UT (Tax & Chancery) UT-2023-000064 - [2024] UKUT 00394 (TCC)

There are three particular amendments that Mr Staley takes issue with on this ground as follows:

The text of the amendments referred to at [86 (1)] is as follows:

“162A The Authority’s position is that Mr Staley has not been candid with the Authority in his interview to the extent that his answers are misleading and that he has filed a Reply in these proceedings that is misleading, or at risk of being misleading in material respects, and that he has done so dishonestly or recklessly.

162C Mr Staley’s Reply in these Upper Tribunal proceedings is dated 21 August 2023, shortly after he was deposed on 10 June 2023 in the US Proceedings on matters relating to his involvement with Mr Epstein, including his contact with Mr Epstein via his daughter after he had joined Barclays. He must therefore have been aware the Reply was misleading in material respects.

162D The Authority considers the following assertions in the Reply are misleading on the basis of answers given in the deposition by Mr Staley and/or on the basis of the Epstein Estate emails:

i.

The assertion in the Reply at paragraph 3.28 that “personal interaction extended to occasional dining invitations to Mr Epstein’s home in New York and on other isolated occasions at other venues, at which many well connected persons were often present.” The personal interaction revealed by the emails between Mr Staley and Mr Epstein cited in the amended Statement of Case extends well beyond this description.

ii.

The assertion in the Reply at paragraph 3.28 that “the purpose of the Applicant’s interaction with Mr Epstein over the period in question was for business.” The emails and Mr Staley’s evidence in the deposition show the interaction was not solely for business purposes.

iii.

The assertion in the Reply at paragraph 3.28 that “the evidence to be deduced from the email correspondence over the period from 2008 to 2015 establishes… that no personal friendship existed between the two men.” This statement is misleading including in light of the Epstein Estate emails which clearly show a personal friendship between the two men.

iv.

The assertion in the Reply at paragraph 3.28 that “no relationship whatsoever existed when the Applicant joined Barclays” (and the numerous other assertions in the Reply that Mr Staley had no contact with Mr Epstein since joining Barclays at paragraphs 3.11, 3.17((iv), 3.28, 4.5, 4.6, 4.11(v), 4.13, 4.33 and 4.53(ii) already set out at paragraph 162D above) when in fact he continued to communicate with Mr Epstein via his daughter Alexa Staley until at least February 2017 as is clear from the Epstein Estate emails and the deposition.

v.

The assertion in the Reply at paragraph 4.36(ii) that Mr Staley travelled on Mr Epstein’s plane on one occasion around 2006 with his wife and daughters when it is plain that the number of trips he took on Mr Epstein’s private planes was greater.

231A As set out at paragraphs 162A to 162D above, the Authority’s position is Mr Staley has not been candid his interviews with the Authority and filed a misleading Reply in these proceedings. It is the Authority’s view that Mr Staley’s statements in interview and decision to file such a Reply, demonstrate a continuing lack of insight into why his conduct lacked integrity and are also material considerations in relation to the protective purpose of a prohibition order under section 1D FSMA. The Authority contends that Mr Staley’s ongoing conduct in filing a misleading Reply is sufficient grounds alone to justify the imposition of a prohibition order.”

Mr Staley concedes that the Tribunal has the jurisdiction to consider these amendments but contends it should exercise its case management discretion to decline permission to make the amendments.

The Authority says that the rationale for the amendment regarding the interview is that in interview on 20 December 2019 Mr Staley said that he had had “zero contact” with Mr Epstein whilst he had been at Barclays, that he “had no contact at all, of any nature” with Mr Epstein since joining Barclays and gave another answer in similar terms.

The Authority’s position is that these assertions were plainly inaccurate in the light of emails obtained from the Epstein Estate and answers that he gave in his Deposition to the effect that he continued contact and engagement with Mr Epstein after his appointment at Barclays via his daughter Alexa. These are the emails referred to at [65] above.

An examination of these emails leads me to conclude that they are highly relevant evidence to the issue as to whether Mr Staley had contact with Mr Epstein after he joined Barclays, contrary to what was indicated in the Letter. It seems to me that the Authority has a real as opposed to fanciful prospect of success of proving that the emails that Mr Staley’s daughter exchanged as an intermediary between Mr Epstein and Mr Staley amounted to contact with Mr Epstein that took place after he joined Barclays. It seems to me that the Authority has a real rather than fanciful prospect of success of proving that Mr Staley’s statements in interview were reckless, if it is able to demonstrate that he was aware of a risk that his answers were misleading because of what he knew about the contact that took place through his daughter.

However, I am not satisfied that the Authority has a real prospect of success on the question as to whether Mr Staley’s answers were dishonest. In order that the Authority makes good its case on this point, it will have to demonstrate that Mr Staley lied in his interview, that is he knew that the statements in question were untrue.

