IN THE COURT OF APPEAL OF SEYCHELLES
Reportable
[2024] (18 December 2024)
SCA 13/2024
(Arising in MC 04/2021)
In the Matter Between
Financial Services Authority Appellant
(rep. by Mr. Basil Hoareau)
And
Brijesh Jivan Respondent
(rep. by Mr. Guy Ferley)
Neutral Citation: Financial Services Authority v Jivan (SCA 13/2024) [2024] (Arising in MC 04/2021)
Before: De Silva, Sharpe-Phiri, Sichinga, JJA
Summary: Article 125(1)(c) of the Constitution - Judicial Review – Grounds of Review – Procedural Impropriety – Content of a Fair Hearing
Heard: 4 December 2024
Delivered: 18 December 2024
ORDER
Judgment of the Supreme Court dated 27th June 2024 is set aside.
The petition dated 28th January 2024 filed by the Respondent is dismissed.
Costs to the Appellant.
JUDGMENT
DE SILVA JA
(Sharpe-Phiri JA, Sichinga JA, concurring)
The Appellant is a statutory body established in terms of Section 3 of the Financial Services Act (FSA Act). It has the power to regulate the financial services industry.
The Respondent is a Chartered Accountant specializing in securities and investments. At all times material to this appeal, he was a Non-Executive Director of Aronex Corporation Limited (Company), a company registered under the Companies Act 1972 and the Compliance Officer of the Company.
By letter dated 21st January 2021, the Appellant removed the fit and proper status of the Respondent as Compliance Officer and as Non-Executive Director of the Company. The removal was done as the Respondent failed to “demonstrate probity, competence and soundness of judgment” in fulfilling his responsibilities as Non-Executive Director and Compliance Officer of the Company.
Aggrieved by the said decision, the Respondent invoked the supervisory jurisdiction of the Supreme Court under Article 125 of the Constitution. On 27th June 2024, the Supreme Court issued
A writ of Certiorari quashing the decision of the Appellant to revoke the fit and proper status and directorship of the Respondent;
A writ of Mandamus ordering the Appellant to restore the Respondent’s fit and proper status and ability to serve as Director and Non-Executive Director of the Company.
The Appellant has raised the following grounds of appeal:
The learned judge erred in law and on evidence in coming to the findings that the response of the Appellant that the Appellant did not have the powers to appoint an examiner to examine the conduct of the Respondent, as Compliance Officer and/or Director of the Company, to be very much wanting in logic and an abdication of its responsibility to ensure fairness in its decision making process – in view that the Appellant did not have the power in law to appoint an examiner to examine the conduct of the Respondent. (Ground 1)
The learned trial judge erred in law in holding that the decision of the Appellant - to revoke the fit and proper status and the Non-Executive Directorship of the Respondent to be illegal and unfair and in breach of the fundamental principles of natural justice – since the Appellant acted in accordance with the principles of natural justice in revoking the fit and proper status and Directorship of the Respondent. (Ground 2)
Applicable Law
In terms of Article 125(1)(c) of the Constitution, the Supreme Court has supervisory jurisdiction over subordinate courts, tribunals and adjudicating authority and has the power inter alia to issue writs or orders in the nature of Certiorari and Mandamus as may be appropriate for the purpose of enforcing or securing the enforcement of its supervisory jurisdiction.
In Seychelles International Business Authority v. Agnes Jouanneau and Anor [SCA 40 and 41 of 2011, para. 9] it was held that the Supreme Court is not precluded from looking at precedents in English Law that have application in terms of pre-reform writs and rules of civil procedure and decisions given by the courts of England after 1976 as they continue to have strong precedential value.
English Law
The modern formulation for the exercise of the powers of judicial review in English Law is found in the seminal decision in Council of Civil Service Unions and Others v. Minister for the Civil Service [(1984) 3 All ER 935], where it was held that administrative action is subject to control by judicial review under three heads. They are (1) illegality, where the decision-making authority has been guilty of an error of law, e.g. by purporting to exercise power which it does not possess; (2) irrationality, where the decision-making authority has acted so unreasonably that no reasonable authority would have made the decision; (3) procedural impropriety, where the decision-making authority has failed in its duty to act fairly.
Lord Diplock went on to expound these three heads (pages 950-951) as follows:
“By illegality as a ground for judicial review I mean that the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. Whether he has or not is par excellence a justiciable question to be decided, in the event of dispute, by those persons, the judges, by whom the judicial power of the state is exercisable.
