North London Van Centre Ltd v The Financial Conduct Authority [2019] UKUT 233

North London Van Centre Limited v The Financial Conduct Authority [2019] UKUT 233 (TCC) concerned an appeal by the applicant against the Financial Conduct Authority’s cancellation of its Part 4A permission under the Financial Services and Markets Act 2000. The Upper Tribunal (Tax and Chancery Chamber), comprising Tribunal Judge Jonathan Richards, Gary Bottriell and Mark White, dismissed the reference.

North London Van Centre Limited (“NLVC”) held authorisation from 27 March 2015 to conduct consumer credit activities including credit broking in connection with its van sales business. By decision notice dated 18 September 2018 the FCA cancelled that permission, a decision which NLVC referred to the Tribunal. The hearing took place on 15 July 2019, at which Mr Daniel Cotier-McInerney, a director of NLVC, represented the applicant and Messrs Adrian Berrill-Cox and Matthew Stone appeared for the FCA. The Tribunal heard oral evidence from Mr Cotier-McInerney and written evidence from Mr Alexander Banerjea of the FCA’s Enforcement and Market Oversight Division. Mr Cotier-McInerney did not challenge the evidence in Mr Banerjea’s statement, which the Tribunal accepted in full. The Tribunal found Mr Cotier-McInerney to be a reliable and honest witness.

NLVC had incorporated on 24 November 2014 and drew up accounts to 30 November each year. At all material times it had two directors, Mr Cotier-McInerney (who was designated the CF8, being the person responsible for the regulated apportionment and oversight function) and Mr Mark Mullen. The company initially both sold and hired vans but in the past couple of years had ceased hiring and focused on sales. Although NLVC made relatively little money from its regulated activity (its CCR007 return for the year ended 30 November 2016 recorded only £1,850 of revenue from regulated activities), the Part 4A permission was nevertheless important because the ability to introduce customers to credit enabled it to sell vans and approximately 30 to 40 per cent of NLVC’s sales were made on credit.

The FCA’s decision to cancel the permission was based upon a sustained failure by NLVC to comply with reporting requirements. Under SUP 16.3.13R and SUP 16.12.29C of the FCA Handbook, NLVC was required to submit an annual CCR007 form within 30 business days of its accounting reference date. The CCR007 was a relatively modest document requiring details of the firm’s total revenue, revenue from credit-related activities, the number of transactions involving credit-related activities, the number of complaints relating to credit-related activities, the category of credit-related activity generating the highest revenue, and total annual income for the purposes of calculating the fee due to the FCA.

The Tribunal found the following pattern of non-compliance. NLVC’s first CCR007 (for the year ended 30 November 2015) was due on 14 January 2016. Despite receiving a warning letter before the deadline, NLVC did not submit the return by that date. In February 2016 the FCA sent three reminder letters, all of which were received. On 1 March 2016 the FCA imposed a late regulatory return administrative fee of £250 and reminded NLVC to submit the return within 10 days. NLVC paid the fee but still did not submit the return. The CCR007 for the year ended 30 November 2015 was eventually filed on 15 June 2016, 155 days late.

A similar pattern occurred with the CCR007 for the year ended 30 November 2016. Despite reminders before and after the deadline and the imposition of a further late return fee of £250, NLVC did not submit the return. On 1 September 2017 the FCA called NLVC and its receptionist, on the instructions of Mr Cotier-McInerney, stated that the return would be submitted that day. When it did not materialise the FCA sent a notice on 27 September 2017 warning that it was proposing to cancel the Part 4A permission. This prompted Mr Cotier-McInerney to call the FCA to say that he had sent the return to the Enforcement team on 14 September 2017, but the FCA had no record of receiving it through its computerised GABRIEL system. Eventually the return was submitted on 13 October 2017, 270 days late and just in time for the FCA to withdraw its threat to cancel the permission. In a letter of 17 October 2017 the FCA discontinued its action but provided a clear warning that if NLVC failed to submit either of the next two CCR007 returns by the relevant due dates, the Authority would recommend cancellation of the Part 4A permission even if the CCR007 were later submitted.

