Hincks v Sense Network Ltd

A reference writer owes the subject a duty to exercise reasonable skill and care so that the reference is true, accurate and fair. The writer must objectively and rigorously assess relevant facts and opinions, ensure that negative opinions have a proper and legitimate basis, and consider the material underlying an earlier investigation. Fairness concerns whether the reference is misleading by omission, implication, nuance or innuendo. It does not ordinarily require a retrospective examination of the procedural fairness of the underlying investigation. Further inquiry may be required where the available material reveals an obvious error or a red flag concerning the reliability or integrity of the facts or opinions. The standard remains fact-sensitive and is not equivalent to an employment tribunal’s review of disciplinary fairness.

Kevin Hincks, an independent financial adviser operating under Sense Network Ltd’s regulatory authorisation, challenged a reference written after Sense terminated that authorisation. The reference described earlier compliance problems, redress offered to customers, enhanced monitoring and a later investigation into his unauthorised sale of a structured capital at risk product.

Hincks alleged that the reference contained inaccuracies and was misleading, and that the underlying investigation had been conducted in bad faith and without procedural fairness. He claimed damages in tort and contract for loss of earnings. The trial concerned liability only, principally whether a reference writer must investigate the fairness of an antecedent investigation before expressing a negative opinion based on it.

1. Duty of care. The reference writer owed a duty to exercise reasonable skill and care in providing a reference that was true, accurate and fair, consistently with Spring v Guardian Assurance PLC [1995] 2 AC 296 and Bartholomew v London Borough of Hackney [1999] IRLR 246.
2. Content of the duty. The writer must conduct an objective and reasonably rigorous appraisal of the relevant facts and opinions; take reasonable care that factual statements are accurate and that opinions have a proper and legitimate basis; review underlying material where an opinion derives from an earlier investigation; and ensure that the reference is not misleading through omission, implication, nuance or innuendo.
3. Earlier investigations. The duty does not ordinarily require the writer to investigate the procedural fairness of an earlier internal investigation or to conduct a fresh investigation. Cox v Sun Alliance Life Ltd [2001] EWCA Civ 649 was fact-specific, and Jackson v Liverpool City Council [2011] EWCA Civ 1068 showed that fairness in this context concerns the impression conveyed by the reference, rather than procedural safeguards for challenging an adverse opinion.
4. Red flags. Further inquiry may be required where the available material reveals an obvious error or information casting doubt on the reliability or integrity of the underlying facts or opinions. No such trigger existed here.
5. Application. The material reviewed by the reference writer provided a proper and legitimate basis for the conclusions that Hincks knowingly breached pre-approval requirements and circumvented the agreed process. The reference was not misleading in its treatment of redress, rehabilitation or the Carter transaction. The allegations of bad faith also failed.
6. Disposition. The negligent misstatement claim and the contractual claim failed. The claim was dismissed and judgment was entered for the defendant.