Secondments, Conflicts, and Banking

James Hurley has an interesting story in today’s Times about professional advisers breaching confidentiality during secondments to RBS’s bank Global Restructuring Group. It states some of the allegations relate to ‘lawyers’ and highlights one case involving a solicitor.

Promontory highlighted the case of a solicitor on secondment at GRG acting as a “relationship manager” on a customer’s case while being employed and paid by the law firm. The solicitor used their GRG email account to request a tender from their own firm.

The same solicitor later submitted the tender to GRG using the firm’s email address. The solicitor was “privy to tenders received from other legal firms in relation to the same work for which they submitted a quote”, Promontory found.

Promontory investigated GRG on behalf of the FCA and found 14 cases where the use of seconded staff “clearly led to a potential conflict of interest”. Some involved accountants and surveyors by the look of it. It appears that GRG customers would have been paying for the work done under at least some of these tenders. The wrongdoing included, “ensuring their firm appears on the tender lists through to providing information on the content of other bids to their parent firm.”

Interestingly, too, Promontory’s findings are reported as suggesting it, “did not find any cases where third-party firms “directed customers to take specific actions that were detrimental to them or where the use of third-party firms to conduct specific pieces of work was inappropriate”.” If this is all it says about harm to GRG’s customers, it rather misses the point. Indeed, Promontory also found that “the potential conflicts identified were more likely to impact other third-party firms than the customer”. This is a rather surprising finding. Passing on inside information about bids would have meant GRG customers might pay more, and receive weaker bids through the tender process than they otherwise would have. A professional firm with inside knowledge might know its competitors’ bottom lines and terms of service and so would know what marks to beat. The potential for GRG customers to be harmed seems clear.

Lawyers on secondment to clients who release such information have clearly behaved without integrity, and – unless given permission by the banks – breached confidentiality. Lawyers back at the ranch tendering with the benefit of inside information are similarly tainted, at least if they know about the origin of the information. The case is an interesting footnote in a broader picture of concern about banks’ relations with law firms. Steven Vaughan and Clare Coe did a very interesting study of the problems for the SRA (my blog and the link are here). The study threw up a tension between the firms that thought the SRA needed to act, and the firms that did not.  It was my judgment at the time that the firms not inclined to encourage action were more concerned about their competitive position, and their relationships with the banks, than they were with the ethical questions posed by increasing bank power over their lawyers. This kind of story strengthens my concerns. But more importantly, the SRA’s reasons for not acting on the report were that these firms were big enough and ugly enough to take care of themselves. The professional rules were a sufficient basis to say no to the banks if they asked for inappropriate things (secondments was one issue of concern, interestingly). What this line of argument missed was the potential for third parties to be harmed by the ethical problems: GRG’s customers were not the Goliaths of Big Law. This story shows that the potential harm to them was real. Perhaps the SRA should think again.

 

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AO, AO, AO: Weinstein’s men and the long arm of the law

The FT has published a detailed story (£) on Non-Disclosure Agreements (NDAs) with Allen & Overy the focus, for having represented Harvey Weinstein during a sexual harassment claim. Of course, Harvey W is as entitled to legal representation as the next rich, white male,* and NDAs are a common practice where unsavoury allegations are made (compare the hacking allegations where MPs were outraged with the idea that silence could be bought in such a way). There are however, one or two unusual features of the case which merit attention. The FT reports this about the clauses:

One of the clauses of the NDA says that if “any criminal legal process” involving Harvey Weinstein or Miramax requires her to give evidence, she will give 48 hours notice to Mark Mansell, a lawyer at Allen & Overy, “before making any disclosure”.

In the event her evidence is required, “you [she] will use all reasonable endeavours to limit the scope of the disclosure as far as possible”, the agreement says, adding that she will agree to give “reasonable assistance” to Miramax “if it elects to contest such process”.

It would be interesting to know how standard such clauses are, seeking as they do, to inhibit any police investigation. For me they raise the question as to whether they are intended to pervert the course of justice. According to CPS guidance, the offence is committed where a person: ”does an act (a positive act or series of acts is required; mere inaction is insufficient); which has a tendency to pervert; and, which is intended to pervert the course of public justice.” One does not have to show an actual perversion occurred, and the offence plainly applies to police investigations. Indeed, “any act that interferes with an investigation or causes it to head in the wrong direction may tend to pervert the course of justice.”

