Third Party Rights: What’s in a name?

May 2, 2017

On 22 March this year, the Supreme Court handed down its decision in the case of Macris v FCA [2017] UKSC 19 (on appeal from [2015] EWCA Civ 490)  

This followed extensive litigation between the parties from the Upper Tribunal to the Court of Appeal to the Supreme Court with Mr Macris successful until the final hurdle.

The FCA emerged victorious (albeit probably somewhat surprised) but will this have the effect of derailing the many identification cases that have followed Mr Macris’ trailblazing footsteps?

The nuance of the four separate judgements make this a complicated question but let’s start with the basics. The relevant legislative provision (section 393 of the Financial Services and Markets Act 2000) is concerned with Notices typically issued by the FCA to an individual or firm with respect to initial (Warning Notice), determined (Decision Notice) findings of misconduct. The contents of such a notice may be contested or it may be agreed by the subject (in return for mandated discounts on financial penalties). However, if “any of the reasons contained in a [……….]  notice to which this section applies relates to a matter which  (a) identifies a person (the third party’) other than the person to whom the notice is given, and (bin the opinion of the regulator giving the notice is prejudicial to the third party, a copy of the notice must be given to the third party.” The third party then has the right to relevant disclosure of the underlying material and to make representations contesting the Notice insofar as it applies to them.

The Judgement

It was common ground in the litigation that if Mr Macris was identified in the notice served on (and agreed with) his former employer JPMorgan Bank (“the Bank’s Notice”), there were certainly statements that were prejudicial to him. Running partly in parallel to this case was the ongoing investigation into Mr Macris’s conduct which ultimately upheld a number, but crucially not all, findings as were averred to in the Bank’s notice. 

The Reasoning

The tests varied in four different judgements though some common ground did emerge.

Lord Sumption (with whom Lord Neuberger and Lord Hodge agreed) ruled that the meaning of “identifies” is satisfied if a person is identified by name or by a synonym for him, such as his office or job title. But, in the case of a synonym, it must be apparent from the notice itself that it could apply to only one person and that that person must be identifiable from information which is either in the notice or public available elsewhere. Importantly though, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice. “What is not permissible is to resort to additional facts about the person so described so that if those facts and the notice are placed side by side it becomes apparent that they refer to the same person.”

He cast doubt on the primacy given to Mr Macris being named in a US Senate Subcommittee Report (a detailed narrative and dissection of the relevant episode) as being conclusive of his identification in the Bank’s Notice as the Court of Appeal had done. He also did not accept that because reporting lines lead to individuals, any reference to “management” must be to an individual. In essence, “the real question is whether the terms of the notice itself would have conveyed to a reasonable member of the public without extrinsic information that any of these terms was a synonym for Mr Macris. Plainly it would not”.

One wonders how the SMR and its prescribed responsibilities may ultimately affect this question in cases to come.  

Lord Neubuerger, while agreeing with Lord Sumption, also set out some further observations in the light of the judgements of Lord Mance and Wilson who had argued for a wider interpretation.

Lord Neuberger identified the elephant in the room, that in a case such as this, where the notice is addressed to a firm, the interests of the firm and the third party, an ex - employee are by no means necessarily aligned. Further, the facts of the particular case, and the fact that some of the allegations made in the Bank’s Notice had been upheld, the “more serious ones, including one which at least implied that he had not been honest in certain respect, were rejected”. While acknowledging that there is no entirely satisfactory logical basis for justifying any particular conclusion as to the precise point at which one draws the line, Lord Neuberger indicated that he “would accept that a person is identified in a document if (i) his position or office is mentioned (ii) he is the sole holder of that position or officer, and (iii) reference by members of the public to freely and publicly available sources of information would easily reveal the name of that individual by reference to his position or office.”

From this he distilled two main points, firstly that it involves assessing the identifiability of an individual by reference to what members of the public generally know or could discover and that any research or investigation should be straightforward and simple, “as would be the case in relation to identifying who chairs the board of a UK-registered company”.  It should not require detective work or jigsaw identification.

Lord Mance came to the same conclusion in relation to Mr Macris but was not overly swayed by Lord Neuberger or Lord Sumption. He recognised that a notice is not issued into a vacuum but concluded that whether a notice identifies a person should be considered against whether the identity of the person is apparent from the terms in which the matters is described or explained, read in the light of information generally or publicly available in the financial world (as distinct from information available only to persons acquainted with the person or his company).

Lord Mance concluded that the criticism directed to CIO London Management (held in the earlier cases to have identified Mr Macris) in the report could not by itself be taken to relate to any particular individual or individuals. Further “A notice will, in my view, only identify an individual if it does so to person operating in that world, unacquainted with the particular individual or his company, though familiar with information generally available publicly to operators in that world

Lord Wilson (dissenting) spoke of the need for balance and laid out various grounds for his perplexity at the construction of Lord Sumption.

He believed that the Court of Appeal was wrong to rely on the law of defamation and that they made two key errors in so doing. Firstly, it included “persons acquainted with the [applicant]” in the class of persons who could identify the individual and secondly that the court defined the decision for that constituency as being whether the applicant was a person prejudicially affected by matters in the notice as opposed to matters in the notice being simply prejudicial to him. But he maintained that the kernel of the Court of Appeal’s reformulation of the question at the second stage remained. That is that the relevant conclusion should be reached by “persons… who operate in his area of the financial services industry, and therefore would have the requisite specialist knowledge of the relevant circumstances.”

Ultimately Lord Wilson plumped for an ordinary market operator test which asked, “Are the words in the notice such as would reasonably lead an operator in the same sector of the market who is not personally acquainted with the applicant, by reference to information in the public domain to which he would have ready access, to conclude that the individual referred to in the notice is the appellant?”

He further held that the existence of the Senate Subcommittee report (referred to above), referring as it did to Mr Macris and to emails which could easily be cross referenced to the Authority’s notice, did render Mr Macris identified under the statutory test.

The Future

So does this close the floodgates for the Upper Tribunal? Well, not exactly. For those whose actions have been included in notices to firms, particularly those referred to generically as Trader A, Trader B in various LIBOR notices, it may not take too much detective work to compare the descriptions of the anonymised roles with the available financial press concerning those employees who had been terminated by the bank. It will be very much case by case but in all likelihood a fair number might still slip through the identification net as these “synonyms” often quite clearly relate to one person who has a specific role at a bank i.e. specific currency submitter or derivatives trader. This role may be easily discernible to those that work in the financial sector but who are not necessarily acquainted with the individual. Or, as is often the case, the financial press may have already named an individual with reference to their specific role.

Any individual subject to potential disciplinary action for which a notice against an employer company or colleague is likely to be in motion should be alive to these issues though the question will always fall to be addressed by the FCA. Recent commentary suggests that the regulator may seek to synthesise the timing of individuals and firms so that anonymization can be done away with completely but in the meantime, various challenges will continue to work their way through the Tribunal.
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About Catherine

Catherine is a solicitor, with a background in corporate regulation and investigations. Catherine graduated with degrees in Law and Asian Studies from La Trobe University in 2007 and was admitted to practice in Australia in 2009 following completion of a post graduate diploma of Legal Practice at the College of Law, Victoria.