GUERNSEY Royal Court judgement overturns fines and prohibition orders imposed by GFSC

On Tuesday, 18^th April, the Royal Court of Guernsey handed down its Judgment in the appeal of

• Domaille, Clarke and Hannis (the Appellants) v the Guernsey Financial Services Commission (GFSC).

The initial GFSC decision [July 2022] had imposed

• Prohibition orders on the three Appellants of eight, four and three years, and
• Fines of £280,000, £90,000 and £30,000.

In summoning up, Her Hon Hazel Marshall KC, Lieutenant Bailiff, said:-

I have found this a very difficult and troubling case, although – but perhaps, in fact, because – I have reached my conclusions so very firmly.

The Commission did not, in this case, achieve the “fair balance” recognised as required by the then Deputy Bailiff in Bordeaux (above) at [30]

The financial services industry is an extremely important part of the economy of Guernsey. It is hugely in Guernsey’s interests to be a location which those who have responsible and respectable fiduciary or finance business to set up, operate or transact find attractive for that purpose. The Commission is understandably fervent in the performance of its functions of protecting the public interest and protecting and enhancing the reputation of the Bailiwick as a financial centre. However, it seems to me that on occasions, the Commission may overlook the fact that the reputation of the Bailiwick as a financial centre includes the reputation of the Commission itself as a regulator.

In my Judgment that reputation needs to be one of being “firm but fair” and the Commission needs to keep in mind the danger that, in the interests of being perceived to be the former, it may overlook the latter.

This is particularly so as regards dealing with “small” businesses - persons or entities who could not afford the costs of challenging a decision of the Commission.

THE JUDGEMENT IS HERE.

https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=84276

SUMMARY OF THE STORY

The initial GFSC decision had imposed, amongst other things, prohibition orders on the Appellants of eight, four and three years, respectively, along with fines of £280,000, £90,000 and £30,000.

2. The Royal Court:
   • Has Quashed the prohibition orders; and
   • Has Remitted the fines to the GFSC for reconsideration with suggested maximum amounts of £175,000 and £60,000 (with the last fine not having been appealed).
3. The Judgment is a hallmark of a regulatory environment that is “firm but fair”, covering several key legal issues, including:

• The test for ‘probity’ – is a key element for the imposition of prohibition orders;
• The retrospective application of newly increased fining powers under the Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020 (the “EP Law”);
• The various grounds of appeal under the EP Law, including, in particular, that a decision of the GFSC is considered to be “unreasonable”;
• The relevance of ‘comparator cases’ from before the new EP Law came into force;
• The urgent injunctive relief obtained by the Appellants, directing the Commission to remove the publication of the prohibition orders from its website;
• Issues of fairness, reasonableness and proportionality in terms of the enforcement procedure itself and the general approach of the GFSC in this case.

2. The Judgment notes,

Mr Domaille

• Variously, that the findings in relation to an alleged want of probity for Mr Domaille were “quite unsatisfactory”, “flawed for being made upon an error of law” and “unreasonably made”;

Mrs Hannis

• In relation to Mrs Hannis, they were “unreasonable and unjustified”; and

Mr Clarke

• In relation to Mr Clarke, they were “quite excessive” and “not properly sustainable”.

2. 1. In upholding the appeal, the Judgment also went on to make a number of observations regarding the Commission’s approach in this case, including
      • Its “attitude to changing goalposts”, and
      • The “flawed and unfair introduction of charges of want of probity at the Final Notice stage, based on no further relevant evidence”.
   2. The Judgment also made several important observations regarding
      • The correct approach in enforcement cases involving historical misdeeds, as the majority of the allegations pre-dated November 2017, and
      • In some instances related to events that occurred before the introduction of the obligation to obtain the source of wealth information from clients.
   3. In particular, it was observed
      • “Whilst there may be no period of prescription as regards sanctions for regulatory offences, imposing sanctions for apparent historic misconduct as if it were recent must run the risk of being unfair on any basis.”
   4. Ultimately, the Judgment concluded that concerning all three Appellants, there was
      • No evidence that any of the matters of which they were accused had caused any harm to clients, beneficiaries, investors, creditors or members of the public, nor the reputation of the Bailiwick.

The judgement is here.

https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=84276

Source

https://channeleye.media/prohibition-orders-imposed-by-gfsc-overturned-by-appleby/