David Jonathan Francis v The Jersey Financial Services Commission

• Jurisdiction: Jersey
• Court: Royal Court
• Judge: Sir Michael Birt,Jurats Nicolle,Pitman,Birt
• Judgment Date: 04 December 2017
• Neutral Citation: [2017] JRC 203A
• Date: 04 December 2017

[2017] JRC 203A

ROYAL COURT

(Samedi)

Before:

Sir Michael Birt, Commissioner, and Jurats Nicolle and Pitman

Between

David Jonathan Francis

Appellant

and

The Jersey Financial Services Commission

Respondent

Advocate P. C. Sinel for the Appellant.

Advocate B. H. Lacey and E. M. Layzell for the Respondent.

Authorities

Financial Services (Investment Business (Restricted Investment Business — Exemption)) (Jersey) Order 2001.

Financial Services (Trust Company Business (Exemptions No. 5)) (Jersey) Order 2001.

Financial Services (Jersey) Law 1998.

Banking Business (Jersey) Law 1991.

Collective Investment Funds (Jersey) Law 1988.

Insurance Business (Jersey) Law 1996.

Financial Services Commission (Jersey) Law 1998.

Interface Management Limited v Jersey Financial Services Commission [2003] JLR 524.

Anchor Trust Company Limited v Jersey Financial Services Commission [2005] JLR 428.

Token Limited v Planning and Environment Committee [2001] JLR 698.

Minister for Planning and Environment and Others v Hobson [2014] (2) JLR 57.

Anchor Trust v JFSC [2006] JCA 040.

Royal Court Rules 2004.

UV and W -v- JFSC [2014] JRC 202.

W -v- JFSC [2015] JRC 017.

W -v- JFSC [2015] JCA 060.

W -v- JFSC [2014] JRC 250.

JFSC -v- W [2015] JRC 094.

W -v- JFSC [2015] JCA 135.

W -v- JFSC [2015] JRC 241.

W -v- JFSC [2016] JRC 199.

W -v- JFSC [2016] JRC 231A.

South Bucks District Council -v- Porter [2004] 1 WLR 1953.

Clarke Homes Limited -v- Secretary of State for the Environment [1993] 66P&CR 263.

De Smith, Judicial Review (7th Edition).

Interface Management Limited -v- Jersey Financial Services Commission [2003] JLR 524.

Anchor Trust Company Limited -v- Jersey Financial Services Commission [2005] JLR 428.

R -v- Westminster City Council Ex p Ermakov [1996] 2 All ER 302.

European Convention on Human Rights.

Kanda -v- Government of the Federation of Malaya [1962] AC 322.

R -v- Secretary of State for the Home Department, Ex P Doody [1994] 1 AC 531.

Real Estate Opportunities Limited -v- Aberdeen Asset Managers Jersey Limited [2007] Bus LR 971.

Real Estate Opportunities Limited -v- Aberdeen Asset Managers (Jersey) Limited [2007] Bus LR 971.

Re Galileo Group Limited [1999] Ch 100.

Newell-Austen -v- Solicitors Regulatory Authority [2017] EWHC 411 (Admin).

Twinsectra Limited -v- Yardley [2002] UK HL 12.

Bolton -v- Law Society [1994] 1 WLR 512.

Solicitors Regulation Authority -v- Wingate [2016] EWHC 3455 (Admin).

Malins -v- Solicitors Regulation Authority [2017] EWHC 835 (Admin).

Financial Conduct Authority -v- Macris [2017] 1 WLR 1095.

Business — reasons for dismissing the First Appeal but allowing the Second Appeal.

CONTENTS OF THE JUDGMENT

	Paras
Introduction	1–3
Factual Background
(i) General	4–8
(ii) The Handmade/Paragon Structure	9–24
The Commission's Investigation
(i) General Procedure	25–32
(ii) The particular investigation	33–65
Applicable Statutes	66–72
Rights of Appeal	73–82
The Grounds of Appeal	83–85
The History of Appeal	86–93
The First Appeal	94
Ground 1 — Unreasonable findings	95
(i)	96–103
(ii)	104–126
(iii)	127–141
(iv)	142–149
(v)	150–155
(vi)	156–159
(vii)	160–167
(viii) and (x)	168–198
(ix)	199–208
(xi)	209–220
Ground 1 — General	221–222
Ground 2 — Reasons	223–251
Ground 3 — Procedure	252
(i) Predetermination	253–262
(ii) Inadequate opportunity to respond	263–275
(iii) and (iv) Non-accessible material and taking account of undisclosed material	276–286
(v) No meaningful opportunity to challenge or test evidence	287–288
(vi) Board unduly influenced by Executive	289–293
(vii) Bias	294
(a) The Debenture	295–299
(b) Article 37	299–317
(c) Executive's file note	318–320
(d) Unsigned board minute	321–324
(e) Drafting statement of complaint	325
(f) Conclusion on (vii)	326–327
Conclusions on Ground 3	328–331
Return to Ground 1	332–346
Ground 4 — Disproportionate penalty	347–350
The Second Appeal	351–368
Summary of Conclusions	369

THE COMMISSIONER:

1 In this case the appellant (“the appellant” or “Mr Francis”) appeals against a decision of the Jersey Financial Services Commission (“the Commission”) to issue a direction prohibiting him from engaging in any manner in financial services business in the Island and to issue a Public Statement to that effect. He also appeals against the decision of the Commission to issue Public Statements in respect of three other individuals in circumstances where he contends that he is identified in such statements.

