R v Hayes; R v Palombo

Whether a written answer constitutes a genuine statement of the maker’s opinion is a question of fact. It depends on the maker’s understanding, intended meaning and actual belief. A judge cannot determine that factual issue by construing the document which posed the question.

A benchmark interest-rate submission is therefore not necessarily false merely because trading advantage influenced it. That influence may support an inference of falsity, but the jury must decide whether the submitted rate represented the submitter’s genuine opinion. Nor must a benchmark submission invariably state the single cheapest possible borrowing rate. The assessment may properly involve selecting one figure from a range of reasonably possible rates.

Tom Hayes and Carlo Palombo were convicted of conspiracy to defraud in connection with attempts to influence submissions used to calculate LIBOR and EURIBOR respectively. Their convictions were upheld on their original appeals. The Criminal Cases Review Commission later referred both convictions to the Court of Appeal following the decision in United States v Connolly and Black. The Court of Appeal dismissed their renewed appeals in [2024] EWCA Crim 304.

The Supreme Court considered whether a submission influenced by trading advantage was necessarily neither genuine nor honest, and whether the LIBOR and EURIBOR definitions required an assessment of the single cheapest borrowing rate. It also considered whether the jury directions had wrongly converted factual questions concerning the submitters’ beliefs into questions of law.

1. Both appeals allowed and the convictions quashed. The certified questions were answered in the negative. The jury directions in both trials contained material errors which prevented the convictions from being regarded as safe (paras [7]-[9], [162], [234]-[235]).

2. The legal effect of a document is a question of law for the judge. Its ordinary linguistic meaning, and the meaning intended or understood by a person making a representation through it, are questions of fact for the jury. Whether a rate submission represented the submitter’s genuine opinion therefore did not turn on the court’s construction of the LIBOR or EURIBOR definition (paras [101]-[123], [159]-[161]).

3. A submission could be false because it impliedly represented that the stated rate was the submitter’s genuine opinion of the relevant borrowing rate. It was false if the submitter did not hold that opinion. The fact that trading advantage influenced the submission could support an inference of falsity, but it did not establish falsity as a matter of law (paras [80], [89]-[91], [129]-[131], [212]-[214]).

4. The Court of Appeal’s “cheapest rate” theory was rejected. Benchmark submissions ordinarily involved subjective estimates based on several data sources. The requirement to submit one number did not mean that only one number could genuinely be considered accurate. A submitter might reasonably regard several rates within a range as equally possible (paras [68]-[74]).

5. At Mr Hayes’ trial, the judge repeatedly equated compliance with the LIBOR definition, absence of commercial influence and genuineness. This effectively directed the jury that Mr Hayes had agreed to procure false submissions once his intention to obtain a trading advantage was established. It removed his range-based defence from the jury and also risked prejudicing its separate assessment of dishonesty (paras [124]-[135]).

6. The EURIBOR Code was contractually binding and prohibited panel banks from allowing commercial interests to influence submissions. That contractual rule did not establish that every non-compliant submission falsely represented the submitter’s actual opinion (paras [188]-[206], [219]-[224]). The directions at Mr Palombo’s trial conflated contractual non-compliance, falsity and dishonesty. They also wrongly suggested that taking commercial interests into account had always contravened the criminal law of England and Wales (paras [227]-[234]).

7. Although there was ample evidence on which properly directed juries could have convicted, neither jury was bound to convict. The material misdirections therefore rendered both convictions unsafe (paras [162], [234]-[235]).

1. United Kingdom Supreme Court: Allowed both appeals from [2024] EWCA Crim 304 and quashed both convictions.
2. Court of Appeal (Criminal Division), 2024: Dismissed the appeals following references by the Criminal Cases Review Commission: [2024] EWCA Crim 304 ; [2024] 2 Cr App R 6.
3. Criminal Cases Review Commission: Referred Mr Hayes’ conviction in July 2023 and Mr Palombo’s conviction in October 2023 after considering United States v Connolly and Black.
4. Earlier appeals: Mr Hayes’ original appeal was dismissed in [2015] EWCA Crim 1944 ; [2018] 1 Cr App R 10. Mr Palombo’s original appeal was dismissed in [2020] EWCA Crim 1662 ; [2021] 4 WLR 113.