As Mr Smith submitted, in order for the Authority to plead dishonesty, it will need to satisfy me that on the basis of the facts pleaded, an inference of dishonesty is more likely than one of recklessness.

The relevant test was set out by the House of Lords in Three Rivers D.C. v Governor and Company of the Bank of England [2001] UKHL 16. In JSC Bank of Moscow v Kekham and others [2015] EWHC 3073 (Comm) Flaux J carried out an exhaustive analysis of this judgment at pages 592 to 596 concluding at [20] as follows:

“. ……. The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact “which tilts the balance and justifies an inference of dishonesty”. At the interlocutory stage, when the court is considering whether the plea of fraud is a proper one or whether to strike it out, the court is not concerned with whether the evidence at trial will or will not establish fraud but only with whether facts are pleaded which would justify the plea of fraud. If the plea is justified, then the case must go forward to trial and assessment of whether the evidence justifies the inference is a matter for the trial judge. This is made absolutely clear in the passage from Lord Hope's speech at [55]-[56] which I quoted above.”

In my view, the Authority does not explain in the ASOC why Mr Staley’s answers in interview are more likely to give rise to an inference of dishonesty rather than recklessness. The two standards are simply pleaded in the alternative on the basis of the same facts. There is no reference to some fact which tilts the balance from recklessness to dishonesty and which would justify an inference of dishonesty. Nothing is said as to why the Authority considers that Mr Staley deliberately lied in his answers. Consequently, the pleading fails to satisfy the criterion in Bittar that it is formulated with sufficient clarity and particularity.

Accordingly, the allegation of dishonesty cannot stand in the ASOC. Subject to what I say below in relation to the Authority’s allegations regarding the Reply, the amendment at paragraph 162A is permitted subject to the deletion of the words “dishonestly or”.

In relation to the allegations regarding the Reply, I am not satisfied that it is fair to permit these allegations to stand. I accept Mr Smith’s submission that it is not appropriate for these amendments to be included in the ASOC because they are matters for submission at the hearing, and in particular to support the Authority’s case that Mr Staley was reckless in approving the statements in the Letter which the Authority contends are misleading.

The allegations as to the Reply being misleading rely on the allegations made elsewhere in the ASOC based on the new material received by the Authority, in particular (i) the communications with Mr Staley’s daughter, (ii) the question as to whether Mr Staley’s relationship with Mr Epstein was purely of a business nature, (iii) whether he continued to have contact with Mr Epstein after he joined Barclays, and (iv) the number of trips he took on Mr Epstein’s private plane. Since I have not permitted the allegation of dishonesty to stand, the allegations regarding the Reply being misleading add nothing to the Authority’s case.

Furthermore, it seems odd that there should be allegations in a Statement of Case as to the contents of a Reply, a document which follows on from the Statement of Case. Mr Staley will be permitted to serve an amended Reply in response to the ASOC and in that context may amend or explain some of the statements that the Authority alleges are misleading.

Ms Mulcahy submits that it is plain from Hussein v FCA [2018] UKUT 186 (TCC) that the Tribunal has the ability to prohibit an individual for an integrity breach founded on behaviour which occurred within regulatory proceedings, even in circumstances where the underlying conduct which was referred to the Tribunal is found not proven and resolved in the Applicant’s favour. In Hussein the Tribunal found that the Applicant had been dishonest in his evidence before them and observed (at [224]):

“Therefore, whilst it might be understandable why Mr Hussein behaved the way he did, we cannot excuse it. It is a very serious matter not to be candid and truthful with one’s regulator and equally serious, if not more so, to give untruthful evidence under oath to a Tribunal. Those are failings that we cannot ignore and go right to the heart of whether a person wishing to work in the financial services industry can be relied on to act honestly and with integrity.”

It is important to note that the ability of the Tribunal to take into account Mr Hussein’s conduct during the hearing of the reference was not dependent on that matter being pleaded. It was simply a matter that the Tribunal took into account in deciding whether or not to remit the Authority’s decision to prohibit Mr Hussein. The Tribunal found that the conduct of Mr Hussain relied on by the Authority did not demonstrate that Mr Hussein lacked integrity. In the normal course, that would result in the matter being remitted to the Authority for it to reconsider its decision. However, the Tribunal said this at [225]:

“…we cannot see that there is any basis on which we could properly ask the Authority to reconsider its decision to make a prohibition order against Mr Hussein. It cannot be said that in the light of the circumstances, the decision to prohibit is one that is not reasonably open to the Authority to make”

The “circumstances” that the Tribunal was referring to in this passage was the fact of Mr Hussein’s conduct during the hearing of the reference. Likewise, in this case if the Tribunal finds the Authority’s allegations against Mr Staley to have been proved, and it does so to any extent on the basis of the matters referred to at [97] above, it will necessarily follow that Mr Staley’s Reply will have been found to be misleading on the basis of his recklessness, thus supporting a finding of a lack of integrity. Such a finding would in the usual course lead to the Tribunal dismissing the reference as it relates to the prohibition order rather than remitting the decision to the Authority.

