R(on the application of Christopher Wilford) v The Financial Services Authority  EWCA Civ 677 – Read judgment
This Court of Appeal judgment further reduces the scope for judicial review of a Decision Notice issued by the Financial Services Authority (“the FSA”, now the Financial Conduct Authority). Indeed it comes close to excluding judicial review of these Notices. This is because there is a statutory mechanism for challenging Decision Notices. This case sheds light on the very limited role of judicial review where there is such a statutory right.
The FSA regulates the financial services industry. Its Regulatory Decisions Committee (“the RDC”) decides whether or not a regulated person has breached the relevant rules and issues Decision Notices.
This case arose from a Decision Notice which the RDC issued against Mr Wilford, the Finance Director of a bank. The bank’s board had decided to carry out a rights issue in order to generate more capital. Two weeks later, having been alerted to new negative financial information, the bank was forced to issue a profits warning. This meant that the rights issue largely failed.
The RDC heard submissions from Mr Wilford and then issued a Decision Notice stating that he should have known about this negative financial information and communicated it to the board before the rights issue. The RDC found that he had failed to “exercise due skill, care and diligence” in carrying out his role.
Central to this case is the fact that a person wishing to challenge an RDC Decision Notice has a statutory right to “refer” the matter to the Upper Tribunal (“the UT”). Proceedings before the UT start afresh. They are neither a review nor an appeal, but a total rehearing. The RDC’s Decision Notice falls into the factual background: as Moore Bick LJ states, “The tribunal is not concerned with the reasoning of the RDC…”
Mr Wilford argued that the RDC had not given him full reasons as to why it rejected his submissions. The statute requires a Decision Notice to contain reasons. He argued the lack of reasons mean the Decision Notice was a nullity and that the proper way to challenge the lack of reasons was a judicial review of the RDC’s decision.
It is well established that judicial review is only available where there is no other adequate way to challenge a decision. Mr Wilford therefore had to tackle the fact that he had a statutory right to refer the matter to the UT for a rehearing.
He argued that a rehearing by the Upper Tribunal was an inadequate remedy for his case. As well as being costly and time-consuming, he pointed out it carried the risk that fresh allegations could be raised against him or the penalty could be increased. He argued that without full reasons for why his submissions failed before the RDC he was unable to decide whether to take his case to the UT.
Mr Wilford succeeded in the High Court. Mr Justice Silber agreed that the RDC’s reasons were inadequate. He said that in this case the statutory remedy would be “nowhere near so convenient, beneficial and effectual”. The UT could not require the RDC to give adequate reasons and lack of reasons caused serious prejudice to Mr Wilford. This meant that it fell into an exception to the general rule that a right of statutory redress bars judicial review.
(Virtually) No judicial review where there is a right to a statutory rehearing
A unanimous Court of Appeal allowed the FSA’s appeal: with Lord Justice Black agreeing with the judgment of Moore-Bick LJ and Pill LJ deciding the case only on the basis that adequate reasons had been given.
In his judgment Lord Justice Moore-Bick endorsed R(Davies) v FSA  EWCA Civ 1128 where the Court of Appeal said that only in the “most exceptional” cases could judicial review be allowed. He pointed out that in Davies the Court had decided that even where it is alleged that the FSA had acted beyond its powers, such that its Warning Notice is void, a reference to the UT remains the proper route of challenge.
Moore Bick LJ emphasised that a full rehearing before the UT was the means of redress which Parliament had intended for those dissatisfied with an RDC decision, rather than a judicial review.
The statutory right to refer the matter to the Upper Tribunal enables the person enables the person subject to the disciplinary procedure [to get] a fresh decision by an expert tribunal exercising a judicial function…. Although separate from the FSA both in terms of its constitution and its function, the tribunal is nonetheless an integral part of the regulatory scheme [applying to the financial services industry].
