[2025] UKUT 00185 (TCC)

In FCA v Capital Alternatives [2018] 3 WLUK 623 (“Capital Alternatives”), McCahill J reviewed the case law and gave guidance, which so far as relevant is as follows:

“797.

S.382 FSMA gives the Court jurisdiction to grant restitution orders against those ‘knowingly concerned’ in a contravention of a ‘relevant requirement’, in addition to the primary contraveners.

798.

In SIB v Pantell (No.2) [1993] Ch 256 [Pantell] at 264D-E, at first instance, Browne-Wilkinson VC stated of ‘knowingly concerned’:

‘The most obvious example of a person ‘knowingly concerned’ in a contravention will be a person who is the moving light behind a company which is carrying on investment business in an unlawful manner. Professor Gower in his report, which was the basis on which the Act was introduced, specifically pointed out the mischief of directors hiding behind the corporate veil of companies...If, as is often the case, the company is not worth powder and shot, it is obviously just to enable the Court, as part of the statutory remedy of quasi-rescission, to order the individual who is running that company in an unlawful manner to recoup those who have paid money to the company under an unlawful transaction.’

799.

The learned Judge there identified the most obvious example of a person who is ‘knowingly concerned’ in a contravention, namely the ‘moving light’ behind a company which has contravened a relevant requirement, but, in my judgment, the matter is not limited to those who are the moving lights behind the contravening entity. Each case must be considered on its own unique facts.

800.

In the Court of Appeal in the same case and the same report (at 283G), Steyn LJ held that proof of actual knowledge is essential but not enough. Mere passive knowledge is not sufficient and actual ‘involvement in the contravention must be established’.

801.

The concept of ‘involvement’ is a broad one, covering those who pull the strings at a directorial and/or managerial level (this would include the ‘moving lights’ in the contravening entity) and could, in an appropriate case, include those who are involved at a lower level, depending on their knowledge and participation in the contravention.

802.

In SIB v Scandex Capital Management [1998] 1 WLR 712, the Court
of Appeal, at 720F-H, confirmed that the relevant knowledge is knowledge
of the facts on which the contravention depends, and that it is immaterial as to whether or not the individual knows that such facts constitute a relevant contravention. This is because the individual is presumed to know what the law is, and ignorance of the law is no defence.”