Interface Management Ltd, Interface Trustees, Interface Secretaries Ltd and Rosenthal v Jersey Financial Services Commission

CourtRoyal Court
JudgeBirt, Deputy Bailiff and Jurats Rumfitt and Allo
Judgment Date06 October 2003
Date06 October 2003
Birt, Deputy Bailiff and Jurats Rumfitt and Allo

M.H.D. Taylor for the appellants;

J.P. Speck for the respondent.

Cases cited:

(1) Island Dev. Cttee. v. Fairview Farm Ltd., 1996 JLR 306, considered.

(2) R. v. Home Secy., ex p. Doody, [1994] 1 A.C. 531; [1995] 3 All E.R. 92, considered.

(3) Sagnata Invs. Ltd. v. Norwich Corp., [1971] 2 Q.B. 614; [1971] 2 All E.R. 1441, considered.

(4) Taylor v. Island Dev. Cttee., 1969 J.J. 1267, referred to.

(5) Token Ltd. v. Planning & Environment Cttee., 2001 JLR 698, considered.

Additional cases cited by counsel:

Pearce, In re, 1990 JLR N-1.

Pergamon Press Ltd., In re, [1971] Ch. 388.

Poyser & Mills' Arbitration, In re, [1964] 2 Q.B. 467.

R. v. Environment Secy., ex p. Brent London B.C., [1982] Q.B. 593.

R. v. Panel on Take-overs & Mergers, ex p. Guinness PLC, [1990] 1 Q.B. 146.

R. v. Windsor Licensing JJ., ex p. Hodes, [1983] 1 W.L.R. 685.

Wiseman v. Borneman, [1971] A.C. 297

Legislation construed:

Financial Services Commission (Jersey) Law 1998, art. 5(1): The relevant terms of this paragraph are set out at para. 4.

art. 7: The relevant terms of this article are set out at para. 5.

art. 10(3): The relevant terms of this paragraph are set out at para. 7.

Financial Services (Jersey) Law 1998 (originally entitled Investment Business (Jersey) Law 1998 and renamed by Financial Services (Extension) (Jersey) Law 2000) art. 7(1), as amended:

"A person to whom this Law applies who intends to carry on [financial service business] shall make an application to be registered under Article 8 . . ."

art. 7(5): The relevant terms of this paragraph are set out at para. 70.

art. 8(3): The relevant terms of this paragraph are set out at para. 6.

art. 10(2): The relevant terms of this paragraph are set out at para. 60.

Text cited:

de Smith, Woolf & Jowell, Judicial Review of Administrative Action, 5th ed., para. 9-049, at 465-466; para. 9-055, at 469-470 (1995).

Administrative Lawappealsgrounds of appealappeal lies against administrative decision if (a) decision ultra vires; (b) decision-maker's procedures generally unsatisfactory, i.e. unfair and incorrect; or (c) individual decision unreasonable

Jurisprudencejusticenatural justiceduty to act fairlyExecutive, Board and Jersey Financial Services Commission as whole under duty to act fairly throughout application processincludes duty to inform applicant of general nature of case against him and provide him with adequate opportunity to respond

The appellants challenged the Commission's refusal to register them to carry on financial business.

The appellants, on behalf of Interface Management Limited ("IML"), applied to be registered to carry on trust business pursuant to art. 7(1) of the Financial Services (Jersey) Law 1998. After detailed consideration of the application, meetings and extensive correspondence, the Director General sent a warning letter to IML informing it that he was minded to refuse to register it as a trust company business. His reasons were (a) doubts about the appellants' integrity which were based on its non-compliance with the customer money rules contained in the Financial Services (Trust Company Business) (AssetsCustomer Money) (Jersey) Order 2000, its carrying on unauthorized financial service business and an allegation of forgery which had been made against the third appellant, Ms. Rosenthal, in connection with one of the trusts previously handled by the company; (b) uncertainties about the company's solvency including concern as to whether the trust company was maintaining adequate internal controls and keeping adequate and orderly accounting records as required by the Trust Company Codes and therefore as to its ability to produce an accurate Adjusted Net Liquid Assets (ANLA) calculation and inform the commission if it fell beneath 110%; (c) the competence of the directors, none of whom was fully qualified according to the criteria laid down in the Codes of Practice; and (d) the structure of the companythe "span of control" required by the Codes of Practice was inadequate as there were not three suitably qualified persons operating the business. IML was given one month in which to respond with reasons why the company should not be refused registration and meanwhile, on the same date, directions were given under art. 20 of the 1998 Law that no payments or transactions in connection with client assets should be undertaken without counter-signature by the two partners of Deloitte & Touche appointed for this purpose by the Commission.

