JUDGE TIMOTHY HERRINGTONWafa Shah for ApplicantAdrian Berrill-Cox, Counsel (instructed by the Financial Conduct Authority) for AuthorityDate 17 November 2015Category: Financial services
[1]This decision relates to an application by the applicant ("5 Dr Koksal") to make a reference to this Tribunal out of time in respect of the decision notice issued by the Authority to Dr Koksal (trading as Arcis Management Consultancy) on 9 December 2014. In that decision notice the Authority decided to refuse Dr Koksal’s application to vary Arcis's Part 4A Permission to enable it to carry on various mortgage related 10 activities. The Facts[2]On 2 December 2013 Dr Koksal applied to vary the permission granted to Arcis pursuant to Part 4A of the Financial Services and Markets Act 2000 ("FSMA") to carry on various regulated activities. In the application Arcis sought to add the 15 following activities to its permission:(a) advising on regulated mortgage contracts;(b) arranging (bringing about) regulated mortgage contracts; and(c) making arrangements with a view to regulated mortgage contracts.[3]At the time of the application, Dr Koksal did not employ any additional staff 20 and Arcis was wholly dependent on Dr Koksal to carry out the proposed activities which were the subject of the application (" the Mortgage Activities").[4]The Authority's authorisation team considered that Dr Koksal did not meet the appropriate qualification requirements which would enable Arcis to carry on the Mortgage Activities. Following written representations made by Dr Koksal the 25 Authority’s Regulatory Decisions Committee issued a decision notice on behalf of the Authority on 9 December 2014 refusing the application.[5]On 27 November 2014 Dr Koksal had also applied to vary Arcis's Part4A permission so as to permit it to continue to carry on various consumer credit related activities (the “Consumer Credit Activities”). In relation to that application an 30 associate of the Authority from its Debt Department and Credit Authorisation division wrote to Dr Koksal as follows: “Thank you for your application to vary your permission. I am your case officer. 3 I understand that you currently have another variation of permission application with us, which is currently in the regulatory decisions committee (RDC) process. That being the case ( and given the connection between the two applications), I feel the most appropriate course of action at this stage in respect 5 of this particular application would be to pursue one of the following options:(1) Await the outcome of the other application (The RDC process) before progressing this application further. 10(2) Withdraw this application at this time, and reapplying once the outcome of the RDC process is known. I would appreciate if you could revert back to me with your thoughts on the 15 above."[6]By virtue of paragraph 2(2) of Schedule 3 to the Tribunal Procedure (Upper Tribunal Rules 2008) a reference of a decision of the Authority to this Tribunal must be received no later than the 28 days after the notice of the decision in question is given. Accordingly the time for referring the decision notice in this case expired on 9 20 January 2015.[7]On 24 December 2014, Dr Koksal wrote to the RDC Secretariat informing them that he was not taking the case further to the Upper Tribunal. At some point thereafter, however, it appears that Dr Koksal changed his mind. It appears that he took legal advice from a number of different firms of solicitors which he described in 25 his later correspondence with this Tribunal as "confusing". However, he did on 26 May 2015 receive clear advice from another firm, Berwin Leighton Paisner, which he chose to disclose to the Tribunal. In that advice Dr Koksal was advised that if he wished to make a reference to the Tribunal then it ought to be made as soon as possible in order to maximise the chances of it being considered, bearing in mind that 30 it was out of time, and that he should not wait until after the determination of any complaint that Dr Koksal had in relation to the conduct of the Authority in relation to the application.[8]Accordingly on 8 June 2015 Dr Koksal referred the decision notice, 151 days out of time. As it appears from his reference notice and his subsequent 35 correspondence with the Tribunal, the reasons for the lateness of the reference given by Dr Koksal are as follows. First, he has complaints regarding the conduct of the Authority in relation to his dealings with them which are under consideration pursuant to the Authority’s complaints scheme and he was of the view that his complaints had to be dealt with before he could make his reference to the Tribunal so as to give it any 40 prospect of success. Second, he believed that the Authority's letter of 9 December 4 2014 in relation to the application in respect of the Consumer Credit Activities was being considered together with the application relating to the Mortgage Activities. He therefore thought it would be better to deal with what he described as the "baseless allegations and misinformation" which had emerged from the Authority’s consideration of the application in respect of the Mortgage Activities 5 in the context of the application in respect of the Consumer Credit Activities which he did not wish to prejudice by referring the decision in respect of the application relating to the Mortgage Activities to the Tribunal. The law and factors to be considered 10 9. The approach to be taken by this Tribunal in considering an application for an extension of time of this type, which may be granted pursuant to the power to extend time contained in Rule 5 (3)(a) of the Rules, was set out by this Tribunal in Martin- Artajo v Financial Conduct Authority [2014] UKUT 0340 (TCC) at [31] to [51] of the Decision. I need not set out the relevant passages in full again but the approach to be 15 taken, which was common ground, can be summarised as follows: (1) In exercising its power to extend time the starting point is the overriding objective of the Rules which requires the Tribunal to consider whether in all the circumstances it is fair and just to extend time: see [32] to [35] of the Decision; (2) As set out by Morgan J, sitting in the Upper Tribunal, in Data Select Ltd v 20 HMRC [2012] UK 187 (TCC) there are five questions which as a general rule a Tribunal was to ask itself when considering whether to extend time, namely (a) What is the purpose of the time limit?