Lessons from the Supreme Court decision in Hayes & Palombo [2025] UKSC 29

I have followed the various appeals of Tom Hayes with particular interest (I successfully represented one of the brokers, happily acquitted at trial back in 2016, who Tom Hayes was accused of conspiring with), and so I was particularly pleased to see the Supreme Court finally overturning his conviction (and that of Mark Palumbo).

I was particularly pleased that the Supreme Court recognised (for example at §71 and §72) that the SFO’s approach, unhappily endorsed by Cooke J and then the Court of Appeal, simply did not reflect the real world or what was actually happening in the market at the time.  

The simple truth is that at the relevant time, LIBOR was necessarily a fiction.  The credit crisis meant that there simply was not the sort of inter-bank lending that the LIBOR definition was predicated on.  As such, the notion that there was some objectively “true” or “genuine” single value that submitters could and should have provided was simply unreal.  It seemed clear at the time that, even with the individuals charged with making the banks’ submissions doing the best that they could, there was obviously a range of possible figures that could have been submitted in good faith.

Once that basic and obvious fact was recognised, the flaws in the SFO’s approach were plain to see.  As the Supreme Court observed, the suggestion that a submitter could only properly submit a figure at the very bottom of the range was neither the test set out by the LIBOR definition, or an approach that had any foundation in reality.  Lord Leggatt’s observation, delivered with devastating understatement, that “A banker who adopted such a Panglossian attitude would be unlikely to have a successful career in finance“, struck a far more credible and realistic approach.  The SFO’s whole case was founded on an irrational view of LIBOR.

Equally, the Supreme Court’s dissection of the view, advanced by the SFO and unfortunately accepted by Cooke J and the Court of Appeal, that a LIBOR submission cannot have been genuine if influenced by the bank’s commercial interests was a breath of fresh air.  As the Supreme Court recognised (§131), if a submission was a legitimate one within the LIBOR definition, then the fact that the maker of the submission had considered the bank’s commercial interests and concluded that they happened to coincide with a genuine figure consistent with the definition did not render that submission false, misleading or “polluted”.

Ultimately, the question of whether a submission was a proper one in accordance with the LIBOR definition was always one which was properly a question of fact, and thus one for the jury and not the Judge (§102 et seq).  It is easy to see how the SFO’s mistaken view that this was a question of law (and the fact that Cooke J and the Court of Appeal accepted this) flowed from their unrealistic view that there was some objectively “true” or “genuine” single figure rather than a range of legitimate possible answers to the question.   Sadly, the conflation of questions of law and fact were pervasive (see, for example, §124 and §127).  

Whilst the Supreme Court acknowledged that there was evidence upon which a jury, if properly directed, might still have convicted (§9), the jury were denied the opportunity to make the decision.  Given the verdicts in a number of the other LIBOR trials (including the trial of the brokers in which my client was acquitted), it is far from certain that they would have done so.    Whilst one never knows the basis of a jury’s decision, many of the defence counsel in our trial got the impression that the jury simply felt that the prosecution was inherently unfair.  

It seemed obvious (to me at least) that the market, the Treasury and No.11 Downing Street all knew that the credit crisis meant that there was no meaningful inter-bank lending in the way envisaged by the definition, and so the “true” rate that would be required to secure such lending was likely to be far higher than was being reported.  However, such a “true” figure would have caused huge damage to the economy due to the index-linking of so many mortgages and investments to LIBOR.  As such, there was an implicit recognition that the LIBOR rate would have to remain a fiction in order to prevent wider economic catastrophe.  That may have been wholly understandable, but once one accepts that submitters were being asked to participate in this charade, it seemed fundamentally unjust to prosecute people for putting in the “wrong” fiction.

In any event, it is a relief to see the Supreme Court correcting the wrong turn that the SFO and the lower Courts had made, and I take off my hat (or perhaps wig) to all of those who have fought so hard and for so long to correct this injustice (and not just those who argued the appeal in the Supreme Court).

What then will be the impact of this ruling?  Whilst it is obviously most directly relevant to rate manipulation cases, it seems to me that there are at least four important themes which have a much wider application, particularly in fraud cases:

1. The Supreme Court highlighted that many of the errors in this case would have been identified and resolved far earlier if the SFO had properly particularised the indictment.  Sadly, it is my experience that fraud prosecutors are often keen to keep their indictment broad and simple and therefore do not particularise their case with sufficient detail from the outset.  The Supreme Court’s observations at §54 and §55 could equally be criticisms of the particulars of many of the conspiracy to defraud indictments that are often seen in the criminal courts, where Judges are often disinclined to force reluctant prosecutors provide more detailed particulars.  It is to be hoped that the Supreme Court’s observations will lend valuable support to defence requests for judicial directions for greater particularisation of the prosecution’s case at an early stage in proceedings.
2. It is a helpful reminder of the importance of proper consideration by parties and judges of what issues are properly questions of law and which are, in truth, questions of fact for a jury.   If the test for criminal liability is going to turn on everyday concepts like “genuine” and “honest”, just like “knowledge” and “belief”, these are terms that juries understand and apply best.  That remains the case even if the underlying subject matter is complicated or technical.  Those concepts turn on the subjective mindset of the defendant, which is best judged by a jury.
3. It is to be hoped that this will be a signal to prosecutors not to assess alleged wrongdoing in a theoretical or legalistic vacuum, but rather to have proper regard to context and market reality.  This is something which affects not only questions of guilt/innocence, but also broader questions of whether a prosecution is actually in the public interest.
4. It is impossible, when reading the judgment of the Supreme Court, to escape the fact that many of the problems came from the fact that the Judges (both in the Crown Court and Court of Appeal), approached the issues from an overly legalistic perspective (e.g. construing the definition as though it were statute rather than a matter of fact).  I do not necessarily say this as a criticism of the Judges involved.  It is, after all, the mindset that we have all learned over a lifetime in legal practice.  However, at a time when it is being suggested that fraud cases should be tried by Judges alone (or a Judge with a couple of “expert” assessors), it is a timely reminder that a lawyer/judge’s perspective may not be the only one (or even the right one).  The fact that this miscarriage of justice flowed from the jury being kept away from consideration of the facts might well be a useful illustration of the dangers of the Leveson proposal.

The Supreme Court judgement can be found at https://www.supremecourt.uk/cases/uksc-2024-0087