When I heard about the Bordeaux case I thought I would be writing the fourth installment of my series of articles about the reasons for enforcement action being taken by the Commission. To my surprise, upon reading the judgment, I realise that my concern was with the quality of the decision making instead: a theme close to my heart.
For those of you who don’t know, on May 16th this year, the judgment of the Royal Court was handed down in respect of the appeal by the three directors of Bordeaux Services (Guernsey) Limited against their 5 year prohibition orders. It also dealt with the amount of the fine leveled at Bordeaux itself by the Commission.
After the judgment was issued, the Commission, on the 6th June, published a summary setting out the basis for the enforcement action and the findings of the Royal Court and will be following this up with a seminar on the 20th June. As the summary sets out perfectly the issues at the heart of the action, I have chosen instead to deal with why some of the original orders made were set aside on appeal.
In July 2015, the Senior Decision Maker, who was acting on behalf of the Commission, issued a written statement [or Decision] setting out the fines and prohibition orders imposed against Bordeaux and its directors together with the findings of fact in the case and the reasons for the enforcement action taken. The job of the Deputy Bailiff on hearing the appeal was to decide, on the basis of the contents of the Decision, whether Bordeaux’s fine and the prohibition orders imposed against the directors were reasonable. As the appeal was partly successful, it is clear something went wrong but what was at fault?
Before looking at the outcome, the Deputy Bailiff looked at the level of review the Decision deserved. He explained that “the availability of discretionary financial penalties as one of the sanctions that can be imposed raises such cases to a level where the process is quasi-criminal” concluding that “the Decision can properly be subjected to a level of review that would not otherwise be appropriate for a more obviously “lay” administrative decision affecting another sector of activity.”
Then, after confirming that the Decision Maker was able to make prohibition orders even though there was no proof of some lack of integrity, the Deputy Bailiff considered the appeal against those orders made under the full suite of regulatory Laws. Whilst he found that the reasons for such orders were adequately argued in respect of the POI Law and the Fiduciaries Law, the remaining three prohibition orders were set aside. But why? Because, quite simply, the Senior Decision Maker did not include reasons for making prohibition orders under the other three Laws. Without reasons, the Deputy Bailiff had to set aside those prohibition orders because:-
“[a]lthough it would only have taken a paragraph or so to make the connection between the various findings of non-fulfilment under the POI Law and the Fiduciaries Law and findings that there have similarly been failings that could be leveled against each of the Bordeaux Directors under the other Laws, this has not been done.”
It is interesting to note that the original Decision issued to Bordeaux on the 28th July 2015 omitted to mention all the regulatory Laws, only referencing the POI Law and, when spotted the next day, an amended and final Decision was issued on the 31st July 2015. However, despite the Decision now extending the prohibition orders so that they were made under all the regulatory Laws, as can be seen, the reasons in the Decision for making such orders were not.
The next error was in relation to the length of the prohibition orders imposed on all three directors. The problem here was not that there were no reasons given in the final Decision but the lack of cohesion between the “Minded To Notice” and the final Decision issued in July. A “Minded To Notice” is a draft decision setting out what the Decision Maker is, literally, minded to impose. It is intended to give an opportunity to put forward objections against the proposed penalties and this is what happened. However, whilst some of the objections were accepted, the problem arose because the arguments set out in the “Minded To Notice” did not flow through to the final Decision.
In the “Minded To Notice” the imposition of 15 years prohibition for the directors, Mr Radford and Mr Meader, and a 5 year prohibition for Mr Tostevin were mooted. In the final Decision, the 15 year orders were reduced to 5 years but Mr Tostevin’s 5 year order remained the same. The error was not considered to be in this reduction but because there was no arguments put forward as to why the length of Mr Tostevin’s prohibition order was not also proportionately reduced. This change of heart was not explained and, therefore, the Deputy Bailiff felt there “was insufficient reasoning given for 5 years.”
Lastly, the £150,000 fine imposed on Bordeaux was reviewed and again there was a paucity of reasons given. One aspect was the comparison of other judgments and the Deputy Bailiff states
“The fact that the Decision is silent as to how the GFSC took into consideration the penalties imposed by it in other cases (para. (f)) is troubling. Where there is a statutory obligation on the GFSC to take this factor into consideration, it is clearly desirable for it to demonstrate that it has done so.”
So back it must go for reconsideration as to the amount of the fine to be imposed on Bordeaux as well as the review of the prohibition orders which weren’t upheld on appeal. Not only does this mean there is more work for the Commission to do to impose the penalties it wanted, but also some of the costs of the appeal are to be met by the Commission because the Appellants were, to a certain extent, successful.
So, whilst some reassurance can be taken to know that, despite the poor record of decisions made, those who do fail the fit and proper test will not slip through the net, one must ask at what cost?