Accordingly, I refuse permission to make the amendments set out at paragraphs 162C and 162D. Paragraph 231A can stand insofar as it is limited to the allegations regarding Mr Staley’s conduct at his interview.

The text of the second of these amendments is:

“ 72F Between 2008 and 2011, Mr Staley shared confidential information relating to his then employer, JPM with Mr Epstein showing the closeness of their relationship and Mr Staley’s willingness to breach obligations owed to his employer including where there was a conflict of interest between JPM and Mr Epstein:…”

In this regard, the Authority relies on various emails summarised in the Statement of Undisputed Material Facts as follows:

“45.

On multiple occasions, Staley shared with Epstein confidential information about transactions the Bank was structuring or exploring”

46.

Staley discussed the confidential status of other Bank clients with Epstein.

47.

Staley shared information protected by the attorney-client privilege about Epstein’s ongoing litigation against JPMC with Epstein. JPMC Ex. 104.

…

49.

Staley kept Epstein informed about the status of the Bank’s investigation into the allegations against him in March 2011.”

Mr Staley objects to this amendment on jurisdictional grounds and, in the alternative, on the basis that the Tribunal should not exercise its discretion to commit the amendment.

In my view the objection on jurisdictional grounds must fail. The amendment does no more than seek to add evidence which supports the breaches which have always been alleged in this case. The allegation therefore has a real and significant connection to the procedural and substantive subject matter of the reference.

The basis of Mr Staley’s contention that the amendment should be refused in the Tribunal’s discretion, is that there is no supporting evidence against the mass of background to establish that there was a breach of duty on Mr Staley’s part in terms of his employment. The question therefore is whether I should refuse this amendment on the grounds that it does not have a real, as opposed to fanciful prospect of success.

In my view, the allegation has a real as opposed to fanciful prospect of success in supporting the allegation that there was a close relationship between Mr Staley and Mr Epstein. It seems to me that evidence as to the willingness of Mr Staley to share confidential information with Mr Epstein, if proved, is capable of supporting the key allegation that the relationship between Mr Staley and Mr Epstein was a close one and went beyond normal professional contact. It seems to me that it is self-evident that information regarding transactions that JPM were involved in, the status of other clients of JPM with Mr Epstein and the ongoing litigation with Mr Epstein is more likely than not to be regarded as confidential so that disclosure of such information is likely to be a breach of his terms of employment. It is not appropriate for me at this stage to review the underlying evidence in that regard, but there is some evidence to support the allegation and it seems to me that if the underlying evidence supports the allegation, then it will support the allegation that the relationship between Mr Staley and Mr Epstein was a close one.

Accordingly, the amendment is permitted.

The text of the third of these amendments is as follows:

“64B There are a number of emails in the 2009-2011 period which the Authority considers are inconsistent with a business or professional relationship of any type. The Authority’s view is that emails of this nature would not be exchanged between or in relation to individuals who were anything other than close friends. Several emails in 2009 and 2010 show Mr Epstein sending Mr Staley photographs of women and Mr Staley responding to some of those emails, and Mr Epstein and Mr Staley exchanging other types of emails which are described in the JPMC Statement of Undisputed Material Facts and Counterstatement of Additional Material Facts filed in US Proceedings under the heading “Staley exchanged Suggestive Emails with Epstein About Women.”

Mr Staley does not dispute that the emails referred to in the proposed amendment can be relied upon by the Authority to show the nature of the relationship between Mr Epstein. Mr Staley’s concern arose solely from the reference to the emails being described in the Statement of Undisputed Material Facts and the reference to the heading under which that description occurs in that document. Mr Smith submitted that these references give rise to an unfair innuendo that Mr Staley was involved in some way with Mr Epstein’s misconduct.

I accept that the heading referred to at the end of the proposed new paragraph 64B is unnecessary and in the interests of fairness it should be deleted. I do not, however, consider that the reference to the Statement of Undisputed Material Facts should be deleted. It is a convenient way of describing the source of the material. As will become apparent later in this decision, the hearing bundle should only include those parts of that document which are relevant to the issues in this case which in my view is sufficient to dispel any suggestion of innuendo.

Accordingly, the amendment is permitted subject to the deletion referred to at [113] above.