Of course one could argue that such clauses are a necessary prophylactic against vexatious complainants. So if the woman in this story had been judged to be vexatious then the 48-hour warning would provide a useful tool for warning the police of her weaknesses as a witness. A quarter of a million in damages and, “days of gruelling questioning at Allen & Overy’s London office, capped by a 12-hour session before a phalanx of Mr Weinstein’s lawyers that broke at 5am,” does not suggest that Weinstein or his lawyers thought the claims were without merit, and nor does the clause requiring Weinstein to seek therapy, but I can’t rule the possibility out.

Even so, the requirement for her to limit disclosure to the police is, on the face if it – and I would welcome other explanations from experienced employment lawyers – a strange requirement which – again on the face of it – has significant potential to interfere with any police investigation. One could argue that the fact that Zelda Perkins was represented in the negotiation of the NDA protects against the problem, but, “All that is necessary is proof of knowledge of all the circumstances, and the intentional doing of an act which has a tendency, when objectively viewed, to pervert the course of justice.” Perhaps there is something in the negotiations which would lead us to the view that the agreement would not have that tendency. I suspect we will hear more.

Buried in that paragraph is the second feature of this case that merits attention. The lengthy questioning sessions, if they are accurately reported, are – I understand – unusual. Were A&O playing out US-style dispositions for their US client; was it part of the need to satisfy Miramax that there was a claim needed to be settled? Perhaps but, if accurately reported, the approach is heavy-handed to the point of unreasonableness – so why would Ms Perkin’s lawyers go along with it? More mystery. Ms Perkins says this in the FT story, “I was made to feel ashamed for disclosing his behaviour and assault, and expected to name those I had spoken to, as if they too were guilty of something,” she says. Were those people’s names being sought to establish if there was a wider problem that Miramax needed to take seriously, were they being taken to seek evidence capable of undermining Ms Parkins, and/or were those individuals also to be approached to ensure their non-disclosure? How far was corporate wrongdoing reported up the chain? The questions go on.

We do not know that A&O went too far when negotiating this agreement, but one more point for readers thinking that a reputable firm like Allen & Overy should not face such questions. Think back to the Dahdaleh case, a serious bribery trial knocked sideways by allegations that Allen & Overy had pressurised prosecution witnesses in the week before a major trial. One of the witnesses, in that case, was reported as saying this:

“It was very clear to me that they came to the meeting wanting to pressurise me and influence what kind of testimony I will give here,” he told the court.

“He (one of the lawyers) was telling me what I needed to say and I found that very intimidating,” he said.

The two partners from Allen & Overy implicated then sent Alex Cameron QC to speak for them as to why they should not be committed for contempt. A main part of their defence was that they were inexperienced in criminal cases in this Country (one was a US lawyer, the other not a criminal lawyer). The lawyers negotiating Weinstein’s NDA no doubt had similarly limited experience of the criminal process, but that does not remove the concerns about the content of, and process that led to, these NDAs.

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* Other demographics are similarly entitled, but in a somewhat more theoretical sense.

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Lloyds HBOS Quayside- the lawyers’ ethics angles

There is an absolutely fascinating story in today’s FT by Jonathan Ford about the ‘Quayside’ Scandal relating to Lloyds-HBOS. It raises a number of issues about the banks’ lawyers (in- and outside-house) and one about a Magic Circle firm and the legal regulatory framework. The story is essentially about how Lloyds, as it was about to take over HBOS, and Lloyds HBOS thereafter, dealt with former HBOS customers reporting fraud by an employee of the bank and corporate recovery agents appointed by the Bank.

One set of allegations was made to the Bank Chairman and included (to quote from the story), “falsification of business plans and the theft of fees …orchestrated by a corrupt HBOS banker based in the Reading branch, Lynden Scourfield, and his co-conspirator David Mills at QCS, [Quayside] which acted as a turnaround consultant to various HBOS business customers.” Those complaints were, according to the FT, brushed off. Many years passed but earlier this year Scourfield and Mills were convicted of fraud and given considerable jail sentences. The FT says the cost of the scam has been estimated to be up to £1bn.

According to the FT, “Lloyds showed little interest in finding out what happened. …other victims who unearthed evidence of wrongdoing were treated equally dismissively. Far from calling in the police or regulatory authorities, Lloyds maintained right up until the trial’s conclusion that its own internal inquiries had revealed no sign of any criminality.”

This is where it gets interesting from my point of view. Asserting that there is no evidence of criminality suggests an application of legal judgment. Which lawyers were involved in advising on that question, if any? What factual enquiries were made, and under whose direction? What limits were set on the investigation, if any? And so on. The likelihood is that such investigations involved in-house lawyers at the bank and, quite possible, external lawyers.

