The Supreme Court has today allowed the appeals of Tom Hayes and Carlo Palombo. Both Mr Hayes and Mr Palombo had been convicted of conspiracy to defraud, in relation to alleged attempts to influence the LIBOR / EURIBOR benchmark rates.
In a significant decision which the Court said “raises concerns about the effectiveness of the criminal appeal system in England and Wales in confronting legal error” (§1), the Supreme Court quashed convictions which had been previously upheld repeatedly by the Court of Appeal (Criminal Division).
In both cases, the Supreme Court concluded that the trial judge misdirected the jury: “It was wrong for the judge to direct the jury that, if the submitter took any account of the commercial interests of the bank or a trader, the rate submitted was for that reason not a genuine or honest answer to the question posed by the [LIBOR or EURIBOR] definitions as a matter of law” (§8). “Whether a submission was genuine or honest did not turn on how a court construes the LIBOR and EURIBOR definitions. It turned on the state of mind of the submitter and whether the stated opinion of the borrowing rate was one which that person actually held. That is a question of fact which, in a criminal trial, is the province of the jury and not the judge” (§7 see §§124-138, §§207-214, 219-233). The Court considered that misdirection to have been material in both cases, and to render the convictions unsafe (§§9, 162, 234).
The judgment of the Supreme Court is likely to have significant implications for the safety of convictions of others convicted of similar offences arising from alleged LIBOR / EURIBOR benchmark manipulation.
There are a number of significant points of more general application in the judgment of the Supreme Court:
- The Supreme Court affirmed that, in a criminal appeal, the scope of the Supreme Court’s consideration is not confined to the point of law certified by the Court of Appeal pursuant to s 33(2) of the Criminal Appeal Act 1968: “if permission to appeal is given, the certified question does not fetter the court’s discretion” (§§42-43).
- In a criminal trial, the construction of a contract or other document having legal effect (i.e., the determination of “its legal effect: that is to say, what legal relations the document records or creates”, §102) is a matter for the judge, and not the jury (§§106-110). However – and, importantly – “[i]t does not follow from the fact that a document lends itself to construction by a court that the court should construe it. That depends on whether the legal effect of the document is relevant to an issue in the case” (§111). Where the actual issue in the trial is as to the document’s linguistic meaning, or how that meaning was understood (or intended to be understood), those are questions of fact, and are for the jury to decide (§§111-119).
- Although not necessary to decide the case, the Supreme Court considered that it was “hard to see in principle” that a breach of the civil law could suffice as the relevant “unlawful means” for the purposes of the common law offence of conspiracy to defraud (§§216-217): “it was essential to allege … that the defendant has conspired to cause loss by criminal means” (§217).
Tim Owen KC and Tim James-Matthews acted for Carlo Palombo (together with Jonathan Crow CVO KC, Katherine Hardcastle, and Elizabeth Walsh, instructed by Hickman & Rose Solicitors)
Adrian Darbishire KC and Tom Doble acted for Tom Hayes (instructed by Karen Todner Ltd).
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