Guernsey Law Reports 2009-10 GLR Note 6
CANIVET WEBBER FINANCIAL SERVICES LIMITED v. GUERNSEY FINANCIAL SERVICES COMMISSION
COURT OF APPEAL (Carey, Vos and Montgomery, JJ.A.): February 25th, 2009 and May 19th, 2009
Financial Services—insurance managers and intermediaries—licensing—revocation of licence
Following a warning by the Guernsey Financial Services Commission (“GFSC”) that Canivet Webber Financial Services Limited (“CWFSL”) was not complying with the statutory requirements for licensed trading as an insurance intermediary, it warned CWFSL that it was considering revoking its licence, and it prevented the company from taking on new business. The GFSC found that the company lacked a second pair of eyes to manage the business (“the four eyes criteria”); its co-director had resigned and not been replaced; it had neither a company secretary nor an accountant; its record-keeping was poor; and it had no professional indemnity insurance. The GFSC made recommendations for improvement which were not complied with, and CWFSL agreed to the voluntary suspension of its licence. Arrangements were made to service existing clients and to provide administrative support, but these eventually fell through and notice was given that the GFSC intended to revoke the licence under s.9(3) of the Insurance Intermediaries (Bailiwick of Guernsey) Law 2002 if replacements were not found. It gave CWFSL a further eight weeks to comply with the four eyes criteria, to appoint a competent second director, and to bring the record-keeping up to date. At the end of this period, these requirements had not been met, and the GFSC made a provisional decision to revoke the licence as CWFSL did not meet the minimum criteria for licensing under the 2002 Law. A tribunal agreed that the GFSC had come to the correct conclusion.
CWFSL then appealed under s.43 of the 2002 Law against the decision to revoke its licence. Under that section, the appeal had to be instituted within 28 days of the decision being made, but several months of delay followed. The GFSC therefore sought to have the proceedings struck out, but the Royal Court (Newman, Lieut. Bailiff) allowed an extended time to initiate proceedings. It also ordered CWFSL to give security for costs and to file certain material in support of its substantive appeal within a certain time. The proceedings in the Royal Court are reported at 2007–08 GLR 221, and the proceedings in the Court of Appeal upholding the order for security of costs are noted at 2007–08 GLR N [25]. When this time period had expired and the “unless” order had not been complied with, the Royal Court struck out the substantive appeal. CWFSL applied for leave to appeal from the orders (“the procedural appeals”) and the decision to strike out (“the substantive appeal”). It was represented throughout by its director.
Held: (1) The procedural appeals would be dismissed, since the substantive appeal had no realistic prospect of success. The GFSC’s decision could only be reversed if it had been unreasonable. Taking into account the nature of the regulatory failures and their cumulative effect, the lack of evidence showing a likelihood of compliance within a reasonable time, the limited responsibility of the GFSC for CWFSL’s failings and the GFSC’s duty under ss. 4, 7 and 9 of the 2002 Law to consider the interests of the public, policyholders and potential clients, as well as the reputation of the Bailiwick as a finance centre, the only decision it could reasonably have made was to revoke the licence. CWFSL had had ample opportunity to comply with the statutory requirements, but had failed to appreciate the seriousness of the breaches. Although it might have been possible for the business to run if the GFSC were to check every transaction, it was undesirable and impractical for the GFSC to be involved in day-to-day compliance checks however exceptional a company’s circumstances, and had CWFSL been allowed to continue business as usual, its clients would have been exposed to unacceptable risk. There was therefore no real prospect of CWFSL arguing successfully against the decision—the hardship caused was an inevitable by-product of the increasing regulation required to protect the public and to maintain the industry’s reputation in Guernsey. The Royal Court had therefore been right to strike out the substantive appeal—it would not have been in the interests of justice to postpone compliance with the “unless” order if the substantive appeal were hopeless, and, indeed, the court was not to allow a litigant with little hope of success to continue pursuing his case, especially when he has not complied with court orders and requires an exercise of the court’s discretion in his favour.
(2) Even if the GFSC had been unfair in its dealings with what had been an authorized business, and its restrictions been responsible for CWFSL’s problems, it was not necessarily a lawful or reasonable response to treat these as justifying the relaxation of other rules designed to protect both the industry and the public.
(3) Professional indemnity insurance was a requirement under s.4(2)(h)(i) of the 2002 Law, and the GFSC was not entitled to treat it as something that could be foregone or postponed, since that would have exposed the public to an unacceptable risk of loss and would have defeated the object of the 2002 Law, which was the protection of the public.
(4) Given that the solvency of the appellant was in question, and it was doubtful whether any order for costs against it could be met, any order for costs was not to be enforced without leave of the court.
(5) There was no further appeal as of right and the court would not grant leave to appeal (under s.16 of the Court of Appeal (Guernsey) Law 1961) against the decision, since no point of law of great and general public importance was involved. If it wished to pursue the appeal, CWFSL would therefore have to seek the special leave of the Judicial Committee of the Privy Council. To avoid rendering any decision of the Judicial Committee nugatory, the statutory publication of the decision to revoke CWFSL’s licence would be postponed for 3 months to allow CWFSL to apply for special leave to appeal if it wished to do so.
(6) It was regrettable that the proceedings had not been concluded sooner. When an individual was unrepresented in litigation against a public body, it was desirable for the public body to minimize its procedural demands to ensure that the right of recourse to the Royal Court was not thwarted. It would therefore rarely be appropriate to order security for costs in such a situation.
2010
Law Report
None
Guernsey Law Reports 2009-10 GLR Note 6