Newsletters Professional Discipline 14th Jun 2018

R (Lewin) v Financial Reporting Council and others [2018] EWHC 446: When can a Panel Criticise Those Outside the Profession?

It is not an uncommon position for a regulatory panel to make findings of fact which may adversely impact on a third party who is not a member of that profession. In criticising a doctor for his clinical failings, it may be inevitable that those same findings implicitly criticise other healthcare professionals or organisations and businesses involved in the same care. Yet whilst such decisions may impact on the reputation of those individuals or companies, perhaps quite unfairly, what means of redress do they have?

A recent judicial review addressed on this issue. The Financial Reporting Council (“FRC”) appointed a tribunal to consider alleged misconduct by an accountancy firm and one of its partners. In particular, it was said they had failed to detect serious wrongdoing when undertaking a company’s statutory audit. In coming to its judgment, the tribunal made serious criticism of the company in question, and the claimant, who was one of the directors. It did so without having given the claimant an opportunity to defend himself since he was not a member of the accountancy profession and not a party to proceedings. The FRC was ordinarily under a duty to publish the report of one if its tribunals. As a courtesy it provided the claimant with a copy in advance. After his representations to the FRC failed to persuade it not to publish, he brought a judicial review. He maintained the decision of the tribunal to include findings about his conduct, and the publication of the same by the FRC, were – inter alia – unlawful at common law. He had been criticised without being able to defend himself. He relied upon the decision of R (Ross) v Life Assurance Unit Trust Regulatory Organisation Ltd [1993] QB 17, where Glidewell LJ commented:

when a decision-making body is called upon to reach a decision which arises out of the relationship between two persons or firms, only one of whom is directly under the control of the decision-making body, and it is apparent that the decision will be likely to affect the second person adversely, then as a general proposition the decision-making body does owe some duty of fairness to that second person, which, in appropriate circumstances, may well include a duty to allow him to make representations before reaching the decision. This will particularly be the case when the adverse effect is upon the livelihood or the ability to earn of the second person or body.”

The court accepted that the report had the potential to cause the claimant and company significant damage. It was, however, clearly necessary for the tribunal to investigate the nature of the fraud in order to consider the case against the accountancy firm and partner. The court rejected the suggestion the claimant should have been able to make representations. There was simply no mechanism under the relevant accountancy procedures by which impacted third parties could be called upon to make representations, or comment on proposed findings. In considering the issue of fairness, Nicola Davies J commented that

consideration should have been given by the Tribunal to including in the Report a disclaimer…  I do not know whether such consideration was given to this issue but no such disclaimer was contained in the Report. I accept that the Report identifies the parties and the witnesses. Consistent with its duty of fairness, I believe the Tribunal should have set out at the commencement or the conclusion of the Report a disclaimer stating that: (a) the claimant (and any other relevant person) was not a party to the proceedings and was not invited to provide evidence; (b) it would not be fair to treat any part of the Tribunal’s findings as findings made against him/them as he/they were not represented at the Tribunal hearing and had made no representations about the matters in question.

Therefore, she rejected the challenge but directed the parties draft a memorandum in those terms.

This principle of fairness towards third parties must apply equally throughout the regulatory sphere. Yet, to date, it has rarely if ever been adopted. If a care home is heavily criticised in a nursing case, and the management were not called as witnesses and given no opportunity to defend themselves, it must follow that the panel in question should consider whether fairness requires it to issue such a disclaimer. A failure to do so must surely leave regulators open to potential challenge.

Christopher Geering


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