UT (Tax & Chancery) UT-2022-000134 UT-2022-000135 UT-2022-000137 - [2025] UKUT 00214 (TCC)

The Traders submitted that the delays by the Authority in conducting its investigation, and its failure to particularise fully its case at an early stage or put more of the allegations to the Traders in interview and to provide information that would have been available at the time of their trading has prejudiced the Traders and their ability to recall the rationale and motivations for particular trading activity which occurred several years ago.

The Authority submitted that the Traders have known since the Eurex Letter that these were allegations that concerned potential market abuse. The Authority’s case has, it submits, been consistent since the beginning of the investigation - the allegations relate to the placing of large orders opposite small orders which were then cancelled after the small order traded. Mr Shivji submitted that the impact of the passage of time as a result of any delays (which were denied) in the investigation was likely to have been modest.

The Traders took different approaches in their witness statements to explaining their trading activity. They were each clear that they do recall and can explain their Trading Strategy. They generally said they could not recall the rationale for specific trading activity in the Instances (although Mr Lopez did, whilst giving evidence, occasionally say that he had some actual recollection, eg in relation to F30). Mr Urra addressed two Instances (F47 and F150) as they were two of the trades put to him by the Authority in interview in 2018 and, as a result, he said he had a better recollection of these trades as it had been necessary for him to consider them throughout the investigation, whereas Mr Lopez and Mr Sheth sought to reconstruct the Specified Instances as well as some activity outside the Instance Pool based on the information that is available to them, whilst also drawing attention to the information to which they do not have access.

The submissions of the Traders understandably linked together what they submit are the delays in the investigation, lack of information and fallibility of memory.

The parties took the Tribunal to the leading authorities on the approach to be adopted when assessing the reliability of witness evidence. The Tribunal found the following guidance on the importance of contemporaneous documentation, the task of making findings of fact based upon all of the evidence and the position where there is a “documentary lacuna” to be particularly helpful in the context of the present references:

The difficulty in these references is not primarily about conflicts between witness evidence and documentary evidence (the exception being in relation to challenges made to the accuracy of the notes of the Traders’ interviews with Compliance); it is the absence of contemporaneous documentary evidence, or evidence of electronic communications. Indeed, all parties relied on the absence of such evidence – the Authority relied on the absence of evidence of the Traders documenting their Trading Strategies, explaining them in advance to Mr Heiberg and/or Compliance, keeping records of their use and outcomes; and the Traders relied on there being no contemporaneous documentary evidence, or evidence of electronic communications, of collaboration during the Instances or of a conspiracy to commit market abuse.

It is clear that, even within a few weeks of the Relevant Period, the Traders were not able to remember the details of their specific trading activity. In September 2016 Mr Urra had produced a note for Compliance and in his witness statement he said that at that time his recollection of the specific trades in question was limited, as they had occurred several months earlier. Mr Lopez tried to explain his activity in F174 in an email to MHI on 19 October 2016 (following his disciplinary interview) stating that he was providing details “to the best of what I can remember” but at that time wrongly identified a particular RFQ as the trigger for his Large Order (which had not in fact been received at that time, a confusion which arose as a result of cash trades generally being recorded by reference to UK time whereas the Futures data from Eurex is on CET) on the basis of an attempted reconstruction of events. By the time the Traders produced their witness statements, it was, as Mr Sheth said, “simply impossible” to remember the details of the rationale for their trading activity. The Tribunal is very sceptical of any Trader stating that they could recall particular trades out of hundreds (or even thousands) that had taken place months, let alone years, previously.

Mr Shivji referred the Tribunal to the speech given by Popplewell LJ on 7 November 2023 “Judging Truth from Memory”, in which Popplewell LJ focused on what the current state of scientific research tells us about when and why our memories don’t serve us well and to consider what lessons we can learn when it comes to the exercise of fact finding in commercial dispute resolution. Popplewell LJ looked at what he termed the “Architecture of Memory”, including the stages of memory, describing them as (i) encoding (feeding the information into the memory system); (ii) storage (the preservation of information in the system); and (iii) retrieval. On storage of long-term memory, Popplewell LJ referred at [60] and [61] to a recent study which showed that there was rapid forgetting of both flashbulb and event memories within the first year, but the “forgetting curves” levelled off after that, not significantly changing even after a ten-year delay

The Tribunal accepts the Traders’ submissions that they cannot reasonably be criticised for the absence of recollection as to the specifics of any particular order or trade in the Relevant Period; but also considers that this lack of recollection is almost inevitable.