There is a suggestion that (some in) HBOS knew of the situation before the complaints. In early 2007, Paul and Nikki Turner had HBOS pull their loans, “without warning and the business into which the Turners had sunk all their savings collapsed”. The FT suggests this was at the time when, “Scourfield [was] on the brink of exposure after a new boss started looking into his activities.”

Again, according to the FT, the Turners gathered evidence and reported it to Lloyds’ chief executive. A different senior executive wrote back and, “dismissed their complaints, saying their claims about fraud had been investigated and rejected.” The bank then continued to try and  repossess the couple’s home with 11 possession hearings until, “the judge finally suspended proceedings pending the conclusion of the criminal investigation into the fraud at Reading (which led to Scourfield’s conviction).” There is an interesting question as to what was raised about the (then alleged) fraud in the context of those proceedings, and what the lawyers for the Bank knew or were told when advancing those proceedings.

The dismissal of the Turner’s complaint was not quite on all fours with what the Bank’s position actually was, or at least, came to be. The FT report the Bank saying (it is not clear when), “While concerns . . . were identified, there was not sufficient evidence to establish criminal behaviour.” Whilst, in fact, the FT reporter opines: “Even before the takeover, its executives already realised they were dealing with more than just some rogue executive.” And, in particular:

Facing an audit in the spring of 2008, some HBOS executives in the group risk department were tasked with assessing the losses from the Reading scam. At the time, HBOS was thinking about raising extra capital (it subsequently launched a £4bn rights issue in April 2008). Their email exchanges, contained in an internal report that has been seen by the FT, are telling. An email in February 2008 from Peter Hickman in the group risk department talked about the importance of keeping the Reading losses well below the £285m level at which the bank’s accounting rules would kick in, deeming them material and requiring a note in the financial statements.

At an estimated £265m, they were already too close for comfort, thought Hickman. “Anything we can do to widen the gap between this loss and that limit will help us persuade the Audit Committee we should not disclose — something we seriously do not want to do — especially at the moment,” he wrote. Another email, from Ian Goodchild, then deputy head of group risk, referred openly to the “fraud”, which he estimated had already cost the bank about £200m in losses.

I am, of course, not an accounting expert, but I am not naïve enough to suggest that calculating the losses referred to was necessarily straightforward. The job that faced the Bank was not simply a matter of working out the losses and seeing if they topped the £265m figure. There would have been matters of judgment as to how to calculate a loss and whether to attribute it to the Quayside/Scourfield problem. But it would, I imagine, be well known to these individuals that the accounts and any associated reporting should present a true and fair view. And it is reasonable to think that an ethical (and perhaps, but I speculate, legal) obligation existed to apply a true and fair view when thinking about the disclosure thresholds the bank operated to. Their interpretation of the facts on the ground needed to be true, honest, fair, and reasonable. We do not know if it was, but doing everything one can to ensure the facts fit a picture of comfort is not, to my mind, consistent with wisdom or objectivity. It is, though, the kind of thing lawyers are often asked to do (or like to think of themselves as capable of). Under this view, facts are, to a point, simply ways of seeing the world, bargaining chips in an adversarial process: the banks with the knowledge against the World with its vulnerabilities.

Doing everything one can to ensure the facts look one way is not a sensible way to run a reporting regime or to manage information within an organisation, but it happens. An interesting question is whether that is a lawful approach or one that is professional or ethical. We do not know enough to judge, but we do know enough to wonder and ask questions. The insinuation of the FT story is that the judgments around disclosure thresholds were influenced by the knowledge that they “seriously” did not want to disclose the problem, which was being discussed by some at least as fraud.

Now none of the people named by the FT, as far as I can see, had legal positions in Lloyds or HBOS, but there is an interesting question raised by Mr Hickman’s role. I should emphasise here that we do not see the FT allege that he knew there was a fraud at the heart of this problem. His anxiety about disclosure may relate to other less noxious concerns. Disclosing a large financial hole in the business might be the only concern he was seriously worried about.  But it is something which would bear investigation. I say it would bear investigation in part because Mr Hickman is a COFA, a Compliance Officer of Financial Administration in a Magic Circle Firm. He is also their Chief Finance and Operations Office (or was in June 2017, I cannot find a more current reference to him). COFAs (along with the legal counterpart the COLP) lead on risk and compliance in their organisations. The questions this raises for me are:

  1. Was this an issue disclosed to the firm when he was appointed, or did it arise from their due diligence? How thoroughly was it looked at?
  2. Was this a matter disclosed to the SRA then or subsequently as part of an assessment of the fit and proper person test?
  3. Is this a matter now under the firm’s or the SRA’s investigation?

