Anchor Trust Company Ltd v Jersey Financial Services Commission

JurisdictionJersey
CourtRoyal Court
JudgeBirt, Deputy Bailiff and Jurats Le Cornu and Morgan
Judgment Date27 October 2005
Date27 October 2005
ROYAL COURT
Birt, Deputy Bailiff and Jurats Le Cornu and Morgan

C.J. Scholefield for the appellant;

J.D. Kelleher for the respondent.

Cases cited:

(1) Associated Provncl. Picture Houses Ltd. v. Wednesbury Corp., [1948] 1 K.B. 223; [1947] 2 All E.R. 680; [1948] L.J.R. 190; (1947), 177 L.T. 641; 63 T.L.R. 623; 45 L.G.R. 635; 112 J.P. 55; 92 Sol. Jo. 26, considered.

(2) Blenheim Trust Co. Ltd. v. Morgan, 2004 JLR N [44], distinguished.

(3) Costain Ltd. v. Strathclyde Builders Ltd., [2004] S.L.T. 102; [2004] SCLR 707; (2003), 100 ConLR 41, distinguished.

(4) Interface Management Ltd. v. Jersey Fin. Servs. Commn., 2003 JLR 524, applied.

(5) Island Dev. Cttee. v. Fairview Farm Ltd., 1996 JLR 306, applied.

(6) Planning & Environment Cttee. v. Le Maistre, 2002 JLR 389, referred to.

(7) Porter v. Magill, [2002] 2 A.C. 357; [2002] 1 All E.R. 465; [2001] UKHL 67, followed.

(8) Poyser & Mills' Arbitration, In re, [1964] 2 Q.B. 467; [1963] 1 All E.R. 612; sub nom. Poyser v. Mills (1963), 107 Sol. Jo. 115, distinguished.

(9) R. v. Birmingham C.C., ex p. Quietlynn Ltd. (1985), 83 L.G.R. 461, followed.

(10) R. v. Home Secy., ex p. Doody, [1994] 1 A.C. 531; [1993] 3 All E.R. 92; (1995), 7 Admin. L.R. 1, referred to.

(11) R. (Bewry) v. Norwich C.C., [2002] H.R.L.R. 2; [2001] EWHC 657 (Admin.), dicta of Moses, J. considered.

(12) Stoop v. Royal Borough of Kensington & Chelsea, [1991] J.P.L. 1129; [1992] C.O.D. 87; sub nom. R. v. Kensington & Chelsea Royal London Borough Council, ex p. Stoop, [1992] 1 P.L.R. 58, dicta of Otton, J. followed.

(13) Taylor v. Island Dev. Cttee., 1969 J.J. 1267, not followed.

(14) Token Ltd. v. Planning & Environment Cttee., 2001 JLR 698, dicta of Bailhache, Bailiff applied.

(15) Trump Holdings Ltd. v. Planning & Environment Cttee., 2004 JLR 16; on appeal, 2004 JLR 232, referred to.

(16) Walters v. States Housing Auth. (1997), 24 Guernsey Law Journal 39, dicta of Beloff, J.A. applied.

Legislation construed:

Financial Services (Jersey) Law 1998 (Revised Edition, ch.13.225), art. 9(3): The relevant terms of this paragraph are set out at para. 4.

art. 11(2): The relevant terms of this paragraph are set out at para. 114.

art. 11(3): The relevant terms of this paragraph are set out at para. 5.

Financial Services Commission (Jersey) Law 1998 (Revised Edition, ch.13.250), art. 3:

"(3) The Commissioners shall include—

(a) persons with experience of the type of financial services supervised by the Commission . . ."

Financial Services—Jersey Financial Services Commission—applications for registration as trust company—reasonableness of refusal—refusal under Financial Services (Jersey) Law 1998, art. 9(3)(a) not unreasonable if applicant's attitude towards and procedures for detecting and preventing money laundering and financial crime inadequate—unreasonable to refuse merely because previously handled criminal proceeds

Financial Services—Jersey Financial Services Commission—applications for registration as trust company—applicant to be open and cooperative—duty of maximum disclosure and openness to Commission required—applicant to disclose any information which might affect Commission's decision

The appellant appealed against the Commission's refusal to register it to carry on trust company business.

The appellant applied to be registered to carry on trust company business under the Financial Services (Jersey) Law 1998. The Executive, which investigated such applications, appointed an inspector to review the appellant's files and interview its employees. His reports were highly critical of the appellant, finding, inter alia, various examples of its inadequate attitude towards and procedures for the detection and prevention of money laundering. In interviews, the inspector had cautioned interviewees that their answers might be given in evidence if proceedings were to be brought against them. Mr. S, a director of the appellant, had been particularly uncooperative when interviewed, giving sarcastic and offensive responses.