2 The Court has been provided with a large amount of material comprising some 20 files. The parties provided a reading list (i.e. material which the Court was asked to read before the hearing) and estimated (correctly) that this would take some five days. The hearing itself took four days. In order to keep this judgment within manageable proportions, we shall not be referring to all the documents which we have read or to which we were referred but only to those which we regard as necessary to explain the reasons for our conclusion. Nevertheless, in view of the nature of the arguments put forward by the parties, it is of necessity a lengthy judgment.

3 We think it would be helpful to explain the general structure of this judgment. We begin by setting out the general factual background so as to set the scene for what follows. We then describe the process followed by the Commission in reaching its decision and the applicable statutory provisions. We then consider the grounds of appeal under the various headings listed by the appellant before finally summarising our conclusions.

Factual background

(i) General

4 Horizon Trustees (Jersey) Limited (“HTJL”) was a Jersey company registered to carry on trust company business. It formed part of an informal group of companies which had some common ownership. That informal group was known as the Horizon Group and included entities in Jersey, Cyprus, Poland and Switzerland. The particular companies which we should mention are Horizon Fund Management Limited (“HFML”), Horizon Investments (Jersey) Limited (“HIJL”) and Horizon Management Services Limited (“HMSL”) in Jersey, Horizon Group (Cyprus) Limited (“Horizon Cyprus”) and Horizon Trustees (Suisse) Limited (“Horizon Suisse”).

5 The appellant joined the Horizon Group from Coutts in 2005. He acquired shares in HTJL. In February 2010 the then executive chairman, Mr Gary Bellot, left and the appellant bought out his shares, bringing his total percentage shareholding to 50.15%, which he retained at all material times. He funded the purchase of the additional shares in February 2010 by means of a loan from Mr Christopher Bucknall who then became executive chairman.

6 From January 2008 until his departure in August 2011, the appellant was described as CEO (Chief Executive Officer) of the Horizon Group. As already mentioned, there was no legal entity called Horizon Group but it was used as a description of the appellant's role within the group of companies bearing the Horizon name. He was a director of HTJL from shortly after he joined in 2005 until 13 ^th May, 2009, when he resigned although retaining his role in the Horizon Group. He was re-appointed as a director of HTJL on 9 ^th February, 2010, i.e. some nine months later.

7 Other directors of HTJL at the relevant time whose names will appear in this judgment are Andrew Treharne (Chief Operating Officer), Timothy McKimmon (Head of Trust and Fund Administration), Julie McClafferty (Director), Lesley MacDonald (Finance Director) and Sarah Roberts (Director).

8 Following the examinations by the Commission in 2011 which ultimately gave rise to the regulatory action which is the subject of this appeal, HTJL's book of clients was transferred to a new service provider, namely JTC. In May 2012, the Royal Court ordered that HTJL be wound up on the basis that it was just and equitable to do so. The appellant had resigned from the board of HTJL on 1 ^st August, 2011.

(ii) The Handmade/Paragon Structure

9 The Commission's regulatory action arose as a result of its concern over the Handmade/Paragon structure and it is necessary to describe briefly what this involved.

10 Handmade Limited (“Handmade”) was an English company formed with a view to financing/producing films. Through four subsidiaries it owned a library of films (“the film library”). Handmade was acquired in 1999 by Cartier Investments Limited (“Cartier”) which was owned by the P Meehan Family Settlement (“the Meehan Settlement”) which was established for the benefit of Mr Patrick Meehan (“Mr Meehan”) and his family. HTJL became trustee of the Meehan Settlement in 2005.

11 In 2006, shares in Handmade were listed on the Alternative Investment Market (“AIM”) and the company became Handmade PLC as a result. Following the listing, Cartier was the owner of approximately 40% of Handmade's issued share capital.

12 In August 2007 HTJL established a limited partnership called the Horizon Media Fund 1 LP (“the Media Fund”). This was a limited partnership whose general partner was a BVI company called Horizon Media Holdings Limited (“the Media GP”) which was owned by another BVI company which was in turn beneficially owned by Mr Bellot and the appellant. The Media GP was administered by HTJL. The Media Fund raised some £8.75m.

13 The aim of the Media Fund was, through loans to various companies, to provide pre-production or gap financing for five specified film projects. The Media Fund qualified as a professional investor regulated scheme pursuant to the Financial Services (Investment Business (Restricted Investment Business — Exemption)) (Jersey) Order 2001 and the Financial Services (Trust Company Business (Exemptions No. 5)) (Jersey)...