity of the caseworker.

We should just pause to note that the caseworker did not give evidence before us, or submit a witness statement, and so (as there is no recording of the Call) the evidence around the Call is confined to the caseworker’s notes and what Mr Dalipi said, in writing and latterly in evidence before us, about what took place. As we noted earlier, Mr Dalipi struck us as a fair, balanced witness who was trying to help the Tribunal. He was not prone to exaggeration and, when pressed on what in the Call unsettled him, said that it was a “feeling” and, given the passage of time, he could not point to any particular words or questions. Not least because of everything that followed, but also because this has been his position consistently all throughout his email and other written correspondence with the Authority, we accept Mr Dalipi’s account that something happened on the Call which unsettled him and shook his confidence in the authorisation process so far as the Applicant was concerned. Exactly what that was, whether it was intentional on the part of the caseworker or not and whether it justified Mr Dalipi’s reaction are not issues on which we are able (or need) to come to a conclusion.