Moore Bick LJ was also concerned that JR should not be used to derail the disciplinary process, by being used to criticise discrete aspects of a Decision Notice, without engaging with its findings head on.
the argument that the tribunal is incapable of giving Mr Wilford the remedy he needs in this case is, I think, overstated. It is true that the tribunal cannot quash the Decision Notice and remit the matter to the RDC for its to give better reasons, but it can reconsider the whole matter afresh and thus deal with the substance of the allegations against him….[“T]he real issue…is whether Mr Wilford’s conduct fell short of that which was to expected of him. To quash the decision Notice and remit the matter to the RDC would not advance the resolution of that issue; it would simply cause delay.
Pill LJ echoed this: “One of the purposes of the FSA’s disciplinary power is the protection of the public and substantive issues should not readily be deferred in order to determine the procedural issues.” However he confined his judgment to the question of whether the reasons in this case were adequate. In obiter dicta indicating that he did not see judicial review as being excluded to the same extent as Moore Bick LJ he said that, in creating specialised regulatory procedures “Parliament did not…intend…that they need not be followed scrupulously because an alternative remedy was available”.
Moore Bick LJ suggested that judicial review of RDC decisions might be available in “the most exceptional cases” where there are “strong reasons of policy” but gave no further guidance on this.
Adequacy of reasons
Having decided that the Decision Notice could not be challenged by judicial review Moore Bick LJ (along with both Pill and Black LJJ) went on to hold that the RDC’s reasons had been adequate. He said that the Claimant could not “have failed to understand the basis on which the RDC had reached its decision”. Even though “he could not have discerned…why it had rejected any specific arguments he had put forward” the RDC was not required to answer every submission put to it.
Pill LJ accepted that the Decision Notice “as a whole” did give adequate reasons to meet the statutory requirement. However he did not let the RDC off the hook entirely. He stated that he “would expect a clearer and more focused approach by RDCs”. He also stated that subjects are entitled to properly-reasoned Decision Notices and that those who received inadequate reasons were prejudiced for the reasons argued by Mr Wilford.
It might be said that this decision was unsurprising. Parliament has designed a system whereby those unhappy with an RDC decision can have the UT fully reconsider their case. An application for a judicial review, making procedural criticisms of the RDC’s decision, can easily be seen as trying to avoid the real question, and subverting the statutory scheme.
However, Moore Bick LJ made clear that his conclusion that the RDC’s reasons were adequate was obiter (unlike Pill LJ who said that the adequacy of reasons in this case was determinative). This means that where the RDC gives inadequate reasons for a decision, or even no reasons at all, it would still not be open for the subject of the decision to seek judicial review. All that he could do would be to have a complete rehearing before the Upper Tribunal, with all the expense, time and risk of increased penalties that brings. The fact that the RDC would have flouted the statutory requirement to give reasons apparently does not change that result: Davies states that even where the RDC’s decision is void the proper recourse is through the Upper Tribunal. This case closes down any exception to that rule based on inadequate reasons.
The right to a full rehearing is seen as blocking complaints about the decision making process of the RDC. If this is the case, then in granting this seemingly generous right (one which many other professionals are not afforded) Parliament counter-intuitively deprived subjects of a means of ensuring that the RDC operates in a fair and lawful way. It may be that faced with a starker example of truly inadequate reasons, a court would decide to rely on the exceptional recourse to judicial review alluded to by Moore Bick LJ, and which Pill LJ appeared to support.
It remains to be seen how much weight this judgment – that judicial review for inadequate reasons is entirely barred where there is statutory mechanism for challenge – will have outside of cases where the right is to a full rehearing. Moore Bick LJ did extensively cite cases where there was a statutory right only to an appeal but also emphasised the unique nature of a rehearing “Since the tribunal would have to consider the matter completely afresh, I find it hard to see how he would be assisted by obtaining further reasons from the RDC. The tribunal is not concerned with the reasoning of the RDC…” The same cannot be said where there is right only to appeal a decision, where the original decision often remains relevant.
However both he and Pill LJ emphasised that the Administrative Court should be vigilant to prevent judicial review applications where it appears that a person is raising procedural points in order to avoid the real substance of the disciplinary case against him. We can expect to see this dicta being trotted out by those seeking to prevent judicial review in all cases where there is a statutory right to challenge a decision.
Paul Reynolds is a barrister at 1 Crown Office Row
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