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Simpson v Cantor Fitzgerald: whistleblowing “insiders”, separability and aggregation

01.12.20

A tale of dysfunctional relationships and intrigue amongst about salespeople and traders on a financial markets desk.  It may sound like a certain recent BBC drama series, but such was the theme of the Court of Appeal’s latest offering on the subject of whistleblowing: Simpson v Cantor Fitzgerald Europe [2020] EWCA Civ 1601.

Mr Simpson worked for Cantor Fitzgerald as a salesperson on its Emerging Markets Desk between 23 February 2015 until his dismissal within a few months of completing his six months probationary period.  He brought claims on protected disclosure detriment and dismissal and an unlawful deduction claim relating to alleged unpaid commission (claimed to amount to £4.6m, and found to be unfounded).  Although his claim referred to four protected disclosures, this was in fact founded on 37 separate alleged disclosures made between April and November 2015.  These covered broadly four headings of alleged concerns including providing misleading information to clients and  traders engaging in the illegal practice of front-running (a form of insider training where a trader holds back a client’s order to place their own purchase first and then take advantage of the price rise consequent on the client’s order).

Ultimately Mr Simpson lost on the facts, despite the Court of Appeal’s admiration expressed for David Reade QC’s “ability to make bricks without straw”.  But first instance findings presented an insuperable answer to the appeal.  The ET had rejected the case that dismissal was by reason of the alleged disclosures, and made findings that Mr Simpson lacked a reasonable or even in some cases a genuine belief in his disclosures, had used them to leverage his commission claims, and that if his beliefs were genuinely held had failed in his own FCA obligations to report his concerns promptly to Compliance.

Despite that unpromising backdrop, the decision nevertheless highlights a number of significant issues for the presentation of whistleblowing claims and appeals.

ET Reasons – a Meek end for Rule 62(5) challenges

Rule 62(5) of the ET Rules requires that the ET reasons (amongst other things) “identify the relevant law, and state how the law has been applied to the findings in order to decide the issues”.   In Greenwood v NWF Retail Limited [2011] ICR 896, the EAT held that the provision (or its predecessor) is mandatory.  It added the qualification that it is not necessary formally to set out the legal principles in a separate section, that it is sufficient if there is “substantial compliance”, and in relation to this tribunals could be guided by the approach in Meek v City of Birmingham District Council [1987] IRLR 205 (CA) that the reasons must be set out in sufficient detail to enable the parties to know why they have won or lost.  However it emphasised that in the absence of substantial compliance a decision was erroneous in law.

The ET’s decision in Simpson provided an ideal opportunity to test that approach.  Not only was there no separate section in the Reasons set out the relevant legal principles, there was also no reference to them anywhere in the reasons.  The only authority cited was the EAT’s decision Cavendish Munro Professional Risks Management Ltd v Geduld [2010] ICR 325 (EAT) – much maligned for being seen as drawing an over-rigid distinction between the provision of information and an allegation (since rejected by the CA In Kilraine v Wandsworth LBC [2018] ICR 1850).  As such, notwithstanding the EAT’s conclusion to the contrary, the suggestion that there had been “substantial compliance” with rule 60(5), was difficult to sustain.  Rather than seeking to suggest otherwise, the Court of Appeal concluded that non-compliance with rule 62(5) is not a free-standing ground of appeal.  Compliance with the rule may make it easier to meet the requirement that the parties must be able to tell from the reasons why they have won or lost, and non-compliance might also assist in support of other arguments for a separate error or law.  But here the EAT and CA concluded that it was clear from the findings of fact why Mr Simpson had lost, and there was no error identified in the legal principles applied.  In those circumstances the CA held that it was not enough to fall back on the ET’s failure to expressly to set out those principles.  That seems realistic.  The error of law in setting out the reasons need not vitiate the findings of fact, and there is little purpose to be served in remitting the decision if those findings make clear why the parties won or lost.

Dismissal: separable reasons and the detriment/ dismissal dichotomy post Jhuti

Turning to the substantive decision, the reason given and accepted for Mr Simpson’s dismissal was a breakdown of trust with his colleagues.   The ET found that it had become “utterly impossible” for his colleagues to work with him.  One aspect of this was his poor attendance record.  But ultimately Mr Neilly (who solely made the decision to dismiss) found this was just one aspect of Mr Simpson being a poor team player, leading to an insuperable loss of trust.  Both the EAT and CA accepted that this reason for dismissal, based on the genuine concerns as to the relationship with the rest of the team, was properly separable from any alleged disclosures.