(b) How long was the delay?(c) Is there a good explanation for the delay? 25(d) What will be the consequences for the parties of an extension of time? and(e) What will be the consequences for the parties of a refusal to extend time? ; and (3) The time limit concerned must be given great respect and there must be 30 strong factors in favour of departing from it. Time limits should be respected unless there are good reasons not to and time limits are there for a reason: generally speaking the parties are entitled to finality (see [40] of the Decision).[10]In addition in Martin-Artajo this Tribunal considered that there were two other factors that should be taken into account. 35 11. First, there is a public interest in the Authority’s decisions being as accurate as possible and this will be more likely to be achieved if those decisions are properly tested. This Tribunal is an integral part of the regulatory scheme designed to produce quality decision-making. Consequently, if there had been no opportunity for the applicant to make representations to the Authority’s decision-maker, the Regulatory 5 Decisions Committee (RDC) before the decision notice was issued that would be an additional matter that should be taken into account. That factor was relevant in Martin-Artajo because in that case the Authority had taken the view that the applicant was not a third party for the purposes of s 393 FSMA and consequently he had been given no opportunity to make representations to the RDC. It is not 5 a relevant factor here because Dr Koksal has engaged with the RDC process.[12]Second, regard should be had to the merits of the applicant's reference as there would be no point extending the time if the reference had no reasonable prospect of success, conversely if the reference had merit that is a factor in favour of extending 10 time: see [50] of the Decision.[13]In relation to this second point the recent judgment of the Supreme Court in Global Torch Ltd v Apex Global Management Ltd (No 2) [2014] UKSC 64 calls for a modification of the approach. Lord Neuberger of Abbotsbury PSC said at [ 29 ] to [30 ] : 15 “29. In my view, the strength of a party's case on the ultimate merits of the proceedings is generally irrelevant when it comes to case management issues of the sort which were the subject of the decisions ….. in these proceedings. The one possible exception could be where a party has a case whose strength would entitle him to summary judgment …. 20 30. A trial involves directions and case management decisions, and it is hard to see why the strength of either party's case should, at least normally, affect the nature or the enforcement of those directions and decisions. While it may be a different way of making the same point, it is also hard to identify quite how a court, when giving directions or imposing a sanction, could satisfactorily take 25 into account the ultimate prospects of success in a principled way. Further, it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of a sanction, it could be faced with the exercise of assessing the strength of the party's respective cases: it would lead to such applications costing much more than taking a much more court time than they 30 already do. It would thus be inherently undesirable and contrary to the aim of the Woolf and Jackson reforms.”[14]Consequently, the merits of the case should only be a factor to be weighed in the balance where the case is either obviously hopeless (in which case there is no point extending time) or so overwhelmingly strong that there is no realistic prospect 35 of there being a defence to it. Discussion[15]I now turn to consider whether I should extend time in the light of the facts found and the principles I have identified above. I do so by carrying out a balancing exercise in respect of those factors that tend to favour the grant of an extension and 40 those which do not, giving appropriate weight to the various factors in the light of the facts found and coming to a conclusion as to whether as a result of that balancing exercise it is fair and just to grant an extension. I start by considering the five questions identified in Data Select. 6 The purpose of the time limit[16]Mr Berrill-Cox correctly identified that the time limit serves an important public interest in the finality of litigation. As this Tribunal observed in 5 Martin-Artajo at [54], in principle the time limit should be enforced and it should be regarded as a precise limit and not a vague target. Generally, the time limit should not be departed from unless there is a good reason to do so. This is a strong factor against extending time. The length of the delay 10 17. The delay in this case (over five months) is not trivial or insignificant, as Ms Shah accepted. This is also a strong factor against extending time. The explanation for the delay[18]Ms Shah submitted that Dr Koksal had good reasons for delaying the making of the reference in the context of an application made by an unrepresented applicant. The 15 delay arose from a fundamental misunderstanding on his part. He understood that for the reference to be successful he would have needed to have successfully challenged the underlying factual assumptions of the Authority that have led it to refuse the application to vary the Part 4A permission in respect of the Mortgage Activities through the Authority’s complaint scheme. Ms Shah submitted that Dr Koksal had 20 received legal advice to that effect.