Financial Conduct Authority v Seiler & Anor

Factual and Procedural Background

The case concerns an appeal brought by Company A, the financial regulator, against a decision of the Upper Tribunal Tax and Chancery Chamber ("the Upper Tribunal") by Judge Herrington ordering Company A to pay a proportion of the costs of two respondents, referred to as Respondent One and Respondent Two. The respondents had challenged Decision Notices issued by Company A alleging reckless conduct and lack of integrity related to foreign exchange transactions involving their employer, Company B, a banking group, and an individual connected with a third-party group of companies.

The Upper Tribunal held that Company A had not proven its case that the respondents acted recklessly or lacked integrity and remitted the matter for reconsideration. Company A discontinued the proceedings thereafter. The Upper Tribunal subsequently awarded costs against Company A, finding that Company A had acted unreasonably in certain respects during the proceedings, including failing to call material witnesses and refusing to respond to requests for clarification. Company A appealed the costs decision on two grounds, having been granted permission on those grounds only.

Legal Issues Presented

1. Whether the Upper Tribunal erred in law in finding that Company A acted unreasonably by failing to call material witnesses in the proceedings.
2. Whether the Upper Tribunal erred in law in finding that Company A acted unreasonably by refusing to respond to requests for clarification regarding what other individuals knew about the transactions and details of its investigation.

Arguments of the Parties

Appellant's Arguments

• Company A contended that the Upper Tribunal had made errors of principle in imposing costs, including misunderstanding the nature of the proceedings, which are not ordinary civil litigation but regulatory references.
• It argued that it was a matter for Company A’s discretion which witnesses to call and that it was not required to call witnesses it could not present as truthful.
• Company A asserted that the requests for clarification were not proper or legally relevant and that failure to respond fully did not amount to unreasonable conduct.
• It maintained that the Upper Tribunal’s findings were effectively factual evaluations not subject to appellate interference and that the costs decision involved errors of law or was perverse.

Respondents' Arguments

• This information was not available in the provided opinion.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by affirming the statutory and procedural framework governing appeals from the Upper Tribunal, emphasizing that appeals are limited to points of law under section 13(1) of the Tribunals, Courts and Enforcement Act 2007. It underscored the Upper Tribunal’s role as a specialist judicial body with expertise in financial regulatory matters, which conducts a full rehearing of references rather than a conventional appeal.

The court analyzed the threshold condition for awarding costs in tribunal proceedings, which requires a finding of unreasonableness. It explained that this is a value judgment based on a detailed evaluation of the factual matrix. The court emphasized that the Upper Tribunal’s findings of unreasonableness are factual evaluations entitled to considerable deference and are not readily disturbed absent an error of law.

Regarding Ground One, the court found that the Upper Tribunal’s criticism of Company A’s failure to call certain witnesses was not a legal error but a factual conclusion within its discretion. The court rejected the appellant’s contention that Company A’s role was that of an ordinary litigant and that it was free to decide whom to call without further scrutiny. Instead, the court recognized the regulatory context and the public interest in ensuring that the tribunal is properly assisted by relevant evidence. The court held that the Upper Tribunal was entitled to find that Company A’s efforts to obtain evidence from overseas witnesses were insufficient and that its decision not to seek directions regarding a key witness was unreasonable.

On Ground Two, the court upheld the finding that Company A acted unreasonably by refusing to respond satisfactorily to requests for clarification about the knowledge of other individuals relevant to the integrity assessment. The court accepted that such information was relevant to the tribunal’s evaluation and that Company A’s refusal to engage was unreasonable. However, it noted that this did not amount to a general obligation to answer all requests but depended on the facts and relevance.

The court considered the Refused Ground, concerning the Third FX Transaction, which was not appealed and remains an unimpeachable finding of unreasonableness by the Upper Tribunal. This finding alone sufficed to support the costs order.

The court rejected the appellant’s submission that the Upper Tribunal’s approach was unorthodox or legally flawed, finding that the tribunal’s supervisory jurisdiction and the regulatory context justified its approach, including analogies to judicial review and the duty of candour. The court also acknowledged the detailed and complex factual background known intimately to the Upper Tribunal, which appellate courts cannot replicate.

In the dissenting opinion, the judge argued that the Upper Tribunal’s decision was reviewable for errors of law or perversity and contended that the tribunal misdirected itself by considering evidence and requests that were legally irrelevant. The dissenting judge also emphasized that the appellant had procedural remedies under tribunal rules to address information requests and witness issues, and that the costs decision improperly imposed sanctions without those remedies being invoked. However, the majority did not accept these arguments.

Holding and Implications

The appeal by Company A is dismissed.

The court upheld the Upper Tribunal’s costs order requiring Company A to pay a proportion of the respondents’ costs, concluding that the findings of unreasonableness were within the tribunal’s evaluative judgment and not subject to successful appeal on points of law. The decision affirms the supervisory role of the Upper Tribunal in regulatory references and underscores the distinct nature of such proceedings compared to ordinary civil litigation, highlighting the public interest and the regulator’s duty to assist the tribunal effectively.

No new precedent was set beyond confirming established principles concerning the scope of appellate review of Upper Tribunal costs decisions and the regulatory context of such proceedings. The direct effect is to maintain the costs award against Company A in the form originally ordered by the Upper Tribunal.