It appears that Mr Simpson sought to argue that even if Mr Neilly was not himself influenced by the protected disclosures, his decision was manipulated (on the grounds of alleged protected disclosures) by Mr Simpson’s line managers Mr Cortellesi and Mr Blondin.   That argument was rejected in the EAT on the basis in part that, in line with the CA’s decision in Royal Mail Ltd v Jhuti [2018] ICR 982, since they took no part in the investigation or disciplinary process their state of mind was not relevant.   Subsequently the SC in Jhuti ([2020] ICR 731) concluded that where an employee’s line manager essentially brought about a dismissal by putting forward a fictitious reason, reliance could be placed on the line manager’s reasons for dismissal even if not known to the actual decision maker.  That did not however assist Mr Simpson on the facts, whether based on a test of manipulation of the decision maker or identification of an invented reason.  Indeed Mr Cortellesi had been pushing back against dismissal due to difficulties of recruitment for the desk.

It is not difficult to see, though, that on different facts the reliance on a loss of trust and confidence amongst colleagues as a separate reason may be problematic in whistleblowing cases.  The decision echoed the language in decisions such as Panayiotou v Chief Constable of Hampshire Police and another [2014] IRLR 500 (EAT).  But equally a string of decisions have emphasised the need for care in distinguishing between a disclosure and some feature of it, such as the persistence or unreasonable manner in which disclosures are made.  Most recently in Riley v Belmont Green Finance Ltd t/a Vida Homeloans UKEAT/0133/19/BA, 13th March 2020 the EAT emphasised that something more than ordinary unreasonable conduct was made.

To some extent the focus on reasoning in Jhuti side-stepped that issue by focussing on the limits on those whose state of mind is relevant when considering fairness of the dismissal.  In that sense the decision illustrates the continuing importance of a properly particularised detriment claim alongside an unfair dismissal claim if there is a contention that the loss of trust by colleagues is itself influenced by protected disclosures.  It has been clear since at least the decision in Timis v Osipov [2019] ICR 655 (CA) that a detriment claim can be founded on the detriment of dismissal or treatment which causes or influences a dismissal.   Whilst the SC’s decision in Jhuti has expanded the scope to look beyond the state of mind of the dismissing officer, the position remains that it does not cover all the ground of a detriment claim under s.47B ERA.   Suppose in Simpson the loss of trust by colleagues other than his line managers had been caused or influenced by protected disclosures (which was not the ET’s finding).  Whilst an unfair dismissal claim might still be defeated on the basis of the approach in Jhuti, that would provide no answer to a detriment claim founded on vicarious liability for those colleagues. Choudhury J emphasised that the issue of time keeping was an instance of something considered serious in itself but which had nothing to do with protected disclosures.  But that was not necessarily an answer to a detriment claim, where it was sufficient if the protected disclosures were a significant influence rathe than the principal reason for the loss of trust amongst colleagues.

Qualifying disclosures

Mr Simpson fared little better on the question of whether he made protected disclosures.  But the decision touches up three of the commonly recurring themes:

  • Aggregation of disclosures
  • Information versus mere allegations (or queries)
  • The relevance of “insider” status

In each case these themes bear upon the issue of whether there has been a sufficient disclosure of information to sustain the requisite reasonable belief that the information tends to show one of the relevant failures.  It is the reasonable belief test which is intended to strike the balance between facilitating protection for workers in a wide variety of situations who may not yet have a full picture as to what has happened, whilst providing for an element of objectivity as to whether sufficient information has been disclosed to sustain the relevant belief.   There must of course first be a subjective belief that the information tends to show one of the relevant failures.  But also, as set out in Kilraine v Wandsworth LBC [2018] ICR 1850 (CA), for a communication to be a qualifying disclosure it has to have “sufficient factual content and specificity such as to be capable of tending to show” one of the relevant failures.   Whether that is so is a matter for the evaluative judgment of the tribunal and is a question of fact; allowing for the context and for the possibility that the could be scope to disagree without the worker’s view necessarily being unreasonable.

(1) Aggregation

In one sense the issue of aggregating disclosures is the obvious converse of the fact that protected disclosures can be made in a wide variety of situations.  If a worker sets about formally making a protected disclosure, after taking legal advice, then clearly it will make sense to collect together all relevant information.  But the legislation also has to be capable of applying in much less formal situations where a worker raises concerns.  In the real world much may go without saying, whether because it is obvious in the work context, or given the recipient or because it would just be to repeat what has previously been said.   Consistently with this, whilst accepting that in principle it may be possible to aggregate disclosures, the Court of Appeal emphasised that whether two or more disclosures could be read together was a question of fact for the tribunal, and that there was nothing special about the law of protected disclosures in this respect.

That of course in turn begs the question as to what factors might be relevant to the factual assessment of whether separate disclosures could be read together.  In Robinson v His Highness Sheikh Khalid Bin- Saqr Al Qasmi [2020] IRLR 345 (EAT), Lewis J suggested that, apart from cases where there was express reference to an earlier disclosure (or where it was enclosed with it), the context would only be sufficient to bring in an earlier disclosure if this was required by necessary implication.   Arguably the test of necessary (rather than reasonable) implication sets the bar too high when set against the test of reasonable belief.  Disappointingly the Court in Simpson made no reference to that approach.  There was no need to do so in the light of its acceptance that there was no protected disclosure whether taking the communications in isolation or read with previous disclosures.

