R (Baker Tilly UK Audit LLP) v Financial Reporting Council

The High Court has handed down an important judgment which provides guidance on the circumstances in which it will be appropriate to judicially review the decision of a regulatory body to institute disciplinary proceedings. The decision under challenge was the decision of the Executive Counsel to the Financial Reporting Council to deliver a Formal Complaint regarding the Claimants to the Financial Reporting Council Conduct Committee. The Formal Complaint related to clean (unqualified) audit opinions issued by the Claimants in respect of the financial statements of Tanfield Group and two of its subsidiaries. As a result of the delivery of a Formal Complaint, a Disciplinary Tribunal was appointed to hear the Formal Complaint.

Pursuant to the applicable Accountancy Scheme, the Executive Counsel was required to deliver the Formal Complaint where he considered that (a) there is a realistic prospect that a Disciplinary Tribunal will make an adverse finding against the relevant Member or Member Firm (the evidential test); and (b) a hearing is desirable in the public interest (the public interest test) (Accountancy Scheme, §7(11)). There is published Guidance on the Delivery of Formal Complaints (Guidance).

Baker Tilly attempted a pre-emptive strike to the pending disciplinary proceedings, arguing that (a) the Guidance was unlawful; (b) the Executive Counsel had acted unlawfully in applying the evidential test under the Guidance; and (c) the Executive Counsel had acted unlawfully in applying the public interest test under the Guidance. Mr Justice Singh rejected the claim on its merits, however went on to provide guidance on the circumstances in which judicial review will be appropriate where there are pending disciplinary proceedings. He considered that the Claimants' judicial review challenge did not simply raise the question as to whether there was an adequate alternative remedy, but "raise[d] a point which goes deeper than that and is more fundamental (§133).

Mr Justice Singh considered that an analogy could be drawn between the evidential test and public interest test in the Accountancy Scheme, and the tests commonly found in the context of decisions whether or not to prosecute in criminal cases (§134). He considered that if the Claimants' submissions were correct, and it was possible to challenge the decision of the Executive Counsel, it would "follow that, in principle, every case in which a defendant to a criminal charge disagrees with the assessment of the CPS as to whether the public interest supports the bringing of a prosecution would found a claim for judicial review" (§134). Mr Justice Singh held that "it is wrong as a matter of principle that such cases should ordinarily be brought before this Court by way of judicial review" (§135).

Having undertaken an extensive review of the well established line of authorities in the context of applications for judicial review of the decision to prosecute in criminal cases (§§136-143), Mr Justice Singh concluded that the factors that have led the courts to say that challenges to decisions to prosecute will be rare in the criminal context, were also present in this case (§144). In particular: (a) such cases should in the ordinary course of events be determined by the Disciplinary Tribunal, which is the expert Tribunal in the field (§145); (b) decisions as to where the public interest lies are par excellence decisions for those entrusted to make such judgments (§146); (c) the Disciplinary Tribunal will have the opportunity to consider the evidence in full, something which a judicial review Court is not equipped to do (§147); and (d) the Disciplinary Tribunal has its own jurisdiction to stay proceedings on grounds of abuse of its own process (§148). For these reasons, Mr Justice Singh determined that "[a]lthough there is no jurisdictional bar to claims for judicial review in cases such as this … in my view it will be rare that it would be appropriate for such challenges to be entertained, since they should normally go, as a matter of principle, to the Disciplinary Tribunal" (§151).

A copy of the decision is available here: http://www.bailii.org/ew/cases/EWHC/Admin/2015/1398.html

Michael Fordham QC and Jason Pobjoy appeared on behalf of the Financial Reporting Council, Financial Reporting Council Conduct Committee, and Executive Counsel to the Financial Reporting Council. They were instructed by Nusrat Zar and Natacha Heffinck of Herbert Smith Freehills LLP.