I am really not insinuating massive problems here – we do not have anywhere near all the facts – but the FT story gives rise to enough causes of concern to suggest to me that this is something that should be looked at with reasonable alacrity. And while it is interesting that this story touches on the SRA’s regulatory regime in this way, it is probably not the most interesting lawyers’ ethics angle on the goings-on.

The FT criticises HBOS’s internal by its corporate financial crime prevention team in 2007 as inadequate and inconsistent. Given its focus on evidence and fraud, I would expect that to have involved in-house legal advice at the very least. They may have led on it. Similarly, an FSA official asks the question in 2009 of the Bank, “Who decided not to investigate?” It would be surprising if such a decision did not engage the Bank’s lawyers at some, if not several, stages.  Again, they may have led.

Lloyds sought subsequently to offer reassurances to victims of the fraud that the Bank was “fully supportive” of a police investigation. Anthony Stansfeld, police commissioner for Thames Valley, sees things differently, according to the FT.

 “If it hadn’t been for the unearthing of evidence by victims and whistleblowers within the banks, much would not have come to light,” he says of the investigation. “The treatment of whistleblowers, and the huge legal pressure they were then put under by the bank’s lawyers, has been disgraceful.”

There are not details here of the pressure, other than the number of possession hearings the Turners’ were subject to (housing lawyers would know better than me how unusual this was). An interesting question is whether any of the lawyers involved in bringing the possession hearing knew of the bank’s concerns about the fraud which contributed to the Turner’s debt, and perhaps was the cause of them being unable to pay. Put another way, more pointedly, but the facts seem to bear out (if the FT’s reporting is accurate): did any lawyers advising the Bank or its Board know that proceedings were being brought to recover the proceeds of fraud from one of the victims? That would be a very serious thing if shown to be true depending – perhaps – on how they dealt with that knowledge.

Then there is the issue of legal privilege. Recent court decisions on privilege have led to a good deal of rending of professional garments. The FT reports:

an internal police document. This is understood to accuse Lloyds of leading the investigating officers a “merry dance”; of claiming legal privilege over documents that were not entitled to be protected; of deluging the police with vast amounts of irrelevant information; and of “briefing witnesses” prior to police interviews as to what they could say without breaching the guidelines set by the bank and its lawyers. Lloyds claims it “always complied appropriately with requests for information from Thames Valley Police”, even on occasions writing to the force “to make clear that it wanted the investigation to continue”. A spokesperson points out that in the course of the inquiry, Lloyds shared about 600 lever-arch files with officers and “more than 150,000 electronic documents”.

I wonder how much of this documentation is really covered by professional privilege. The crime-fraud exception may well loom large here. The profession needs to be wary of aggressive use, and misuse (if that is what really happened – again we do know enough) of privilege if it wants to hang onto it, for the benefit of their clients.

The Bank is seeking to deal with these problems with the Corporate Classic- the independent investigation. In their favour, a former judge is conducting the investigation. Yet

Dobbs is assisted in the provision of the necessary documents by Herbert Smith, the bank’s own lawyers, who were closely involved in both the regulatory inquiry between 2009 and 2010 and Lloyds’ assistance with the Thames Valley investigation. This has raised questions about the Dobbs inquiry’s independence.

No kidding. It also raises, at the very least, a potential conflict of interest. The conduct of Lloyds during those investigations has been criticised. Dobbs is, it appears, ‘getting to the bottom of’ all these matters (and more perhaps). It is possible that Herbie’s advice or conduct will come under the spotlight. Indeed, it seems likely (fairly or unfairly). They might think they have done nothing wrong, but they cannot possibly independently advise the client in such circumstances. I would welcome a sensible explanation as to why this does not breach Chapter 3 of the Code of Conduct: “You can never act where there is a conflict, or a significant risk of conflict, between you and your client.” Because I think I must be missing something here. Few things in law are rarely so clear, but this seems to be one.

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Who’s Pravda? A few quick comments on the reporting of the Leigh Day Judgment

The SDT recently published the Leigh Day judgment, just before the start of term proper, on a PDF which was a scan rather than a proper, easily readable, and editable PDF. All of these things undermine my ability to blog about the substance of the case. It’s a small sign of the SDT’s rather poor attitude to transparency or good management (a more important example is the absence of a full and searchable database of their decisions, available to all). But, I digress, because that is not what I want to write about.