The CCR007 for NLVC’s year ended 30 November 2017 was due on 16 January 2018. NLVC received the same reminders as in previous years and an invoice for a £250 late filing fee which it paid on 16 March 2018, but it still did not submit the return. By the date of the hearing NLVC had still not submitted that CCR007. On 29 August 2018 the FCA sent NLVC a notice warning that it was proposing to cancel the Part 4A permission and gave it until 14 September 2018 to make representations. NLVC made no representations by the due date and the FCA issued the decision notice on 18 September 2018. NLVC also did not submit the CCR007 for its financial year ended 30 November 2018, which was due on 16 January 2019, and that return had not been submitted by the date of the hearing.

Mr Cotier-McInerney explained the reason for the delayed submission of the first CCR007 as being that NLVC did not really understand what needed to be done. He felt that the people involved in the business at the time were not equipped to perform basic tasks. He cited widespread problems including some dishonesty (for example, an employee was collecting payments from customers but not passing them on to NLVC) and the fact that all of this was happening when he and his fiancée were having their first child. The Tribunal accepted that Mr Cotier-McInerney had some difficulties with staff and legal disputes and was prepared to make some allowance for the fact that the year ended 30 November 2015 was the first in which NLVC had been subject to FCA regulation. However, the Tribunal held that while there were some extenuating circumstances, the reasons put forward did not come close to justifying a delay of 155 days. Mr Cotier-McInerney might well feel let down by his staff, but ultimately the responsibility for submitting the CCR007 lay with NLVC and, given his role as the CF8, he was himself accountable for any failures. If NLVC’s staff were not equipped to file the CCR007 it was incumbent on NLVC to obtain assistance elsewhere. While the Tribunal accepted that the birth of Mr Cotier-McInerney’s first child would have caused some disruption, that might excuse a delay of a couple of weeks, not over five months. The delay in filing the CCR007 for the year ended 30 November 2015 was not reasonable in the circumstances.

The Tribunal accepted Mr Cotier-McInerney’s evidence that in late 2016 he became severely ill. He was in and out of hospital for some six to eight months. His illness, first thought to be a stroke but later diagnosed as problems with his vagus nerve, affected his memory. Understandably the amount of time he was able to devote to NLVC reduced and he asked a Mr Ciprianou to take charge of the company. Around the same time Mr Mullen, the other director, lost a child which understandably meant that he was not able to focus on the business for some time. The Tribunal held that Mr Cotier-McInerney’s illness was severe and excused some delay in the filing of the CCR007 for the year ended 30 November 2016. Similarly, Mr Mullen’s loss of his child would naturally have impacted on his ability to help with NLVC’s filing obligations. However, neither event excused a delay of 270 days. The CCR007 required only relatively basic information which, despite Mr Cotier-McInerney’s illness and Mr Mullen’s understandable grief, should not have taken that length of time to prepare. While the Tribunal could understand that Mr Cotier-McInerney felt let down by Mr Ciprianou, failings by Mr Ciprianou could not absolve either NLVC or Mr Cotier-McInerney of their responsibilities to provide the FCA with the relatively modest information required in the CCR007.

Mr Cotier-McInerney himself accepted responsibility for the failure to file the CCR007 for the years ended 30 November 2017 and 30 November 2018. By way of explanation he pointed to the time taken to sort out legacy issues affecting the business and the fact that NLVC was behind not just with regulatory filings to the FCA but also with VAT and corporation tax returns. He explained that he was so busy trying to sort out previous years’ tax returns that he did not have time to deal with current returns. He also accepted that he had prioritised vehicle sales with the result that he had not spent enough time on the compliance side of the business. In response to questions from the Tribunal, Mr Cotier-McInerney confirmed that he was not seeking to excuse the failure to file the return for the year ended 30 November 2018 on the basis that he thought by then that his Part 4A permission had been cancelled. The Tribunal observed that it was to Mr Cotier-McInerney’s credit that he frankly accepted his failings, but held that his explanation did not come close to justifying or explaining a complete and protracted failure to submit basic regulatory filings.