[19]Secondly, Dr Koksal had formed the conclusion from the Authority’s letter of 9 December 2014 that the application in respect of the Mortgage Activities and the application in respect of the Consumer Credit Activities were being considered together and that it would reflect badly on the latter application if he were to pursue a 25 reference with the Tribunal in respect of the application relating to the mortgage Activities.[20]In my view neither of the reasons given are good reasons for the delay. No person in the position of Dr Koksal, as a principal of a firm regulated by the Authority who it is reasonable to expect would read carefully both the basis on which the 30 complaints scheme operated before making a complaint and the circumstances in which a reference may be made to the Tribunal and the time limits for so doing, could reasonably have come to the conclusion that the making of the reference to the Tribunal should be deferred pending the consideration of his complaint regarding the underlying facts and assumptions relating to the Authority’s decision. This is the case 35 regardless of whether he was represented or not. Neither could such a person have reasonably believed that the Authority’s letter of 9 December 2014 indicated that the two applications were being considered together. The wording of the letter quite clearly refers to them as two separate applications. As Dr Koksal's letter to the RDC on 24 December 2014 makes clear in stating that he was not referring the decision 40 notice to the Tribunal, he was aware that the two applications were being dealt with 7 separately. I can take no account of Ms Shah’s submission regarding the taking of legal advice as there was no evidence before me to that effect. Therefore, in this case the explanation for the delay does not amount to a factor in favour of extending time. The consequences for the parties of an extension of time Should an extension of time be granted, then Dr Koksal will 5 have the opportunity of challenging the Authority’s decision in the Tribunal. I accept Mr Berrill-Cox’s submission that an extension of time would cause a degree of prejudice to the Authority in that it quite reasonably relied on finality in decision-making to determine and plan how to deploy limited resources, particularly in circumstances such as those 10 in this case where Dr Koksal had indicated clearly soon after the decision notice was issued that he was not going to make a reference. In this case therefore the factor tends to be a factor against extending time. The consequences for the parties of a refusal to extend time[21]As far as the Authority is concerned, a refusal to extend time would mean that it 15 would not have to devote any of the resources of its Enforcement Division to the matter. The effect on its Authorisation Department is unlikely to be significant because it is still considering the application relating to the Consumer Credit Activities. As far as Arcis is concerned, although it would not be able to pursue the reference, it would be open to it to make a fresh application to vary its permission. 20 Consequently, a failure to extend time would not be fatal to its prospects of varying its permission if it were able to satisfy the Authority that it was in a position to satisfy the threshold conditions in a new application. Indeed Ms Shah indicated that if the reference was admitted steps would be taken to hire additional staff to meet the Authority’s concerns regarding the availability of resource with sufficient knowledge 25 and qualifications in respect of the Mortgage Activities. It seems to me that this course of action could be equally followed in the context of a fresh application to vary the permission. Therefore in this case the factor does not tend to support an extension of time. The merits of the application 30 21. Mr Berrill-Cox submitted that the merits of the application were very weak because Dr Koksal had essentially said that he should be the exception to the rules and be granted permission to perform the Mortgage Activities despite not meet the minimum qualification requirements which the Authority contends are necessary in order to satisfy the threshold conditions. I did not hear sufficient argument in detail to 35 form even a preliminary view as to whether there were means by which Dr Koksal could satisfy the threshold conditions other than through obtaining the qualifications referred to by the Authority and accordingly I shall regard the merits as being a neutral factor in this case. 8 Conclusion[22]Applying the overriding objective in the light of all of the factors considered above, I am of the view that the balancing exercise comes out clearly against granting an extension of time.[23]My reasons for this conclusion are 5 as follows:(1) The delay in making the reference is a long one and there is no good reason for it.(2) There will be some resource implications for the Authority if the reference were admitted but not to the extent that it would be seriously prejudiced. In this 10 particular case, because of the nature of the application, the prejudice to Dr Koksal of not pursuing his reference is not substantial because he would be in a position to submit a fresh application in which he would have the opportunity of addressing the concerns that have been expressed by the Authority in its decision. This factor, combined with the strong factors against granting time set 15 out at (1) above weighs heavily against granting an extension of time.[24]I therefore conclude that it is in the interests of justice that time for the making of the reference is not extended and the reference cannot therefore be admitted. 20 TIMOTHY HERRINGTON UPPER TRIBUNAL JUDGE RELEASE DATE: 17 November 2015