(2) Disclosure of information or a mere “query”

A distinct objection was made that, in relation to one of the disclosures relied upon, the ET had drawn a false contrast between a disclosure of information and a mere query.   Mr Simpson had written to the Head of Compliance setting out what the ET found to be a hypothetical scenario which he relied upon as being a disclosure of front running.  He had prefaced his disclosure with the words, “Could you let me know if the following information raises any issues?”  The ET concluded that the protected disclosure allegation failed “in two ways – information (not just query), and reasonable belief”.  The EAT supported that conclusion by offering two alternative illustrative examples (at [42]):

“Whether or not something is merely a query, or amounts to the provision of information albeit framed as a query, is for the tribunal to determine. If an employee sets out sufficiently detailed information that, in the employee’s reasonable belief, tends to show that there has been a breach of a legal obligation, then the fact that such information is contained within a communication that can be described as a query will not prevent it from amounting to a qualifying disclosure. A straightforward example might be a communication to a manager in the following terms: “On 1 January 2019, I saw employee X manipulating and falsifying data to enhance the employer’s year-end results. I consider this to be fraudulent conduct. Do you agree?” The query in that communication does not alter the fact that there is a disclosure of information which, in the reasonable belief of the worker tends to show that a criminal offence is being committed. However, the position might be different if the employee had merely said as follows: “On 1 January 2019 I saw employee X access the year-end results. Could you let me know if that raises any concerns?” In the latter example, the information probably lacks sufficient factual content to amount to the disclosure of information within the meaning of section 43B.  Moreover, the communication invites the recipient to form an assessment as to whether any concerns arise, rather than it tending to show, in the sender’s reasonable belief, that a criminal offence is being committed.”

That approach might be said to give too much weight to the form of the disclosure.  There may be a host of reasons for the whistleblower, as a matter of caution, to frame a disclosure in qualified terms.  After all, an important aspect of the underlying policy is to encourage reporting to others (typically the employer) who may be better able to investigate.  The crucial focus is surely on the substance of the information disclosed.   The Court of Appeal appears to have recognised as much in acknowledging (at [52]) that the ET may have been applying too rigid a distinction between a query and information, and instead falling back on the ET’s finding that in any event Mr Simpson lacked the requisite reasonable belief that the information tended to show a breach of FCA regulations.

(3) Insider information

A further common theme in relation to qualifying disclosures has been the impact of “insider status” – in the sense of some specialist knowledge or expertise.  Both the EAT and CA in Simpson endorsed the dicta in Korashi v Abertawe Bro Morgannwg University Local Health Board [2012] IRLR 4 at [62] that insider status works both ways.  It may mean that respect is to be afforded to their view that there is or is likely to be a breach of a regulatory obligation.  But it may also entail a higher standard in relation to the determination of whether it was reasonable for the worker to hold that belief, taking into account the extent of the material available and the expertise to be expected in making that assessment.  Whilst those principles are well-established, the approach in Simpson, highlighted two more novel respects in which insider status might be material in relation to the assessment of reasonable belief.

First, in the EAT, it was emphasised that the “insider status” of the recipient of the disclosure may also be material.   Some of the disclosures were made to Mr Cortellesi (the head of the Emerging Markets business).  The ET took into account Mr Cortellesi’s view that the practice described by Mr Simpson did not entail front-running.  The EAT upheld that approach, noting that the ET had been entitled to take into account Mr Cortellesi’s “insider” status ie his specialism and expertise.  Clearly that was plainly part of the evidential picture that the ET was entitled to take into account, provided that the tribunal makes clear that the focus is only on whether the belief held by the person making the disclosure was one reasonably available, and that there could be scope for reasonable disagreement. Again, though, the point as to the relevance of the insider status of the recipient of the disclosure may also be deployed in the opposite direction; it may be that more can go without saying given what can be assumed to be obvious to someone already in the know.

Secondly, the particular obligations of “insiders” may raise issues as to whether they have acted in a way to be expected if they genuinely believed that information tended to show a relevant failure.  Specifically, in Mr Simpson’s case, the ET was entitled to place reliance on its finding that if the claimant genuinely believed that there had been regulatory breaches it was his duty as an FCA professional to report to Compliance (per Bean LJ at [57, 59]).  The failure to do so, together with his failure to provide details when pressed for them, supported the ET’s conclusion that Mr Simpson lacked not only a reasonable but also a genuine belief as to the wrongdoing.

Whatever the merits of that approach on the facts in Mr Simpson’s case, however, clearly the counter-concern is that those with genuine public interest concerns, may be deterred from raising them at all if they are open to criticism and suspicion for not having done so earlier.

Commentary by Jeremy Lewis

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