Elliot v Financial Services Authority, Court of Appeal - United Kingdom Financial Services and Markets Tribunals, March 16, 2006, [2002] UKFSM FSM027

Resolution Date:March 16, 2006
Issuing Organization:United Kingdom Financial Services and Markets Tribunals
Actores:Elliot v Financial Services Authority
 
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REGULATED ACTIVITIES ­ performance of - prohibition order - whether Applicant a fit and proper person to perform functions in relation to regulated activities carried on by an authorised person ­ no ­ whether the Authority had power to make a prohibition order ­ yes - reference determined in favour of the Authority ­ Financial Services and Markets Act 2000 s 56 THE FINANCIAL SERVICES AND MARKETS TRIBUNAL ALLEN PHILLIP ELLIOTT Applicant - and - THE FINANCIAL SERVICES AUTHORITY Respondent Tribunal: DR A N BRICE (Chairman) MR I B ABRAMS MR P V BURDON Sitting in public in London on 20 and 21 October 2005 and 19 December 2005 Graham Platford of Counsel for the Applicant in respect of the second issue only; otherwise the Applicant appeared in person Timothy Dutton QC and Dermot Lynch for the Respondent © CROWN COPYRIGHT 2006 2 DECISION The reference1. Mr Allen Phillip Elliott (the Applicant) referred to the Tribunal a Decision Notice issued by the Financial Services Authority (the Authority) on 15 December2003. The Decision Notice stated that the Authority had decided to prohibit the Applicant from performing any function in relation to any regulated activity carried on by an authorised person because it appeared to the Authority that the Applicant was not a fit and proper person to perform any such function. The legislation2. The Decision Notice was given under the provisions of section 56 of the Financial Services and Markets Act 2000 (the 2000 Act) the relevant parts of which provide: "(1) Subsection (2) applies if it appears to the Authority that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised person. (2) The Authority may make an order ("a prohibition order") prohibiting the individual from performing a specified function, any function falling within a specified description or any function. (3) A prohibition order may relate to- (a) a specified regulated activity, any regulated activity falling within a specified description, or all regulated activities; (b) authorised persons generally or any person within a specified class of authorised person. (4) An individual who performs or agrees to perform a function in breach of a prohibition order is guilty of an offence ... ." ... (8) This section applies to the performance of functions in relation to a regulated activity carried on by ­ (a) a person who is an exempt person in relation to that activity, and (b) a person to whom, as a result of Part XX, the general prohibition does not apply in relation to that activity, as it applies to the performance of functions in relation to a regulated activity carried on by an authorised person. The issues3. At a hearing held on 11 July 2005 the Tribunal heard a preliminary issue. In 2001 the Solicitors Disciplinary Tribunal found the Applicant guilty of conduct unbefitting a solicitor and ordered that he be struck off the Roll of Solicitors. The preliminary issue was whether the Findings and Order of the Solicitors Disciplinary Tribunal were admissible evidence of the Applicant's fitness and propriety and whether the Authority could reply upon the Findings and Order without the need to prove each and every allegation which the Solicitors Disciplinary Tribunal had found to be proved. 34. In its preliminary Decision dated 28 July 2005 the Tribunal decided that the Findings and Order of the Solicitors Disciplinary Tribunal were admissible evidence of the Applicant's lack of fitness and propriety and that the Respondent could rely upon the Findings and Order without the need to re-prove each and every allegation which the Solicitors Disciplinary Tribunal had found to be proved. However, the Tribunal also stated that it would consider any other evidence which either party wished to put before it after which the Tribunal would make its own decision as to whether the Applicant was a fit and proper person within the meaning of section 56.5. After the release of the preliminary Decision the issue remaining for determination in the reference was whether the Applicant was a fit and proper person within the meaning of section 56. At a very late stage, namely on 10 October 2005 which was ten days before this hearing, the Applicant sought to raise another issue, namely, whether the Authority had exceeded its powers by the issue of the prohibition order. This issue had not been raised in the reference notice nor in the Applicant's reply to the Authority's statement of case. However, as the Authority was prepared to deal with the issue at this hearing, we considered it also.6. Thus the issues for determination are: (1) whether the Applicant is a fit and proper person within the meaning of section 56; and, (2) whether the Authority exceeded its powers by the issue of the prohibition order. The evidence7. Two bundles of documents were produced by