The Court of Appeal today handed down its judgment in this judicial review application. The court had to consider the proper process to be observed by the Executive Counsel of the FRC when he has to decide whether to pursue a formal complaint against a member. Argument centred around the wording of the FRC’s own Guidance on the delivery of Formal Complaints which seemed to suggest that (having first reached the view that there was a case to answer as to misconduct) the Executive Counsel could take into account as an aggravating factor justifying a public hearing the fact that the alleged misconduct was a “non-trivial failure… to act with professional competence“.

Given that accepted definitions of professional misconduct and the definition of misconduct in the Accountancy Scheme itself (conduct which falls “significantly short of the standards reasonably to be expected“) both set the bar well above merely a ‘non-trivial failure’, it was argued that this part of the guidance made no sense and was unlawful, as was the Executive Counsel’s decision to pursue a formal complaint which was expressly based upon those words.

The challenge to the Executive Counsel’s decision was dismissed, although the court members’ reasoning differed. Lady Justice Arden considered:

  • that professional misconduct requires more than mere error and is to be equated with gross negligence
  • “non-trivial misconduct” should not be construed to mean any misconduct which is more than trivial but to mean significant misconduct
  • the Executive Counsel does not however have to show more than ‘ordinary’ professional misconduct.

Lord Justice Sales and Lady Justice King held that a “non-trivial failure” is indeed an aggravating factor and the Executive Counsel has to be able to point to a significant failure beyond misconduct; that is misconduct which is particularly grave. They recognised however that it was not easy to find a “practical meaning and coherent effect“ for the provision and suggested that the Conduct Committee consider re-drafting the relevant section of the Guidance, King LJ describing the drafting as “clumsy at best”.

The decision illustrates the well-established challenges faced when seeking to review the decisions of regulators or prosecutors to pursue a case. For good policy reasons the courts do not wish to be called upon to unpick complex factual judgements and in this case the court placed emphasis on the fact that the Executive Counsel appeared carefully to go through the process of weighing the various factors; thereafter the court felt he was not required to explain in what way the alleged failings were particularly serious - he had merely to state that he considered the alleged omissions fell within the category of non-trivial failure. Given the obscurity of the meaning of this part of the guidance there is a risk that allegations which are not serious enough to constitute misconduct could be waved through as non-trivial and it is to be hoped that the Conduct Committee will accept the Court of Appeal’s invitation to revisit the wording of the guidance.