Mr Cotier-McInerney invited the Tribunal to conclude that NLVC was now better placed to comply with its regulatory and other obligations. He explained that NLVC had ceased hiring vans so it had more time to devote to its regulatory obligations. He stated that a Mr Cianan O’Shea, who had experience as an estate agent and had formed his own car company, was now involved with NLVC and had been liaising with Mr Matthew Stone at the FCA. He also explained that NLVC had a book-keeper on site. More generally, Mr Cotier-McInerney said that his experience with the FCA had made him realise that the Part 4A permission was important to NLVC and could be lost if it did not meet its regulatory obligations. In effect he said NLVC had learned its lesson and would, if permitted to keep its permission, comply with its obligations in the future. The Tribunal was unable to share Mr Cotier-McInerney’s confidence. It formed the clear impression that he was well-meaning and honest, but had not put NLVC in a position to comply with its regulatory obligations. Mr O’Shea had been involved with NLVC since before September 2018, yet despite his involvement the CCR007s for the years ended 30 November 2017 and 30 November 2018 had not been filed. While the Tribunal accepted that NLVC had ceased hiring vans, thereby freeing up management time, it was not satisfied that this would lead to a material improvement in its compliance record. The CCR007s were not lengthy forms requiring detailed information. The Tribunal did not consider that lack of management time alone explained why they were filed so late or not at all. It followed that even though the management of NLVC now had more time at its disposal the Tribunal was not satisfied that its compliance record would improve if it maintained its Part 4A permission.

The Tribunal recalled that, under section 133 of FSMA as considered in Carrimjee v FCA [2016] UKUT 0447 (TCC) and Dr Saim Koksal T/A Arcis Management Consultancy v Financial Conduct Authority [2016] UKUT 478 (TCC), it could only interfere with the FCA’s decision if it concluded that the decision was not within the range of reasonable decisions. The Tribunal would be entitled to reach that conclusion if it made findings of fact clearly at variance with findings made by the FCA which formed the basis of the FCA’s decision.

In his oral submissions Mr Cotier-McInerney repeatedly stressed that NLVC acknowledged its failings, was not criticising the FCA’s decision but was simply asking for one last chance to keep its Part 4A permission. The Tribunal observed that before it could interfere with the FCA’s decision it needed to be satisfied that the decision was not reasonably open to the FCA. When pressed to identify why he considered the FCA’s decision to be wrong, Mr Cotier-McInerney was eventually driven to submit that the FCA erred by revoking the permission instead of giving NLVC one last chance. The Tribunal rejected that submission. At the time of the decision notice the FCA was confronted with a sustained pattern of non-compliance with the requirement to submit the CCR007 over three consecutive years. The excuses put forward did not justify the lengthy delays or, in the case of the return for the year ended 30 November 2017, the complete failure to file the return. Moreover, NLVC appeared to be disregarding the FCA’s threats of sanctions. Despite being told in October 2017 that if its next two CCR007s were late the FCA would recommend removal of its permission, NLVC did not file the next CCR007 at all, still less on the due date.

In those circumstances the Tribunal held that the FCA was entitled to conclude that NLVC was not ready, willing and organised to comply with its regulatory obligations (as set out in COND 2.5.6 of the FCA Handbook), did not have a competent and prudent management (as referred to in COND 2.5.4(G)) since it could not comply with a requirement to provide limited and basic information about its business in any reasonable timescale, and that NLVC’s business was not being conducted in an appropriate manner having regard to the interests of consumers (as set out in paragraph 2E(c) of Schedule 6 to FSMA). The Tribunal accepted the FCA’s submission that it does not carry out day to day supervision of small firms such as NLVC with limited permissions. From the FCA’s perspective the information in the CCR007s was vital as it provided the only window into NLVC’s behaviour as an authorised person. When NLVC consistently failed to provide that information on time or at all, the FCA was entitled to be concerned that NLVC’s business was being run in such a way that the FCA would not have any adequate notice of any problems, thereby prejudicing the FCA’s ability to ensure that the interests of consumers were protected. It followed that the FCA was entitled to conclude that NLVC did not meet the suitability threshold set out in paragraph 2E of Schedule 6 to FSMA.

The Tribunal noted that the

Carrimjee v FCA [2016] UKUT 0447
Dr Saim Koksal T/A Arcis Management Consultancy v Financial Conduct Authority [2016] UKUT 478