On its application form for registration, the appellant did not, in response to the question "is there any other information about . . . any . . . associate . . . which may have a bearing on the Commission's decision in determining this application," mention its relationship with Mr. D, who had previously been convicted and imprisoned for offences of dishonesty. Mr. D had not been an employee of the appellant but the inspector found inter alia that he had signed letters typed on the appellant's letterhead, approved fees, had unimpeded access to its client files and computer system, and had an office within the appellant's offices. "Associate" was defined narrowly in the 1998 Law but the Trust Codes required openness and cooperation with the Commission. Mr. S had stated that he had never been declared en désastre, whereas he had in fact been declared en désastre in 1995 but the declaration had been recalled on the same day.

The Executive recommended to the Board, which determined applications under the 1998 Law, that the appellant should be refused registration essentially on the ground that its attitude and conduct in relation to the detection and prevention of money laundering had been, and despite some improvement continued to be, inadequate. It had, for example, failed to respond appropriately when one of its clients had been convicted of conspiracy to import drugs and had also failed to review thoroughly the files of a former director who had conducted very suspicious and possibly illegal transactions. The Executive also found that several internal suspicious transaction reports had been dismissed by the appellant, some of which were considered by the inspector to merit further action. Moreover, the appellant's attitude to criticism had been combative and, rather than acknowledging that its attitude and procedures had been deficient, it had sought to justify them. The Executive regarded Mr. S to be a dominant and negative force within the company and found his failures to cooperate with, and combative attitude towards, the inspector and other authorities to have been particularly inappropriate. The Executive also found the appellant to have failed to be open and honest with the Commission, as required by the Trust Codes.

At the hearing before the Board, the Chairman addressed the Director General, who represented the Executive, by his first name but the appellant's representatives by their formal titles. The Financial Services Commission (Jersey) Law 1998, art. 3 provided that some Commissioners should have experience of the type of financial services which the Commission supervised and several members of the Board were associated with firms which were or had been instructed by the Executive.

The Board decided to refuse to register the appellant, basing its refusal on the grounds in art. 9(3) of the 1998 Law, namely that (a) the appellant was not a fit and proper person, under art. 9(3)(a), primarily because it had demonstrated an inadequate attitude towards and procedures for the detection and prevention of money laundering and financial crime, and a failure to accept that its past standards had been inappropriate and to implement recommendations. In finding certain of the appellant's past practices to be deficient, the Board relied on its own knowledge and experience of the standards generally achieved by trust companies at the time. The Board also made certain adverse findings on matters regarding which the Executive had not, e.g. that before opening an account for a client the appellant had failed to obtain the necessary identification documentation; (b) the appellant had failed to provide information concerning its relationship with Mr. D, contrary to art. 9(3)(b)(i), and had provided untrue or misleading information in relation to Mr. S's désastre, contrary to (ii); (c) its registration would have posed a substantial threat to the reputation and integrity of the Island in financial matters (art. 9(3)(e)(ii)); and (d) it had failed to comply with the Trust Codes, including the requirement of openness and cooperation with the Commission and other authorities (art. 9(3)(f)).

After the hearing but before giving its decision, the Board informed the appellant that it was seeking legal advice, which it refused to disclose. In the present proceedings, it stated that the purpose of that advice had been to discover whether a decision to refuse to register the appellant could have been challenged on appeal and it disclosed the advice received.

The appellant requested detailed reasons from the Board, under art. 11(2), shortly before the Board informed it of its decision by letter. The reasons given stated the Board's findings of fact, explaining the material on which they were made, and related those findings to the criteria for refusal in art. 9(3) of the 1998 Law. The reasons were not, however, supplied within 14 days of the decision, as required by art. 11(2).

The appellant had applied for registration in 2001 and had come to the Executive's attention by May 2002. The Board's decision to refuse the application had not, however, been made until March 2005. This delay was largely the result of the time spent by the inspector in producing his final report. Under the transitional provisions of the 1998 Law, the appellant had carried on business pending the Board's decision.

The appellant referred to various entities registered by the Board which it claimed had committed serious and publicized money laundering breaches but which had nevertheless been permitted to continue to carry on trust company business.

On appeal, the appellant submitted that the Board's decision was unreasonable as (a) it had registered other companies despite their having dealt with larger sums which represented the proceeds of criminal conduct; (b) it had made findings, e.g. that insufficient client identification documentation had been...

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