Out-Law / Your Daily Need-To-Know

EAT: adverse tribunal findings justify 'fit and proper' dismissal

Out-Law News | 05 Apr 2019 | 10:15 am | 4 min. read

An investment bank was entitled to dismiss a regulated individual on the grounds of his fitness and propriety following adverse findings about his credibility by an employment tribunal, the Employment Appeal Tribunal (EAT) has ruled.

Milan Radia, the former managing director of Jefferies International Ltd, was dismissed by the bank, which said he could no longer be considered a fit and proper person. Radia had brought a disability discrimination claim against the bank, which the employment tribunal (ET) dismissed after finding Radia's evidence "not credible in many respects" and "on lots of occasions evasive". The ET said that this was of "grave concern" as Radia was a regulated person.

Radia brought a second claim against the bank ahead of his dismissal. He alleged breaches of whistleblowing protections by Jefferies, connected with disclosures he had made to the Financial Conduct Authority (FCA). After his dismissal, he brought a third claim alleging that his suspension, subsequent dismissal and Jefferies' refusal to hold a hearing of his appeal against his dismissal amounted to whistleblowing detriment, victimisation and unfair dismissal. The ET dismissed both claims.

Radia appealed against the ET's finding that his dismissal was not unfair. He based his appeal on two alleged errors of law by the tribunal: that Jefferies had not been entitled to dismiss him based only ET's findings as to his credibility; and that Jefferies should have given him an appeal hearing. The EAT allowed the second ground of appeal, but found that the tribunal had been entitled to come to the conclusions that it did on the first ground (28-page / 464KB PDF).

Financial services employment law expert Ben Brown of Pinsent Masons, the law firm behind Out-Law.com, said that the judgment would be interesting reading for regulated firms, "especially those coming under the scope of the Senior Managers and Certification Regime (SM&CR) in December".

"The judgment of the EAT in this case provides FCA regulated firms with authority that a dismissal for gross misconduct can be justified when relying solely on a court or tribunal's adverse findings regarding the credibility of a senior manager," he said.

"Arguably the most important factor in assessing the fitness and propriety of a person to carry out a controlled function is the person's honesty, integrity and reputation. All firms subject to the SM&CR are required to continually assess and satisfy themselves that senior managers and certified staff are fit and proper," he said.

"Importantly, the EAT emphasised here that there was no requirement for a finding of deliberate dishonesty. It was sufficient, when considering the FCA's fit and proper test, that the tribunal had found that the employee had not told the truth or had misled the tribunal when giving evidence. Similarly, any findings of a failure to tell the truth in any internal disciplinary proceedings will also be a relevant factor when assessing fitness and propriety. If a senior manager or certified person is or has been subject to proceedings which call into question their honesty and integrity, firms will certainly need to reassess their fitness and propriety," he said.

Radia worked for Jefferies from 21 June 2006 until his dismissal on 6 March 2017, initially as an equity research analyst before becoming managing director at the end of 2009. Radia's role was a regulated position, governed by the Financial Conduct Rules. Radia brought a disability discrimination claim against Jefferies in May 2015, and the decision was handed down on 6 February 2017. He made the alleged protected disclosures to the FCA in September 2016. Radia was suspended the day after ET's judgment was handed down, and dismissed the following month.

In its dismissal letter to Radia, Jefferies said that its starting point was the ET's findings as to his credibility and that he had either "lied" or "misled" the tribunal  in his evidence. Jefferies referred to the Financial Conduct Rules, which require whether a person has been "criticised by a court or tribunal whether publicly or privately" to be taken into account as part of the fitness and propriety assessment. It also rejected Radia's claim that his dismissal had anything to do with the protected disclosures he had made to the FCA.

Radia was given the opportunity to respond to the tribunal's findings. In the dismissal letter, Jefferies said that his comments did not make any difference to the ET's assessment of his credibility. With that in mind, it decided that his behaviour was "gross misconduct", "incompatible with his continued employment" and "not compatible with his being a fit and proper person for the purposes of the FCA rules".

Giving the decision of the EAT, Mrs Justice Laing said that it was irrelevant "whether or not the [employment tribunal] expressly found that [Radia] lied and was dishonest".

"The reason why [Jefferies] dismissed [Radia], the ET found, was the findings of [the original] ET about [Radia's] credibility," she said.

"The ET found that his evidence was not credible in many respects, and on lots of occasions evasive … Those findings on any view were very damaging to [Radia] whether or not they amounted to findings of deliberate dishonesty," she said.

"[T]he question for us is not what we consider the best procedure would have been but whether it was open to this ET to find that the procedure which was in fact adopted by [Jefferies] was within the range of reasonable responses … It was open to the ET, in our judgment, to find in effect that there was no further investigation which [Jefferies] could have reasonably been required to conduct before it heard from [Radia], as the findings spoke for themselves," she said.

On the hearing point, however, the employment tribunal had erred in law, the EAT said. Mrs Justice Laing noted that, in its own judgment, the employment tribunal had described Jefferies' failure to allow Radia a hearing as "wholly irregular, contrary to best practice, a breach of the Acas code and contrary to [Jefferies'] own appeal process".

"We do not say that it would not have been open to this ET, correctly directing itself in law, to have held that the dismissal was not unfair, despite the fact that [Jefferies] did not hold an appeal hearing," she said. "However ... it seems to us that the ET did not make the findings that were necessary to make such a conclusion good."