By irrationality I mean what can by now be succinctly referred to as "Wednesbury unreasonableness" (see Associated Provincial Picture Houses Ltd v. Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223). It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it. Whether a decision falls within this category is a question that judges by their training and experience should be well equipped to answer, or else there would be something badly wrong with our judicial system. To justify the court's exercise of this role, resort I think is today no longer needed to Viscount Radcliffe's ingenious explanation in Edwards (Inspector of Taxes) v Bairstow [1955] 3 All ER 48, [1956] AC 14 of irrationality as a ground for a court's reversal of a decision by ascribing it to an inferred though unidentifiable mistake of law by the decision-maker. "Irrationality" by now can stand upon its own feet as an accepted ground on which a decision may be attacked by judicial review.
I have described the third head as procedural impropriety rather than failure to observe basic rules of natural justice or failure to act with procedural fairness towards the person who will be affected by the decision. This is because susceptibility to judicial review under this head covers also failure by an administrative tribunal to observe procedural rules that are expressly laid down in the legislative instrument by which its jurisdiction is conferred, even where such failure does not involve any denial of natural justice…”
The two grounds of appeal are based on the finding of the learned judge that the Appellant failed to afford the Respondent a fair hearing.
Prior to examining the alleged failure to provide a fair hearing, I am compelled to observe that the learned judge erred in conflating grounds of illegality and procedural impropriety. He does so at paragraph 24 by stating “I find that response of the Respondent that the Respondent did not have the powers to appoint an examiner to conduct the conduct of the Petitioner, as a compliance officer and/or director of the Company to be very much wanting in logic and an abdication of its responsibility to ensure fairness in its decision-making process”. No doubt once it is established that there is an illegality or procedural impropriety in an administrative decision, the decision is liable to be struck down. Nevertheless, these heads are clearly distinct in scope and ambit.
Procedural Impropriety
Let me examine the rationale and content of procedural impropriety before addressing the two grounds of appeal.
The justification generally made in contemporary academic discourse for a fair hearing is founded upon instrumental and non-instrumental argumentation. The instrumental argumentation underlines the connection between fair hearing and the substantive justice of the final conclusion. Substantive rules are aimed to attain a specific result. Providing a fair hearing before a decision assist in ensuring that this principle is correctly applied. The non-instrumental justification for a fair hearing is constructed on the allegiance to the rule of law, assuring impartiality and upholding human dignity.
While the rationale for a fair hearing is somewhat readily discernible, the content of a fair hearing is not so given the disparate types of cases that may arise in administrative law. A broad spectrum of procedural requirements is available in the basket of a fair hearing including due notice of the charges, right to respond, oral or written hearing, discovery of documents, legal representation, right to cross-examination and reasons for the final decision.
As Tucker LJ expounded in Russell v. Duke of Norfolk and Others [(1949) 1 All ER 109 at 118]:
"There are, in my view, no words which are of universal application to every kind of inquiry and every kind of domestic tribunal. The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with, and so forth. Accordingly, I do not derive much assistance from the definitions of natural justice which have been from time to time used, but, whatever standard is adopted, one essential is that the person concerned should have a reasonable opportunity of presenting his case."
The exact scope of a fair hearing depends on the circumstances of each case such as the character of the decision-making body, the types of decisions to be made and the statutory framework which guides the decision-making body. In the absence of statutory guidance, Court will seek assistance from common law principles. As Lord Morris alluded to in Wiseman and Another v. Borneman and Others [(1971) AC 297, 308H-309B]:
“We often speak of the rules of natural justice. But there is nothing rigid or mechanical about them. What they comprehend has been analysed and described in many authorities. But any analysis must bring into relief rather their spirit and their inspiration than any precision of definition or precision as to their application. We do not search for prescriptions which will lay down exactly what must, in various divergent situations, be done. The principles and procedures are to be applied which, in any particular situation or set of circumstances, are right and just and fair. Natural justice, it has been said, is only “fair play in action”. Nor do we wait for directions from Parliament. The common law has abundant riches:…”
Although the content of a fair hearing depends on the facts and circumstances of each case, there are certain integral elements that form the core of any fair hearing. It is not my intention to lay down an exhaustive list of the core elements of a fair hearing. Nevertheless, the notice of the complaint against the party and a reasonable opportunity to respond form an integral part of any fair hearing. As Lord Mustill held in Regina v. Secretary of State for the Home Department, Ex parte Doody [(1994) 1 A.C. 531 at 560D-G]:
“[…] (2) The standards of fairness are not immutable. They may change with the passage of time, both in general and in their application to decisions of a particular type. (3) The principles of fairness are not to be applied by rote identically in every situation. What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects. (4) An essential feature of the context is the statute which creates the discretion, as regards both its language and the shape of the legal administrative system within which the decision is taken. (5) Fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result; or after it is taken with a view to procuring its modification; or both. (6) Since the person affected usually cannot make worthwhile representations without knowing what factors may weigh against his interests fairness will very often require that he is informed of the gist of the case which he has to answer.” (emphasis added)
This was quoted with approval and applied in Bank Mellat v. Her Majesty’s Treasury (No. 2) [(2013 UKSC 39) (2014 A.C. 700 at § 30 (Lord Sumpton)].