I want to write briefly about a piece in the Law Society Gazette suggesting that the SDT should not have published the minority judgment in the Leigh Day case. Ostensibly, this is  because the Times and the Sun were provided with ammunition to write a piece knocking lawyers acquittal and it is is not in the public interest because the profession’s reputation is thus besmirched. Now, I complained on twitter about the Times coverage in their ‘Brief’ email. It was poor, not balanced, and very Rupert Murdoch. I am hoping that whoever wrote it, and or edited it, is embarrassed enough to do better. (And today, praise where it is due, they did spot a US study on class actions was not really saying what the survey’s paymasters wanted it to say, so perhaps they are making amends).

Now, one might take the Law Society Gazette more seriously in their argument, if it were not for the fact that there are questions over the way they have selectively reported the Leigh Day case. When the verdict was announced, although they knew that it was a majority verdict, the same author of the piece wrote a piece decrying the prosecution (although primarily for its expense) and also tweeted the following…

Hyde

I’m not sure the Gazette should have immediately piled in with a ‘the SRA must answer questions’ article and their lead reporter on the issue should almost certainly not have tweeted with doubts about the merits of prosecution on such a sensitive case where the verdict was by a majority. We all make mistakes on tweets, and I understand that the majority verdict was not reported because in criminal trials when a defendant is acquitted by majority verdict this fact is not reported. This is to avoid a risk of defamation, I am told, although close watchers of any particular jury trial will know a majority direction by a judge is reported, so anyone following matters will know an acquittal is probably by a majority verdict. Appeals on professional ethics can be by majority verdict and I can think of at least one Cout of Appeal case where the judgments might be deemed to be sensitive to the lawyer’s reputation.

So there is the whiff of hypocrisy about the argument that the Times cannot selectively report the acquittal but the Gazette can. Even if it is right that the majority verdict should not be reported in the aftermath, which I doubt, a little more circumspection in the aftermath of the verdict would have been wise.

And that leads onto my final point. It seems to me extraordinary that it would not be in the interests of the public that the outcome of the hearing is known. The profession should know that the decision was not cut and dried and that the minutiae of what went wrong might bear some reading and reflection. That such a high profile, and esteemed, lawyer had such a close shave with the Tribunal is very much food for thought from which I imagine many lawyers could learn.

Also, to make one last point, the nature of the verdict, and (when I get to read it) the nature of the findings may be enormously important to the debate about the standard of proof in tribunal cases. Stifling the information about this, on such an important case, seems to me to be an idea to be treated with a good deal of scepticism, no matter what source it emanates from.

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There’s something about Jolyon and Lucy…

I’ve either been offline or beavering away on something else hence the long silences but I wanted to draw readers of the blog to two very personal blogs which deserve, I think, a very wide audience. They come from two of the best blawgers – a term I use advisedly for they were also from that era when ‘blawging’ was a thing. They both seem to me to be exceptionally honest bloggers, in the sense that they are engaged in a very personal, open and reflective search for the truth about whatever it is they are writing about and seem to me to be on a bit of a journey. Whatever that pseudo-Californian noun might mean. They are also, as anyone familiar with their work will know, astute and experienced. Anyway, this is their

Anyway, this is their backstories. A fascinating story of two somewhat unusual journeys to the Bar. I hope somehow we see more of these; but not many could write them like this – even if they had the material. So for now, I suspect, we’ll have to make do with these exceptional examples :

Oh, and I think Jolyon is wrong about, or rather under emphasises, class: “we’re” not too fixated on it, many probably aren’t fixated enough on it (Universities included) even if some are fixated on it in the wrong way (the unmentionable Katie amongst them). But still, what a story! And imagine airing these words about your father all these years on. Imagine having the carbon copies to hand on your shelf. And imagine being the lawyer writing them, and think again before you next write to your opposition (or write a blog in anger, or… you get the picture).

I have the dignified letters she [his mother] wrote to him [his father]. “I do not expect you to marry me”, she says in them, “but you need to know I am pregnant”. They sit on my shelf next to carbon copy responses from his lawyers. “Our client denies paternity”, they say, “but will make a nuisance payment of £5 a week until she marries”.

 

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You’re masterful Mr President: Standards of Proof debate takes odd turn

The President of the SDT’s comments on the BSB consultation are highlighted in a story on Legal Futures today

“The SDT will remain the master of its own destiny in this debate. Its membership will do what it believes to be right in a rational, informed, evidence-based manner.

