The Royal Court has largely rejected an appeal from a finance firm and its managing director into regulatory breaches, but has directed that Guernsey’s financial watchdog reconsider its findings and penalties over lack of honesty after identifying errors of law in its process.
Adjure Global Limited and Paul Randall Pybus were found by the Guernsey Financial Services Commission in 2023 to have failed in their regulatory obligations to properly oversee and fix issues with client companies which could have risked money laundering or terrorist financing.
But Deputy Bailiff Jessica Roland directed last October that a new senior decision maker should reconsider its findings over a lack of honesty and reconsider the penalties applied to Mr Pybus, following an appeal against the original decision to the Royal Court.
The Deputy Bailiff judged that the findings of lack of honesty were legally flawed and set aside those conclusions.
But she rejected several other grounds of appeal made by Mr Pybus and the company, accepting that the rest of the GFSC’s conclusions were reasonable and proportionate.
The Deputy Bailiff rejected the appeal on the grounds of a breach of human rights that it wasn’t a fair trial before an independent tribunal; that the GFSC had been prejudiced in its investigation; that Mr Pybus was not given the right to cross-examine; and that the GFSC failed to disclose relevant documents.
But she added that there were multiple instances of an error of law in the GFSC not clearly setting out how it had applied the legal test when making findings against Mr Pybus’s lack of honesty and integrity.
Penalties and GFSC response to the judgment
Terence Mowschemson KC, who heard and decided on the GFSC’s enforcement case, had imposed a £300,000 penalty on the company and a £150,000 penalty on Mr Pybus, as well as suspending him as a financial director and revoking six directorships he held for 10 years.
The GFSC, which opened the investigation into the company, said the judgement “upholds and puts into the public domain a number of serious concerns we have about Mr Pybus which we have been wishing to place into the public domain for some time”.
It accepted that while the court had upheld many of the initial findings it would need to “more explicitly” apply the legal test to prove a lack of honesty and integrity by Mr Pybus in a refreshed investigation.
Mr Pybus was appointed as a director and managing director of AGL in July 2011 following the company’s incorporation in January 2010.
He held 25% of AGL via the Falcon Foundation, of which he was the largest single beneficial owner.
Much of the failures were linked to a company known as H Ltd, a defence and technology contractor in several jurisdictions, but based in Guernsey with AGL acting as directors following a takeover.
Client failures, record-keeping issues and conflicts of interest
The GFSC made AGL aware it wanted to visit and review its client list in July 2019, which prompted Mr Pybus to consider terminating its relationship with H Ltd before sending out the list due to known issues including a lack of client due diligence on its staff and the governments and agencies it contracted to.
H Ltd was found to receive regular €12,000 payments from the International Defence Council, but this was not known to the previous administrators which demonstrated a lack of control by AGL over its clients and their activities.
A list was sent to the GFSC just before the deadline. It didn’t feature H Ltd as AGL had promptly resigned as directors of it – which breached companies law requiring companies to have at least one director.
Other directors offered different testimony to Mr Pybus when interviewed by the GFSC, saying he knew the client of H Ltd well and was aware of issues with its administration and governance for several years.
The Deputy Bailiff found that the GFSC were entitled to this information.
A separate case involved J Ltd, which was taken over by AGL in 2016. AGL did not properly mark J Ltd as ‘high risk’ in line with its own internal procedures. It also provided additional services above what it had declared it would, and logged multiple incorrect pieces of due diligence data which were flagged as needing immediate action in 2019.
It was also found that AGL was in control of a company known as K Ltd for at least two-and-a-half years, but failed to keep proper records or have full or up to date information on the company – including payments to a contractor without understanding what they did or why they were paying them.
AGL continued to administer business despite resigning as directors in 2019 and being aware of serious issues with the company.
The GFSC found numerous instances of the company intending to retrospectively create minutes for board meetings of client companies, saying that “record keeping was a systemic issue within AGL” and it had intended to mislead the investigation.
For insurance company L Ltd, Mr Pybus provided edited minutes to the GFSC after it raised concerns the company was using escrow cryptocurrency funds to backstop the company’s solvency – something he had previously told the GFSC it was not planning to do.
Mr Pybus was deemed to have a conflict of interest as shareholder in both AGL and L Ltd, which he did not declare when the two parties moved from a fixed fee to a time spent charging arrangement.
It was also found he had a conflict with N PCC and N Portfolio, acting as a shareholder for both entities and as a joint liquidator for the companies, which were being charged associated fees by AGL – of which Mr Pybus was a major beneficiary.
It’s the second recent case in which the GFSC has been asked to revisit a decision.
In a detailed judgment handed down on 19 December, and made public for the first time last week, the Guernsey Court of Appeal confirmed that Nicholas Walton Hofgren had acted with a “lack of probity” while running regulated financial business, but ruled that the Guernsey Financial Services Commission must reassess the seriousness of his conduct and the sanctions imposed.