Ground 1
The learned judge was of the view that the revocation of the fit and proper status as Compliance Officer as well as Non-Executive Director of the Company could have been done only after appointing examiners pursuant to Section 25(1) of the FSA Act.
However, the Appellant pointed out that Section 25(1) provides that an examiner can be appointed only where it appears to the Appellant on reasonable grounds that there are, or may be, grounds for taking enforcement action against a licensee or where it appears to the Appellant on reasonable grounds that any person is carrying on, or has carried on, unauthorized financial services business.
I am inclined to uphold this contention. The Respondent is not a licensee. The action against the Respondent was not based on him carrying on any unauthorized financial services business. Hence, the learned judge erred in law in concluding that the Appellant should have appointed an examiner prior to revoking the status of Compliance Officer of the Respondent.
Section 23(2) of the FSA Act empowers the Appellant to approve any individual to be appointed as a Compliance Officer. Section 23(4) empowers the Appellant to revoke its approval given under subsection (2) if it is of the opinion that the individual no longer satisfies its fit and proper criteria.
Plainly, the Appellant had the power to revoke the approval it had given earlier to the appointment of the Respondent as Compliance Officer of the Company.
Section 33(1) of the FSA Act empowers the Appellant to issue codes and guidelines which may extend to persons performing such functions on behalf of licensees including directors, senior officers and compliance officers. Section 33(4) directs all persons to comply with any code or guidelines issued by the Appellant.
Pursuant to these powers, the Appellant issued the Code for Fit and Proper and Competency Standards (Code).
Paragraph 4.1 of the Code, states that under the Securities Act 2007, securities dealers, investment advisors, representatives and all directors and officers of licensees are required to be, and remain, fit and proper. Section 47(1) of the FSA Act amended the Securities Act by repealing the words “Securities Authority” in the said Act and replacing it by the words “Financial Services Authority”. Hence, the Appellant became the statutory authority responsible for the administration of the Securities Act, 2007.
According to paragraph 7.3 of the Code, the Appellant has the power to suspend or revoke the fit and proper status.
Clearly, the Appellant had the power to revoke the approval it had given earlier to the appointment of the Respondent as Non-Executive Director of the Company.
The Respondent contended that the Appellant could have imposed other sanctions on him than revoke his fit and proper status as Non-Executive Director of the Company.
Our attention was drawn to Section 120(2) of the Securities Act 2007 which permits the Appellant to impose one of the sanctions mentioned therein where a licensee has contravened any provisions of that law, or any other regulations made thereunder. Plainly those provisions apply only to a licensee, which the Respondent was not.
Ground 2
The learned Judge held [at paragraph 23] that “it is obvious that no investigation was ever carried out and no “hearing” was ever conducted which can be said would have given the Petitioner sufficient right to present his case before the decision was taken”. This forms the basis of his finding that there has been procedural impropriety.
The FSA Act is silent on the procedure to be followed before the revocation of the fit and proper status.
English Courts have not hesitated to provide additional safeguards in the form of procedural fairness even where a statute has prescribed a certain procedure to be followed in the decision-making process. In Lloyd and Others v. McMahon [(1987) A.C. 625 at 702H] Lord Bridge of Harwich held:
“[…] the so-called rules of natural justice are not engraved on tablets of stone. To use the phrase which better expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making body, the kind of decision it has to make and the statutory or other framework in which it operates. In particular, it is well-established that when a statute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness.” (emphasis added)
The gap in the FSA Act has been filled by paragraph 7.2 of the Code, which states that where the Appellant has reasonable cause to believe that a relevant person fails to continue to satisfy the criteria set for fit and proper, the Appellant shall give written notice to the licensee of its intention to suspend or revoke the fit and proper status, stating the grounds upon which it intends to take such action.
Any decision to revoke the fit and proper status of the Respondent will plainly impinge on his rights. Nevertheless, somewhat surprisingly, the Code does not require any notice to be given to the Respondent prior to such action. Nevertheless, in R (Citizens UK) v. SSHD [(2018) EWCA Civ 1812 (2018) 4 WLR 123 at §68] Singh LJ held:
“[…] the duty to act fairly or the requirements of procedural fairness … will readily be implied into a statutory framework even when the legislation is silent and does not expressly require any particular procedure to be followed.”
I have no hesitation in holding that the Respondent was entitled to a fair hearing before any revocation of his status.
The Appellant concedes that the Respondent was entitled to a fair hearing prior to removing the fit and proper status of the Respondent as Compliance Officer as well as his Non-Executive Directorship of the Company. It is the position of the Appellant that the Respondent was given a fair hearing.