“The SDT will lead on the issue of the standard of proof applied in its proceedings on its own terms and in its own time and will not be distracted by the sometimes ill-informed rhetoric of others.

“The SDT is watching the BSB consultation with interest, recognising that the Bar’s tribunal is a smaller body than the SDT with different issues.”

Like Tony Blair saying this is not a time for soundbites, this President says that this is not a time for rhetoric. Masterful. Never mind that one might wonder how one side can be omnipotent in a debate. Or that the SDT, on current practice, may see itself as more similar to a regulator Vets than the Bar (Vets being the only major profession disciplined to a criminal standard according to the BSB consultation).

I suppose what is meant is that the SDT will decide for itself what its balance of proof should be. This is a curious position because, as I understand, the SDT has previously indicated it is bound by decisions of superior courts on this matter (decisions which Leveson LJ have indicated might need rethinking). But putting that to one side, the comment does throw up an interesting reminder of the unusual position of the SDT in the regulatory structure. It is an independent tribunal, funded by the Law Society but at arm’s length, but it is also subject to supervision by the Legal Services Board.  That supervision is more limited than for the approved regulators. The Board can only direct that the SDT take action where it has failed to perform any of its functions to an adequate standard (or at all) or to comply with any requirement imposed on it by or under this Act (per s. 179 and s. 32 of the Legal Services Act 2007).

However, the SDT is required to get certain rule changes approved by the LSB. The current rules, which are mainly procedural in nature, do not state anything about the balance of proof they apply. It is of course not very impressive that the balance of proof, something which of critical interest to lay complainants and professional respondents, is not in the rules. This must be especially true for a body that has transparency* as one of its three banner values. Yet the SDT has indicated it will be bringing forward rules and will be consulting on the standard of proof. It remains to be seen whether the standard of proof will be in the proposed rules, but even if it is, that is not enough for the LSB to insist that the SDT’s rules are updated in the way the LSB might want. If the SDT decided to stick with the current approach the LSB might decide not to approve the rules, within the constraints imposed by the LSA and public law, forcing the SDT to rethink but the game is then one of regulatory ping-pong. Mastery may not be total on either side. Unless the SDT can avoid putting the standard in rules that need approval they will have to debate the merits of their position with the LSB.

The criticism of rhetorical arguments is also an interesting piece of rhetorical diversion. What are these arguments, and who is making them?** The only argument that I have seen persistently advanced in a sound-bite way is this one: if a profession disciplines to a criminal standard then that profession is failing to discipline professional members that are ‘more likely than not’ unethical or incompetent. That doesn’t strike me as a rhetorical argument. It strikes me as a good argument that needs careful countering if it is not to be conclusive. The barrister Lucy Reed wrote an exceptional blog on this pointing to the special pleading involved in thinking that lawyer’ rights to practice are pre-eminent over the public’s right to be protected.

The SDT’s indicates it is not however up for a debate with the BSB. It’s not because the BSB is too small or has (unspecified) different issues – something it might have been helpful for the BSB to understand. The SDT curiously declines to give a view, or even helpful experiences and evidence that might assist the BSB in making up its mind. This they do on the basis that it might prejudice their handling of future cases saying it:

must have in mind that it should not make public statements (even in the context of consultation) which might give rise to a complaint at a future date from those appearing before it of predetermination and/or apparent bias. The Tribunal is able to respond to a Consultation highlighting difficulties or issues that have been encountered while sitting to determine cases. That is an appropriate function enabling the Tribunal to pass on knowledge and experience to policy makers.

It passes on no such knowledge in the Consultation. The position is difficult to understand, particularly given that it is planning to consult itself: does it plan to suspend the hearing of cases while it cogitates, so as to mitigate the risk? I am imagining the answer is no. And why, if it is impartial, does it need to say the Bar is smaller (indeed, how is that relevant to the balance issue?) and why does it feel the need to speak gnomically of different issues, without acknowledging that the issues faced will also often be very similar? That does not strike me as impartiality so much as laying the ground for special pleading.

Alternatively, is it implying that the evidence that it has or will collect, on which it will found its eventual decision, is based on its own experience only and therefore cannot be of assistance to the BSB? Importantly for the future consultation by the SDT, its experience is based on its current practices, the criminal standard, and not its alternative. How will the SDT get round the myopia of its status quo? Or will they expect other regulators to be willing to engage with them in a way they were not? It is a defensive and troubling statement with more than its fair share of rhetorical silliness. If the SDT is so concerned about asserting its neutrality, independence and ability to decide on something as important as the standard of proof, can it really do so with a membership dominated by legal members (lay members are about a third of the membership) and led by a former President of the Law Society? Getting away from ‘chaps regulating chaps’ was one of the central reasons for having the Legal Services Act. The SDT, with its idea of what constitutes independence, has issued a reminder of times past.

