The United Kingdom Privy Council has upheld a Court of Appeal ruling that the Financial Services Commission (FSC) did not breach the Validation Act when it served a penalty notice on an insurance agent who was not registered under the Insurance Act.
The Validation Act was passed in 2006, giving the FSC the power to regulate the Insurance Act of 2001 and the FSC Act of 2001.
The Privy Council made the ruling on Monday, dismissing an appeal brought by insurance sales representative Lowell Lawrence.
Lawrence was employed as a sales representative with Mony Life Insurance Company of the Americas in February 2004 when the FSC informed Mony that it and 22 of its employees had sold insurance policies totalling US$1.9 million without being registered under the Insurance Act. Mony entered into an agreement to return the money collected to the policyholders.
Registration
It also agreed to withdraw its application for registration and agreed not to reapply before May 1, 2004.
Mony had also agreed to pay the fixed penalty of $100,000 for each sales representative so that they would not face prosecution or have their registration suspended.
The FSC wrote to Lawrence in February 2004, informing him of the agreement it had reached with Mony. Lawrence challenged the agreement and, in May 2004, the FSC sent him a penalty notice that he would have to pay the fine or face prosecution for breaching the Insurance Act.
He took the issue to the Supreme Court, arguing that he should have been given a hearing before he was served with the notice. The Full Court heard his application and dismissed it.
It was after the Full Court hearing in October 2005 that it was observed that the relevant provisions of the FSC Act 2001 were not in force when the notice was issued. The Financial Services Commission (Insurance Services) (Validation and Indemnity) Act 2006, commonly called the Validation Act, came into force to remedy the gap.
Lawrence, who was represented by attorneys-at-law Minett Lawrence and Christopher Dunkley, took the issue to the Court of Appeal, where he then challenged the Validation Act. It was argued that the FSC did not have the authority to issue the notice under the Insurance Act because it did not have the legal authority to regulate the insurance industry.
Validation
The FSC, which was represented by Patrick Foster, QC, relied on the validating legislation.
The Court of Appeal, comprising Justice Algernon Smith (now retired), Justice Howard Cooke and Justice Hazel Harris, dismissed the appeal.
The Privy Council upheld the appeal court's ruling that the Validation Act was intended to validate all acts done in good faith by the FSC before the act was passed in 2006. The Privy Council said, "Because of the terms of the Validation Act, the appellant is not entitled to have the notice quashed, although he would have been if the Full Court had been informed (as it should have been) that the insurance provisions of the FSC Act 2001 were not in force when the notice was given."
The question of legal costs will be determined at a later date by the Privy Council.
barbara.gayle@gleanerjm.com