The Respondent admits the receipt of letter dated 22nd December 2020 from the Appellant whereby he was notified of the intention to revoke the fit and proper status of the Respondent. This forms part of the brief.
An examination of this letter indicates that the Respondent was put on notice of the intention to revoke his status both as Non-Executive Director and Compliance Officer of the Company.
In that letter, the Appellant has notified the Respondent of the following background information:
As part of its functions under the FSA Act, the Appellant received numerous complaints against the Company and launched an investigation culminating in the issuance of a Directive dated 23rd October 2020 pursuant to Section 26 of the FSA Act;
The Company was afforded 7 days from the date of the letter to make representations as to why the Directive should not be enforced against it;
The Company sought and was provided with an additional 7 days to respond;
As part of the Company’s response dated 6th November 2020, it requested for an extension of 15 working days to submit its revised compliance manual reflecting new internal procedures and monitoring measures which was granted;
During the course of the investigation, it was confirmed by the Company that certain functions have been outsourced to a Cypriot based entity known as G4 Shift Services Ltd (G4 Shift) who provides accounting, back-office, financial support, regulatory compliance and legal assistance, customer support and marketing services to the Company;
The recurring individual against whom complaints were made is a member of the G4 Shift team responsible for handling communications, customer support and marketing services with clients and acting as an introducing agent for the Company through G4 Shift;
This individual held himself out to be a licensed broker employed and representing the Company and engaged in the provision of advising on lots to take and when to close, resulting in gross losses on the part of the complainants;
The Appellant was at no given time aware of the relationship of G4 Shift and the Company nor aware of the individuals interacting with the clients of the Company nor have these individuals representing the Company found fit and proper to do so;
The Company has erred in their duty to satisfy itself on reasonable grounds that its appointed representative was a fit and proper person to act in that capacity as provided by Regulation 10 of the Securities (Conduct of Business) Regulation and further failed to properly and effectively supervise their officers and representative as required by Regulation 26 therein;
The Appellant has reasonable grounds to believe that the Respondent in his capacity as the fit and proper Director of the Company and in his capacity as the Compliance Officer, has failed to ensure that the systems and controls in place in respect of outsourcing of functions and ensuring that agents/officers and persons operating on behalf of the Company resulting in the direction and management of the business of a licensee not being conducted in a fit and proper manner;
The Appellant is of the opinion that the Respondent in his capacity as Director and Compliance Officer has ceased to demonstrate probity, competence and soundness of judgment in fulfilling his responsibilities as Non-executive Director and Compliance Officer;
The Respondent was accordingly informed of the intention of the Appellant to remove the fit and proper status of the Respondent.
The letter went on to provide the Company with an opportunity to submit a written notice to the Appellant within 14 days of its receipt to show good reasons as to why the fit and proper status of the Respondent should not be removed, failing which, the Appellant would proceed to remove the fit and proper status of the Respondent.
Although this letter called upon the Company to show cause, the Respondent, at paragraph 19 of his petition to the Supreme Court, unequivocally admits the receipt of the letter dated 22nd December 2020 and that he made representations by letter dated 23rd December 2020 and explained why his fit and proper status and his non-executive directorship should not be revoked. However, this letter is not available in the brief although the Respondent pleaded it as part and parcel of his petition.
In considering whether the letter dated 22nd December 2020 gave the Respondent due notice by way of a fair hearing, we must examine the grounds on which his fit and proper status as Compliance Officer and his Non-Executive Director status was removed by the Appellant.
These grounds are set out in letter dated 21st January 2021. Upon a careful examination of these, it is evident that the grounds for revoking the fit and proper status are based on the background information set forth in the letter dated 22nd December 2020 served on the Respondent. No additional facts were considered by the Appellant other than what was set out in letter dated 22nd December 2020.
In R (Miller) v. Health Service Commissioner for England [(2018) EWCA Civ. 144 (2018) PTSR 801 at §§42-43] it was held that the common law imports a duty of fairness to allow comment on a sufficiently particularized “gist” and “relevant material”. The opportunity provided to the Respondent meets these minimum standards of fairness.
In these circumstances, I have no hesitation in concluding that the Respondent had more than adequate notice of the grounds on which his fit and proper status was to be reviewed and that he was given a fair hearing. Accordingly, the learned Judge erred in concluding that no investigation was ever carried out and no “hearing” was ever conducted which can be said would have given the Petitioner sufficient right to present his case before the decision was taken.
For all the foregoing reasons, I set aside the judgment of the Supreme Court dated 27th June 2024. The petition dated 28th January 2024 filed by the Respondent is dismissed.
The appeal is allowed. The Petitioner is entitled to costs.
_____________________
J. De Silva JA
I concur: ____________________ N. Sharpe-Phiri JA
I concur: ____________________
D. Sichinga JA
Signed, dated and delivered at Ile du Port on 18 December 2024.
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