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*If the SDT really wants to be transparent it could a) improve the drafting of its judgments and b) put those judgments online in a fully searchable way.

** I blogged my own short thoughts on the standard of proof here.

 

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SCJs sing in Unison: Grayling’s high risk poker with the courts opens the tap on A2J jurisprudence

I thought it might be of interest to some of my readers to have a quick highlighting of the key points from R (on the application of UNISON) (Appellant) v Lord Chancellor (Respondent)  [2017] UKSC 51, although there will no doubt be many analyses, especially those praising this significant reversal for the Government. It was a unanimous decision. Lord Reed gave the judgment of the court.[1]

The case is about whether fees introduced for Employment Tribunal (ET) cases by the (then) coalition government were lawful. In contextualising the ET’s work Lord Reed observed they, “are designed to deal with issues which are often of modest financial value, or of no financial value at all, but are nonetheless of social importance. Their procedural rules, which include short limitation periods and generous rights of audience, reflect that intention. It is also reflected in the fact that, unlike claims in the ordinary courts, claims in ETs could until recently be presented without the payment of any fee.” From here on, for

From here on, for brevity of effort from me, I am paraphrasing and quoting from Lord Reed unless I indicate otherwise by (for example) square brackets.

The key points, I think, are:

  • In order for the rights conferred to be effective, and to achieve the social benefits which Parliament intended, they must be enforceable in practice.
  • The constitutional right of access to the courts is inherent in the rule of law. There is a constitutional right of access to justice traceable back to Magna Carta via Blackstone, Coke and evident in decisions on prisoners’ rights [an interesting example of how prison rights cases can shape the broader law].
  • Justice is not merely a public service like any other and the provision of adjudication is not of value only to the users themselves (and those who represent them). In particular, Lord Reed emphasises the value of precedent setting in court cases but also what law and society folk would call the Shadow of the Law argument: employment relations generally, and mediation of employment disputes more specifically, are shaped by the potential to access justice.

But the value to society of the right of access to the courts is not confined to cases in which the courts decide questions of general importance. People and businesses need to know, on the one hand, that they will be able to enforce their rights if they have to do so, and, on the other hand, that if they fail to meet their obligations, there is likely to be a remedy against them. It is that knowledge which underpins everyday economic and social relations. That is so, notwithstanding that judicial enforcement of the law is not usually necessary, and notwithstanding that the resolution of disputes by other methods is often desirable. What I read from this is that the rule of law, and its limitation, must bear in mind any detriment to these positive externalities of access to justice for individuals. 