the Applicant. Six (blue) bundles of documents were produced by the Authority. Not all the documents were referred to at the hearing. The Applicant gave oral evidence on his own behalf. Oral evidence was given on behalf of the Authority by Mr Stephen Kemp, an investigator in the Enforcement Division of the Authority, and by Mr John Gould, Solicitor of Messrs Russell-Cooke Potter & Chapman, Solicitors. The facts8. From the evidence before us we find the following facts.9. The Applicant was born in 1949 and is still an Australian national. In 1973 he qualified as a solicitor in the state of Queensland, Australia. He was there involved in arranging loans secured by mortgage. These loans were usually short term loans made by the Applicant's private lending clients to borrowers who mortgaged real property as security for the repayment of capital with interest. The loans were used by the borrowers to finance property development or property speculation. 1988 ­ the Australian disciplinary proceedings10. In June 1988 the Statutory Committee of the Queensland Law Society considered eleven allegations about the Applicant made by the Council of the Queensland Law Society Incorporated. One allegation was that the Applicant, as solicitor for two clients (who were husband and wife), was in breach of his duties as a solicitor because he mixed the affairs of his clients with his own. The Applicant and 4 his wife had borrowed A$78,500 from his lending clients in order to buy a house and, in the same transaction, the Applicant had acted for his lending clients in connection with the loan to his wife and himself and the provision of security. Another two allegations were that the Applicant, as the solicitor for another client, was in breach of his duties as a solicitor because he mixed the affairs of that client with his own. That second client lent the sums of A$38,000 and A$65,000 to a company; the Applicant acted as the solicitor for both the client and the company; the Applicant was a director of, and a shareholder in, the company; and the company acted as the trustee of a discretionary trust of which the Applicant was a beneficiary. The other allegations were of a similar nature. The dates of the events giving rise to the allegations and the amount of money at issue in each were: 1 3 March 1986 A$ 78,500 2 18 December 1985 A$ 38,0003. 30 April 1986 A$ 65,0004. 27 August 1985 A$120,000 5 10 October 1985 A$ 80,0006. 23 June 1983 A$ 65,0007. 2 December 1985 A$103,500 8 7 March 1986 A$ 8,5009. 4 September 1985 A$ 20,00010. 14 January 1986 A$ 65,000 11 8 January 1986 A$ 65,00011. Thus the allegations covered a course of conduct from June 1983 to April 1986 and involved sums amounting to A$708,500.12. On 1 and 2 June 1988 there was a hearing before the Statutory Committee of the Queensland Law Society at which the Applicant was represented by Leading and Junior Counsel. On 2 June 1988 the Statutory Committee found the above eleven allegations to be proved. In connection with the first allegation the Statutory Committee also found that the bill of mortgage had not been stamped or registered within a reasonable time and so, in that case, the Applicant had failed to take reasonable steps to protect the interests of his clients. The Statutory Committee found the Applicant guilty of unprofessional conduct and ordered that he be fined the sum of A$5,000 and that he should pay 75% of the costs of the proceedings before the Committee. 1991 - 1999- the Australian insolvency proceedings13. In the late 1980's or the early 1990's the Applicant purchased a freehold island (Turtle Island) on the Barrier Reef and borrowed money for the purchase; some of the money was borrowed from lending clients. He then applied for it to be re-zoned so that he could get planning permission to build a resort on the island. He engaged a consultant on a success fee and the consultant obtained the re-zoning and the planning approval. The consultant asked for his fee (which was in the region of A$300,000) but by then the Applicant had borrowed heavily and was unable to pay. The consultant sued the Applicant and obtained judgment.14. On 12 November 1991 a statement of the Applicant's affairs was prepared. The Applicant had total liabilities of A$871,028 and total assets of A$358,986 leaving a deficiency of A$512,042. In evidence which we accept the Applicant told us that 5 most, if not all, of the clients in respect of whom allegations had been made to the Queensland Law Society appeared in the statement of affairs and he regretted that they had lost their money. There followed a meeting of creditors and on 11 December 1991 a Deed of Arrangement under Part X of the Australian Bankruptcy Act 1966 was entered into between the Applicant of the one part and Mr P G Jefferson as trustee of the other part. (The Deed of Arrangement was later referred to as an individual voluntary arrangement (IVA) which is its English equivalent.) Under the Deed of Arrangement the Applicant covenanted and agreed to pay to the trustee the sum of A$75,000 over three years by way of annual instalments...

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