IML responded in writing and a meeting was held in which the Executive expressed the opinion that this response had not adequately dealt with all the matters of concern. The company was given further time in which to respond and, in particular, to inform the Executive how it proposed to achieve compliance with the "span of control" and solvency requirements. Despite a further meeting, the Director General reached the decision that IML had not adequately addressed his original concerns and therefore that he would recommend to the Board of the Commission that the application be refused. He informed IML that he would prepare draft papers for a meeting of the Board and that these would be sent to IML at which time it would have one further month to respond. IML's detailed responses to the draft report stated that although the "span of control" and financial requirements were not currently being met, it should be granted a conditional licence because (a) the "span of control" issue was to be dealt with by employing two suitably qualified individuals, Mr. A and a second unnamed person who was currently the director of another trust company; and (b) IML's financial position was to be addressed by investment from a Swiss trust company. Moreover, a detailed rebuttal to the allegation of forgery was made. The Director General sent all the correspondence and documents from both sides, including these responses, to the Board in a memorandum.

The Board ultimately decided, after adjourning for further information concerning IML's responses, to refuse registration on the ground that the company's financial resources, "span of control," structure and organization were inadequate. The Board had, furthermore, been informed by Deloitte & Touche during the adjournment that IML had been operating without professional indemnity insurance since October 2002, which was a breach of the Codes of Practice, and had had no auditor since 2001, which was a material breach of the Financial Services (Trust Company Business) (Accounts, Audits and Reports) (Jersey) Order 2000.

The Board also refused to grant a conditional registration because (a) the granting of such a conditional licence would set a precedent which might provide the Board with considerable difficulties in future cases; (b) it was, in any case, inappropriate to provide IML with further "transitional" time to address their problems, as they had been given plenty of opportunity to rectify the situation; (c) although IML claimed that compliance with the "span of control" requirement would be achieved through the introduction of two new directors, Mr. A and Mrs. B, they had not provided enough information about them to the Board for it to establish that they were suitably qualified; and (d) the Board had not received enough information about the proposed Swiss investor, Tresag A.G., to convince it that IML's financial position would be adequately improved.

In response to a request by the appellants for a statement of reasons pursuant to art. 10(2) of the Financial Services (Jersey) Law 1998, the Chairman responded that the reasons could be ascertained from the original notification and the papers which had been placed before the Board.

On appeal, the appellants submitted that (a) the Executive had adopted a hostile attitude and acted unfairly and unreasonably towards them, e.g. by not dealing fairly with the allegation of forgery or considering adequately the proposals put forward by the appellants for remedying the situation; (b) the Board's decision not to grant them a conditional licence had been unreasonable; and (c) the Board had failed in its duty to provide a statement of reasons under art. 10(2) of the Financial Services (Jersey) Law 1998, as the reasons given were inadequate.

In reply, the Commission submitted that (a) the Executive had been neither oppressive nor unfair in its dealings with the appellants, which properly included investigating the allegations made with respect to the trust they had previously handled including that of forgery; (b) in any event the Board had made no finding on Ms. Rosenthal's integrity but had based its decision on other grounds, so any unfairness would not affect the overall decision; (c) the Board was entitled to adopt a policy of normally refusing conditional registration provided that it considered the appellants' arguments that it should be granted in this case; and (d) the Board's duty under art. 10(2) had been satisfied by the public statement provided to the appellants which, together with the papers before the Board, contained all the necessary information as to why the application had been refused.

Held, dismissing the appeal:

(1) The registration of the appellants would be refused and they would also be denied conditional registration. Both the Commission as a whole and the Executive and Board in their individual roles had satisfied their duty to act fairly, including their duty to inform the appellants of the case against them and provide them with an adequate opportunity of responding. Not only were the procedures provided fair in the abstract but they had been applied fairly in this case. In particular, the appellants had been given adequate warning of the case against them in the letter of warning and had been given ample opportunity to respond ( paras. 9-13).

(2) However, although no prejudice was caused by it, the...

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