In the Julius Baer case, a costs order with a real sting in the tail

Upper Tribunal Judge Herrington - sitting in retirement - has delivered a final blow to the FCA with a partial costs order in Seiler v FCA [2023] UKUT 00270 (TCC).

The decision does illustrate the considerable hurdles facing costs applicants: a comprehensive costs order remained well out of reach for the applicants despite the underlying decision going firmly against the FCA, the Upper Tribunal making various new findings that highly constrain the FCA remaking the prohibition orders, and strident Upper Tribunal criticism of the FCA's case handling.

Speaking of which, the decision offered further remarkable criticism of the FCA - more below.  Responding to this, the FCA may in future:

• Bolster its efforts to procure key witnesses located abroad including asking the Upper Tribunal to issue Letters of Request.
• Strengthen its systems and controls relating to fairness and balance of its press releases about Upper Tribunal decisions.

Background

In Seiler v FCA [2023] UKUT 00133 (TCC) (see our blog post and note) the Upper Tribunal allowed the applicants' references of FCA decisions to ban them on reckless lack of integrity grounds.  The FCA failed to shoe-horn a competence/capability disciplinary matter into an integrity prohibition case: recklessness requires subjective knowledge of the risk in question (which wasn't made out on the evidence) and the FCA was hampered by numerous procedural deficiencies and delays.

The costs decision

The Upper Tribunal has jurisdiction to order costs - at its discretion - if it considers that a party acted unreasonably in the proceedings or the regulator's underlying decision was unreasonable (UT Rule 10(3)).  (An aside: interestingly, the Upper Tribunal said that if its jurisdiction were enlivened by it being "unreasonable" for the regulator to defend the reference then the default position should be to award the applicants all of their costs.  But the situation is more nuanced where the applicants allege unreasonableness only in certain aspects of the regulator's conduct.)

The applicants did get all their costs of certain aspects of the underlying decision and the Upper Tribunal proceedings:

• On the underlying decision, a new fact pattern that the RDC introduced into the Decision Notices without first issuing a corrective Warning Notice ("New Issue"); and 
• On the FCA's conduct before the Upper Tribunal, the arguments about the New Issue, plus the FCA's failure to call key witnesses.  

But the applicants didn't obtain their other costs.  Despite the Upper Tribunal so comprehensively departing from the FCA's underlying decision, it decided that the FCA's underlying decision wasn't unreasonable on the basis of the evidence before it at the time, and when it came to the FCA's conduct of the proceedings, the Upper Tribunal considered its departures to be based upon complex fact-finding including consideration of new oral evidence before the Upper Tribunal.

The result was cold comfort from the applicants' perspectives, with a costs award of all of the costs of the New Issue (which probably isn't that much) but only 5% of the other costs.

Searing criticism of the FCA

On the FCA's failure to call key witnesses, the Upper Tribunal criticised the FCA for failing to disclose to the Upper Tribunal during the hearing or when receiving the Upper Tribunal's draft decision (which dealt with whether the FCA had attempted to seek attendance of certain key witnesses) that the FCA had made such attempts, saying it was "totally unacceptable".  

• It criticised what it says were the FCA's "utterly feeble" attempts - made "impossibly late" - to obtain the assistance of those witnesses, initially through FINMA via a letter which encouraged rejection of the request.  
• And it criticised the FCA's failure to avail itself of other options to obtain those witnesses including asking the Upper Tribunal to issue Letters of Request.  
• The Upper Tribunal observed that with increasing cross-border business, evidence from witnesses abroad will frequently be relevant, and "it is no good for the Authority simply to wring its hands and say there is nothing we can do to secure the attendance of a witness, who if he or she is asked only on the basis that it is up to him or her whether they wish to assist or not, will inevitably politely decline to assist, as happened in this case."

Finally, the Upper Tribunal excoriated the FCA for its "highly inappropriate" press release following the Upper Tribunal's decision on the reference.  

• It said that the statement was "disgraceful and should never have been made".  
• By starting with the statement "we have already had a successful outcome in this case" it was "highly misleading" because the "outcome" referred to was the settled decision with the relevant firm, not the individuals who were the applicants on this reference.  
• There was no link to the Upper Tribunal decision, no mention that the FCA's proceedings against the applicants would be discontinued, and an attempt to downplay the Upper Tribunal's criticisms of the FCA's case handling.  
• And the FCA took almost a month and detailed discussions with the applicants to agree to take down the statement.  
• The Upper Tribunal speculated whether the statement showed a serious error of judgment on Enforcement's part or a systems and controls failure around statements issued by the FCA's communications team.  
• In any event, the Upper Tribunal said: "I trust that never again will the Authority seek to give such a misleading impression of the result of a Tribunal decision and that it will act fairly, as it usually does, in summarising the results of a decision and providing an appropriate link to the decision."