  • The right of access to justice, both under domestic law and under EU law, is not restricted to the ability to bring claims which are successful. Lord Reed seems to say those with arguable claims have a right to present them for adjudication [this is a significantly more generous test than a legal aid merits test or the test that would typically be passed by cases funded under typical CFAs or insurance].
  • Access to justice need not be free but it must be prompt and fair.
  • Impediments to the right of access to the courts can constitute a serious hindrance even if they do not make access completely impossible. If so, they will be unlawful unless plainly authorised by statute.
  • Even where a statutory power authorises an intrusion upon the right of access to the courts, it is interpreted as authorising only such a degree of intrusion as is reasonably necessary to fulfil the objective of the provision in question.
  • Even so, where such a policy provides for a degree of intrusion into a constitutional right greater than is justified by the objectives the policy is intended to serve, it fails.
  • Here the policy aims were as follows. Using fees to help to transfer some of the cost burden from general taxpayers to those that used the system, or caused the system to be used. And using a price mechanism to incentivise earlier settlements or to dis-incentivise unreasonable behaviour, such as pursuing weak or vexatious claims. These are legitimate aims that may lawfully restrict access to justice.
  • [It is notable that there was no evidence to suggest that the policy met either aims of discouraging vexatious cases or encouraging settlement and whilst it did raise some revenue in considering what level the fees should be set at there was no consideration by the then Lord Chancellor of what the optimal level of fees would be in terms of raising revenue – although Lord Reed is too polite to say it the policy was a bit of a shocker when considered against its stated aims].
  • In the absence of statutory words authorising a limitation of access to the relevant tribunals, the test was whether there was a real risk that access to justice would be prevented. Conclusive evidence is not required if real risk is demonstrated.
  • Ability to pay is not conclusive of legality. The question of whether fees effectively prevent access to justice must be decided according to the likely impact of the fees on behaviour in the real world. Fees must, therefore, be affordable not in a theoretical sense, but in the sense that they can reasonably be afforded. Where households on low to middle incomes can only afford fees by sacrificing the ordinary and reasonable expenditure required to maintain what would generally be regarded as an acceptable standard of living, the fees cannot be regarded as affordable.
  • Fees which would require low to middle-income households to sacrifice ordinary and reasonable expenditure for substantial periods of time (one to three months) are [by implication] too high.
  • In order for the fees to be lawful, they have to be set at a level that everyone can afford, taking into account the availability of full or partial remission. The evidence before the court, considered realistically and as a whole, led to the conclusion that that requirement was not met. The fall in the number of claims was so sharp, so substantial, and so sustained as to warrant the conclusion that a significant number of people who would otherwise have brought claims have found the fees to be unaffordable. This was seen as particularly important in employment cases where applicants are practically compelled to take cases [what he means by this I found elusive on first reading].
  • It is not only where fees are unaffordable that they can prevent access to justice. They can equally have that effect if they render it futile or irrational to bring a claim. [Hence fees which impact on low-value cases or cases where relief is non-financial will need to be especially carefully justified and set low – raising interesting questions especially in judicial review and for the online court, I’d wager].
  • It has not been shown that less onerous fees, or a more generous system of remission, would have been any less effective in meeting the objective of transferring the cost burden to users. [This implies an obligation to set fees at a level which is based on a solid prediction of what is optimal in financial and access to justice terms].
  • A discretionary power to order the remission of fees in exceptional circumstance did not change that conclusion. The problems which have been identified in these proceedings were not confined to exceptional circumstances: they were systemic. [An interesting question is whether this is true in general or because the exceptional power was only operable in very limited circumstances, but logic seem to dictate, this would only be so if an exceptional power altered the systemic picture ].

This I think gets the guts of the decision (corrections and comments of course most welcome). Whilst the case is put on the basis of domestic law, there is also an interesting discussion of the impact of EU law, especially as regards employment rights deriving from EU law. Kniat v Poland, Application No 71731/01, judgment given 26 July 2005, “concerned fees payable in divorce proceedings. At the conclusion of the proceedings, the applicant was ordered to pay a court fee of 10,000 PLN. She was able to pay it, having received a share of the matrimonial property amounting to 300,000 PLN. Nonetheless, the imposition of the fee was held to violate Article 6(1), since the 300,000 PLN constituted apparently her only asset, and it did not seem reasonable to demand that she spend part of it on court fees, rather than build her future and secure her and her children’s basic needs after the divorce (para 44).”

Chris Grayling, should he be reading the judgment on his summer break, will be having a fit.

The judgment itself is, of course, well worth reading. There is a concise and highly readable summary of the evidence surrounding the nature of the fees charged and the impact on cases – which is shocking. The defence of the rule of law is neat, tidy and – forgivably on this occasion – court-(tribunal-)centric. The shadow argument is deftly done. But I thought, before concluding, I would pick out one hypothetical as an indicator of how the test (as was) would bite:

To put the figures discussed in the preceding paragraphs into perspective, the national minimum wage of £7.50 per hour produces an income of £1,300 per month, assuming a 40 hour week. That is before taking account of any benefits and tax credits (which, subject to specified exceptions, are included in the calculation of income under the remissions scheme). A couple each earning the national minimum wage would therefore have an income of £2,600 per month, before benefits and tax credits were taken into account. Such a couple would not normally qualify for any remission of fees for a type A claim, but might qualify for partial remission of the hearing fee for a type B claim.

If one were to put the judgment’s impact in its most general way, it will require the Ministry of Justice to think much more carefully about the impact of its proposals: the MoJ opined in a report “while there is clear evidence that ET fees  have discouraged people from bringing claims, there is no conclusive evidence that they have been prevented from doing so” (p 6) They can no longer get away with putting the risks of their (rather feint and contrived) uncertainty about the problems so firmly back on others. They did so, no doubt, at the behest of their Minister, who – in taking such a high-risk line with what was already recognised to be a constitutional right – has opened the tap on an access to justice jurisprudence which is likely to be running for several years to come. And most of it domestic. And extending well beyond employment tribunals. Grayling’s legacy may be rather different from that which he imagined.

 

[1] Baroness Hale added a coda, which Lord Reed agreed with, on the discrimination points of the case – which did not in the end need deciding.

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