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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Anderson & Ors v Sense Network Ltd [2019] EWCA Civ 1395 (31 July 2019) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2019/1395.html Cite as: [2019] EWCA Civ 1395, [2020] 1 BCLC 555, [2020] Bus LR 1, [2019] WLR(D) 448 |
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ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE JACOBS
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE HAMBLEN
and
MR JUSTICE SNOWDEN
____________________
ADAM ANDERSON & Others |
Appellants/ Claimants |
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- and - |
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SENSE NETWORK LIMITED |
Respondent/ Defendant |
____________________
Simon Howarth and Alexander Echlin (instructed by Reynolds, Porter, Chamberlain LLP) for the Respondent
Hearing dates: 2-3 July 2019
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Crown Copyright ©
Lord Justice David Richards:
Introduction
The facts
Regulatory framework
39.-Exemption of appointed representatives.
(1) If a person (other than an authorised person) –
(a) is a party to a contract with an authorised person ("his principal") which-
(i) permits or requires him to carry on business of a prescribed description, and
(ii) complies with such requirements as may be prescribed, and
(b) is someone for whose activities in carrying on the whole or part of that business his principal has accepted responsibility in writing,
he is exempt from the general prohibition in relation to any regulated activity comprised in the carrying on of that business for which his principal has accepted responsibility.
(1A) But a person is not exempt as a result of subsection (1) –
(a) if his principal is an investment firm or a credit institution, and
(b) so far as the business for which his principal has accepted responsibility is investment services business,
unless he is entered on the applicable register.
(1B) The "applicable register" is –
(a) …[not relevant]
(b) …[not relevant]
(c) in any other case, the record maintained by the Authority by virtue of section 347(1)(ha).
(2) A person who is exempt as a result of subsection (1) is referred to in this Act as an appointed representative.
(3) The principal of an appointed representative is responsible, to the same extent as if he had expressly permitted it, for anything done or omitted by the representative in carrying on the business for which he has accepted responsibility.
(4) In determining whether an authorised person has complied with a provision contained in or made under this Act, or with a provision contained in any directly applicable Community regulation made under the markets in financial instruments directive, anything which a relevant person has done or omitted as respects business for which the authorised person has accepted responsibility is to be treated as having been done or omitted by the authorised person.
(5) "Relevant person" means a person who at the material time is or was an appointed representative by virtue of being a party to a contract with the authorised person.
(6) Nothing in subsection (4) is to cause the knowledge or intentions of an appointed representative to be attributed to his principal for the purpose of determining whether the principal has committed an offence, unless in all the circumstances it is reasonable for them to be attributed to him.
(7) A person carries on "investment services business" if –
(a) the business includes providing services or carrying on activities of the kind mentioned in Article 4.1.25 of the markets in financial documents directive, and
(b) as a result of providing such services or carrying on such activities he is a tied agent or would be if he were established in an EEA State.
(8) In this section –
"competent authority" has the meaning given in Article 4.1.22 of the markets in financial instruments directive;
"credit institution" means –
(a) a credit institution authorised under the banking consolidation directive, or
(b) an institution which would satisfy the requirements for authorisation as a credit institution under that directive if it had its relevant office in an EEA State;
"relevant office" means –
(a) in relation to a body corporate, its registered office or, if it has no registered office, its head office, and
(b) in relation to a person other than a body corporate, the person's head office."
The AR Agreement between Sense and Midas
3.1 Subject to clause 2 and in particular subject to the scope of the AR's authorisation as set out in the Letter of Authorisation regarding Authorised Products and the provision of the Services, the Company:
3.1.1 authorises the AR acting through its Registered Individuals to sell and advise on Authorised Products and to provide Designated Investment Services, Personal Protection Insurance Services, General Insurance Services, and/or Mortgage Services using a Company Agency: and/or
3.1.2 authorises the AR acting through its Registered Individuals to provide Additional Services using a Company Agency; and
3.1.3 agrees that the AR may undertake Separate Business provided that the AR observes the restrictions set out in this Agreement and in the Compliance Manual."
"The Company accepts responsibility to third parties only to the extent required by Section 39 of the Act in relation to the actions of the AR when the AR is carrying out regulated activities on the terms of this Agreement."
Issues on the appeal
Liability under section 39(3) FSMA
"…while the terms of an appointed representative's express authority might be limited to providing investment advice to customers in relation to particular products of his principal, conduct that is incidental to the provision of that advice (such as soliciting the customers, identifying the financial and personal circumstances of the particular customer, assisting in any application that the customer might to choose to make) will still fall within the actual authority of that representative…[in Martin] the advice was inherently bound up with and incidental to the advice given by him in relation to other investments."
"The companies say that they already accept [full responsibility for their activities]; but they are not necessarily legally bound to do so in relation to self-employed salesmen since the vicarious liability of a principal for the acts of an agent who is an independent contractor differs somewhat from that of a master for the acts of his servants and, especially in relation to tortious liability, is less extensive. Moreover it is not clear that the salesman always acts as an agent of the company rather than of the client."
"Hence, I suggest that if the tied salesmen are to continue to be self-employed it should be specifically enacted that the company to which they are tied is fully responsible for their acts to the same extent as if they were its employees with full authority to act on its behalf. This should apply even if, in any particular case, the salesman sold the product of another company."
Vicarious liability
"…a relationship other than one of employment is in principle capable of giving rise to vicarious liability where harm is wrongfully done by an individual who carries on activities as an integral part of the business activities carried on by a defendant and for its benefit (rather than his activities being entirely attributable to the conduct of a recognisably independent business of his own or of a third party), and where the commission of the wrongful act is a risk created by the defendant by assigning those activities to the individual in question."
"…The individual for whose conduct it may be vicariously liable must carry on activities assigned to him by the defendant as an integral part of its operation and for its benefit. The defendant must, by assigning those activities to him, have created a risk of his committing the tort."
Collective investment scheme
"235. Collective investment schemes.
(1) In this Part "collective investment scheme" means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.
(2) The arrangements must be such that the persons who are to participate ("participants") do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions.
(3) The arrangements must also have either or both of the following characteristics -
(a) the contributions of the participants and the profits or income out of which payments are to be made to them are pooled;
(b) the property is managed as a whole by or on behalf of the operator of the scheme.
(4) If arrangements provide for such pooling as is mentioned in subsection (3)(a) in relation to separate parts of the property, the arrangements are not to be regarded as constituting a single collective investment scheme unless the participants are entitled to exchange rights in one part for rights in another.
(5) The Treasury may by order provide that arrangements do not amount to a collective investment scheme -
(a) in specified circumstances; or
(b) if the arrangements fall within a specified category of arrangement."
"6. Common accounts
Arrangements do not amount to a collective investment scheme if –
"(a) they are arrangements under which the rights or interests of participants are rights to or interests in money held in a common account; and
(b) that money is held in the account on the understanding that an amount representing the contribution of each participant is to be applied -
(i) in making payments to him;
(ii) in satisfaction of sums owed by him; or
(iii) in the acquisition of property for him or the provision of services to him."
Conclusion
Lord Justice Hamblen:
Mr Justice Snowden: