United Kingdom Upper Tribunal (Tax and Chancery Chamber)

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Cite as: [2024] UKUT 214 (TCC)

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UT Neutral citation number: [2024] UKUT 214 (TCC)

UT (Tax & Chancery) Case Number: UT/2022/000116, 000117

UPPER TRIBUNAL

TAX AND CHANCERY CHAMBER

Hearing venue: Rolls Building

Fetter Lane

London

EC4A 1NL

FINANCIAL SERVICES - procedure - application for a witness summons - whether it would be unfair and oppressive for the proposed witness to give evidence

Heard on: 26 June 2024

Judgment date:24 July 2024

Before

JUDGE RUPERT JONES

JUDGE JONATHAN CANNAN

Between

(1) BARCLAYS PLC

(2) BARCLAYS BANK PLC

Applicants

- and -

THE FINANCIAL CONDUCT AUTHORITY

Respondent

- and -

JOHN VARLEY

Interested Party

Representation:

For the Applicants: Andrew George KC and Simon Pritchard, counsel instructed by Willkie Farr & Gallagher (UK) LLP

For the Respondent: Paul Stanley KC, Tom Broomfield and Vincent Scully, counsel instructed by the Financial Conduct Authority

For the Interested Party: Javan Herberg KC instructed by Mishcon de Reya LLP

DECISION

INTRODUCTION

We have made various directions following a case management hearing ("CMH") held on 26 June 2024. The CMH was held pursuant to the directions of Judge Jones released on 21 March 2024 following an earlier CMH on 29 February 2024. The purpose of the latest CMH was to determine whether Mr John Varley should be summoned as a witness at the hearing of the applicants' references (we refer to the applicants as "B Plc", "BB Plc" and together as "Barclays"). The hearing of the references is listed for 3 weeks commencing 25 November 2024. We record in this decision our reasons for directing that a witness summons shall be issued to Mr Varley.

The references concern Barclays' communications to the market, including holders and potential holders of Barclays' listed equity securities, in relation to two capital raisings, one in June 2008 and one in October 2008 ("the Capital Raisings"). The Capital Raisings took place at the time of the 2008 financial crisis.

The Financial Conduct Authority ("the Authority") made findings and imposed penalties against Barclays in decision notices dated 23 September 2022. The Authority's case against Barclays comprises two distinct elements, set out at [14] of the Authority's statement of case dated 16 December 2022:

3.1. Allegations that Barclays were in breach of the Listing Rules in failing to take reasonable care to ensure that information contained in announcements and prospectuses relating to the Capital Raisings was not misleading, false or deceptive and did not omit anything likely to affect their import;

3.2. An allegation against B Plc that it failed to act with integrity in breach of Listing Principle 3 ("the LP 3 allegation") in connection with the October Capital Raising because Mr Varley recklessly approved an announcement and prospectus in circumstances where he was aware of the risk that B plc had not taken reasonable care to ensure that the relevant prospectus and announcement was not misleading, false or deceptive and did not omit the information likely to affect its import.

Barclays deny all allegations. In respect of the LP 3 allegation, B Plc also denies that Mr Varley's state of mind can properly be attributed to B Plc. However, what is relevant for present purposes is that B plc denies that Mr Varley acted recklessly or that he was aware of any risk that B Plc had not taken reasonable care.

It is common ground between the parties that if Mr Varley is summoned to give evidence in respect of the LP 3 allegation, then it should be as a witness for Barclays. Barclays have made an application dated 21 June 2024 for a witness summons to be issued to Mr Varley. That application is made subject to the Tribunal being satisfied that it is fair for Mr Varley to be called as a witness.

Barclays maintain that in the circumstances set out below it would not be fair for Mr Varley to be required to give evidence in these proceedings. As such, they submit that the Tribunal should refuse the application for a witness summons. In the event that we do refuse Barclays' application for a witness summons, Barclays have stated that they intend to make an application for a direction striking out the second element of the Authority's case based on breach of LP 3 because in the absence of Mr Varley as a witness, Barclays say that they could not have a fair hearing of that case.

Mr George KC on behalf of Barclays submitted at the earlier CMH that the issue of whether Mr Varley should be compelled to give evidence through a witness summons and the question of whether the Authority should be permitted to pursue its LP3 case were inextricably linked and could only be dealt with together. In the event, the parties were unable to find two days in the listing window when everyone was available. In the circumstances, the CMH was listed for one day and Barclays have not made their application to strike out the LP 3 case. We therefore make no observations on the merits of such an application.

Mr Varley, who was agreed to be joined as an interested party for the purposes of this CMH only, opposes the application for a witness summons. His position is that in the circumstances set out below it would be unfair for him to be summoned as a witness. As we shall explain, Mr Varley's reasons differ in some respects from the case put forward by Barclays. In short Mr Herberg KC, who appeared for Mr Varley, focusses on the impact on Mr Varley of being required to give evidence.

Mr Herberg submits that the regulatory, criminal and civil proceedings in which Mr Varley has been involved have taken a heavy toll on Mr Varley's personal, professional and family life in the 16 years since the Capital Raisings. Whilst Mr Varley's evidence would be relevant to the LP3 allegation, Mr Herberg says it is not crucial or essential for a fair hearing of the Barclays references. Further he argues that anything Mr Varley might now have to say in evidence would be of limited utility given the passage of time. In all the circumstances, it would be unfair and amount to oppression if Mr Varley were required to give evidence.

PREVIOUS PROCEEDINGS

Mr Herberg's skeleton argument provided a helpful summary of previous proceedings arising out of the Capital Raisings in which Mr Varley has been involved. He was the chief executive officer of Barclays at the time of the Capital Raisings. The following is based on Mr Herberg's summary. It should also be noted that transcripts of all interviews and evidence given in the various proceedings will be admitted in evidence as part of the hearing of the substantive references.

The Authority commenced its inquiries and investigation into the Capital Raisings in April 2012, at which stage Mr Varley was voluntarily interviewed by it. By then Mr Varley had retired from Barclays. The Authority's formal investigation commenced in July 2012.

The Serious Fraud Office ("the SFO") launched an investigation in August 2012.

Mr Varley was interviewed by the Authority under compulsion on 19 and 23 April 2013. These were long interviews with substantial pre-disclosure requiring intensive pre-interview preparation on the part of Mr Varley.

The Authority issued a preliminary investigation report on 27 June 2013 and a warning notice to Mr Varley on 13 September 2013. The warning notice alleged that Mr Varley was knowingly concerned in a failure by Barclays to disclose in the announcements and prospectuses associated with the Capital Raisings information relating to fees of £322m payable under advisory services agreements with Qatar Holdings LLC ("Qatar") entered into in connection with the Capital Raisings. Those agreements were entered into in June 2008 and October 2008 ("ASA 1" and "ASA 2" respectively). It was alleged that the failure rendered the information in the announcements and prospectuses misleading, false and/or deceptive. The Authority also alleged that Mr Varley was knowingly concerned in breaches of the Listing Rules and demonstrated a lack of integrity.

The warning notice proposed that Mr Varley should be fined the sum of £1 million and should be prohibited from performing any regulated function in financial services.

Mr Varley also saw a draft warning notice issued to Barclays in early 2013 which alleged breaches of the Listing Rules and that Barclays breached LP3 in that it was aware of the risk of material non-disclosure of fees payable pursuant to the advisory services agreements and ignored that risk in omitting information from the announcements.

The draft warning notice did not include any case based on attributing Mr Varley's recklessness to Barclays. The attribution case was later relied on in two warning notices issued to B Plc and BB Plc in September 2013. Indeed, the draft notice had stated for the avoidance of doubt that the allegation related solely to the conduct of Barclays and the Authority was making no criticism in the draft notice with regard to any other persons. Mr Varley was unaware that the Authority had changed its case against Barclays to allege attribution of recklessness on his part until after the Authority had discontinued its case against him in circumstances described below.

Following correspondence in 2013, the Authority's Regulatory Decisions Committee ("the RDC") stayed the Authority's proceedings against Mr Varley. In the event that stay lasted until after the end of all linked criminal proceedings brought by the SFO.

Mr Varley was interviewed by the SFO on 24 and 25 July 2014.

In January 2016, proceedings against Barclays were issued by PCP Capital Partners LLP ("PCP" and "the PCP proceedings"). A central allegation in those proceedings was what was described as the "same deal representation". It was alleged that a senior Barclays executive, Mr Roger Jenkins, had fraudulently misrepresented to PCP that it would get the same deal as Qatar in the October Capital Raising. The representation was alleged to be false because payments pursuant to ASA 2 were disguised fees paid to Qatar for its investment. The case involved consideration of the true nature of the fees paid to Qatar pursuant to the advisory services agreements, including the nature and extent of the services that Barclays expected to receive from Qatar under the agreements. Mr Varley was subsequently called as a witness in the PCP proceedings on behalf of Barclays pursuant to a witness summons issued by the court.

Mr Varley and others were charged by the SFO in June 2016. The charges included conspiracy to dishonestly make representations in the Capital Raising documents which they knew to be untrue or misleading. Those representations included representations as to the nature and extent of sums payable under ASA 1 and ASA 2. The SFO's case was that payments under the advisory services agreements were disguised commissions to the Qatari entities involved in the Capital Raisings. This led to a contested stay application in the PCP proceedings. A stay was granted and permission to appeal was subsequently refused.

Mr Varley filed a defence case statement in the criminal proceedings on 27 April 2018. The trial commenced in January 2019 and the prosecution presented its case until March 2019. At the conclusion of the prosecution case, the defendants including Mr Varley made successful submissions of no case to answer. Mr Justice Jay directed that Mr Varley should be acquitted, making clear that this was a "non-technical" acquittal and that Mr Varley must "continue to be regarded as a man of utmost good character" and "leaves this Court with his reputation preserved".

The SFO appealed the dismissal of its case to the Court of Appeal and on 21 June 2019 the Court of Appeal dismissed the appeal in respect of Mr Varley. In relation to three other defendants, the Court of Appeal held that the Judge had made certain errors of law which led to a retrial of those defendants. For the purposes of the re-trial, the SFO sought to position Mr Varley as an unindicted co-conspirator despite his acquittal. This approach was rejected by the new trial Judge in August 2019.

The re-trial commenced in October 2019 and in February 2020 all three other defendants were acquitted.

Once the criminal proceedings had come to an end, the stay of the Authority's regulatory proceedings was automatically lifted. The Authority indicated an intention to proceed, and to continue to rely on the warning notice issued to Mr Varley in 2013. Mr Varley continued to refute the allegations but advanced detailed representations as to why the Authority should discontinue the proceedings in a letter dated 9 April 2020. Three grounds were put forward which may be summarised as follows:

25.1. Regulatory proceedings should not, as a matter of principle, follow a criminal prosecution.

25.2. The case against Mr Varley was unsustainable, in particular in the light of legally privileged material disclosed by Barclays to the SFO in February 2016. It was said that this material demonstrated that Mr Varley had been acting with the full knowledge of Barclays' internal and external lawyers and in accordance with their advice.

25.3. The case against Mr Varley was unsustainable in the light of Mr Varley's acquittal in the criminal proceedings.

The Authority responded by letter dated 24 April 2020, rejecting the reasons advanced by Mr Varley. The Authority noted that the warning notice issued to Mr Varley contained different allegations to those involved in the criminal proceedings. In particular, there was no allegation of dishonesty in the warning notice and no allegation that the advisory services agreements were shams. It also noted that the warning notice raised serious questions as to the obligations of senior managers in regulated firms when those firms raise capital, especially during times of financial stress or uncertainty. Despite the Authority rejecting the reasons advanced by Mr Varley and maintaining the substance of the allegations against Mr Varley, it did still decide to discontinue the proceedings on the basis of "overall fairness". In doing so, it considered the history of the proceedings involving Mr Varley, and the personal cost and disruption to Mr Varley since 2012. We shall refer to this as "the Discontinuance".

The Authority concluded as follows:

While the jury's verdict did not determine these important questions, on balance the overall interests of fairness favour significant weight to be given to the jury's verdict of not guilty, which must be assumed to be a considered one, and for there to be finality for your client, given the events since 2012. To that end, I have decided to exercise the FCA's discretion to issue the attached Notice of Discontinuance.

It is important to emphasise that the FCA does not consider that the decision to discontinue means that it is constrained from taking into account the facts and matters referred to in the Warning Notice in any future regulatory assessment or proceedings including, but not limited to, any application by your client to perform a Senior Management Function role.

Mr Varley became aware in or about May 2020 that he was identified in the Barclays' warning notices and that the FCA was intending to pursue its proceedings against Barclays, including the LP 3 allegation which was said to be attributable to Mr Varley's conduct. There was then correspondence between Mr Varley's solicitors and the Authority in connection with the warning notices and third party rights that Mr Varley might have in connection with those notices. The outcome of that correspondence is not relevant for present purposes, save that when decision notices were issued to Barclays in September 2022 Mr Varley considered that he could clearly be identified in those decision notices as "Senior Manager A" whose alleged reckless conduct was attributed to B Plc. However, he had no appetite to assert a right of reference to the Tribunal in relation to those decision notices. He wished to put the matter behind him.

The stay in the PCP proceedings was also lifted at about this time. Mr Varley had been the subject of a witness summons in the PCP proceedings before they had been stayed and it is not clear whether Mr Varley understood that it continued to have effect after the stay of proceedings had been lifted. In any event, Mr Varley had prepared a substantial witness statement in those proceedings which he had signed on 3 April 2020.

The hearing took place between June 2020 and October 2020. Mr Varley had been preparing for the PCP hearing from late 2019 to June 2020, reviewing a substantial volume of documentation. He was cross-examined over the course of four days.

The legally privileged material referred to above was disclosed by Barclays to PCP, after Mr Varley had signed his witness statement in the PCP proceedings, when it became apparent that Barclays had waived privilege in the documents. The documents were available to PCP when Mr Varley came to be cross-examined.

Mr Justice Waksman handed down his judgment in the PCP proceedings on 26 February 2021. He found that Barclays did make fraudulent misrepresentations to PCP but that PCP had failed to establish any loss caused by the misrepresentation. As a result, PCP's claim was dismissed. PCP's application for permission to appeal was refused.

We shall now briefly summarise the position of the parties in relation to Barclays' application for a witness summons.

Mr Varley's position

Mr Varley served a witness statement dated 6 June 2024 for the purposes of the CMH. He describes in that witness statement the heavy toll taken on his personal and family life since 2012 by the various proceedings in connection with the Capital Raisings. Those proceedings include regulatory investigations into his conduct by the Authority, criminal proceedings against him prosecuted by the SFO and civil proceedings by PCP against Barclays in which he was a witness.

Mr Varley's grounds of opposition to a witness summons may be summarised as follows:

35.1. Following the Discontinuance, Mr Varley wishes to resume his normal life, including his career in retirement. He reasonably understood from the Discontinuance that his involvement in regulatory proceedings arising out of the Capital Raisings was at an end.

35.2. It would be unfair and oppressive if Mr Varley is required to give evidence in these proceedings, given the length and burden of previous proceedings and the impact on his personal and family life. This unfairness was recognised in the Discontinuance and applies with added force now that the PCP litigation has concluded. It would be oppressive for Mr Varley to face and answer the same allegations which the Authority has discontinued against him.

35.3. The burden on Mr Varley of having to give evidence is not outweighed by any overriding need for that evidence. He accepts that his evidence would be relevant to the Authority's LP 3 case, but it is not crucial or essential. There are extensive transcripts of interviews, witness statements and transcripts of evidence from previous proceedings which are admissible in the present proceedings. Given the passage of time since the Capital Raisings, it is difficult to see how his evidence would produce any fresh material of real value, free from the risk of reconstruction.

Barclays' position

Barclays have applied for a witness summons, but argue that a witness summons should not be issued because it would be unfair and oppressive for the Tribunal to grant it. If the Tribunal decides for that reason that a witness summons should not be issued, then Barclays will apply to strike out the Authority's LP 3 case against B Plc. That would be on the basis that it would be deprived of Mr Varley's evidence as a result of the Authority's own actions in discontinuing their regulatory case against Mr Varley. In those circumstances it would be unfair and impermissible for the Authority to maintain the LP 3 case.

Mr George KC put forward a positive case that it would be unfair and oppressive to Mr Varley if he is required to give evidence. He also submitted that it is irrational and inconsistent for the Authority to pursue the LP 3 case, in circumstances where it discontinued the same case against Mr Varley personally on the grounds of finality and where the sole ground for the case against B Plc involved attributing Mr Varley's alleged recklessness and lack of integrity to B Plc. Hence, Barclays position in the unusual circumstances of this case is that no witness summons should be issued.

Subject to that, Barclays position in relation to their application for a witness summons may be summarised as follows:

38.1. In order to determine the LP 3 allegation, the Tribunal will need to make findings about Mr Varley's subjective state of mind and knowledge and ask itself whether he was reckless and therefore lacked integrity. Mr Varley's evidence and the Tribunal's assessment of that evidence will be central to and determinative of the Authority's LP 3 case.

38.2. Mr Varley is wrong to say that his evidence would be of limited utility. Barclays say that his evidence is essential if Barclays is to have a fair hearing of the Authority's LP 3 case.

The Authority's position

Mr Stanley KC for the Authority told us that the Authority takes a "largely neutral stance" on the application for a witness summons, neither supporting nor opposing the application. Having said that, he maintained that it was possible for there to be a fair trial of the LP 3 allegation without Mr Varley giving evidence. Mr Stanley did not suggest that we should take into account any risk that its LP 3 case might be struck out in considering whether Mr Varley should be required to give evidence. However, he did ultimately submit that if we considered a fair trial of the LP 3 allegation required Mr Varley's evidence then we should issue a witness summons. Mr Stanley also made certain "observations" as to what factors are relevant in deciding whether to issue a witness summons. We deal with those observations in our discussion below.

DISCUSSION

We must first identify the relevant principles to be applied in determining whether we should issue a witness summons to Mr Varley. Barclays' application for a witness summons is made pursuant to Rule 16 of The Tribunal Procedure (Upper Tribunal) Rules 2008 ("the Rules") which provides as follows:

Summoning or citation of witnesses and orders to answer questions or produce documents

16(1) On the application of a party or on its own initiative, the Upper Tribunal may —

(a) by summons (or, in Scotland, citation) require any person to attend as a witness at a hearing at the time and place specified in the summons or citation ...

(2) ...

(3) No person may be compelled to give any evidence or produce any document that the person could not be compelled to give or produce on a trial of an action in a court of law in the part of the United Kingdom where the proceedings are due to be determined.

(4) A person who receives a summons, citation or order may apply to the Upper Tribunal for it to be varied or set aside if they did not have an opportunity to object to it before it was made or issued.

In the present proceedings, the parties have previously agreed that we should not simply issue a summons giving Mr Varley the opportunity to make an application to set aside. Instead, Mr Varley has been given and has taken the opportunity to object to the summons being issued. He acknowledges that he cannot apply to set it aside if a witness summons is issued.

Rule 16 must be read in the context of Rule 2(3), which provides that in exercising any power under the Rules the Upper Tribunal should give effect to the overriding objective of dealing with cases fairly and justly. It must also be read in the context of our wide case management powers in Rule 5 and our wide powers as to evidence in Rule 15, which provides as follows:

Evidence and submissions

15 (1) Without restriction on the general powers in rule 5(1) and (2) (case management powers), the Upper Tribunal may give directions as to —

(a) issues on which it requires evidence or submissions;

(b) the nature of the evidence or submissions it requires;

...

(e) the manner in which any evidence or submissions are to be provided ...

(2) The Upper Tribunal may —

(a) admit evidence whether or not —

(i) the evidence would be admissible in a civil trial in the United Kingdom; or

(ii) the evidence was available to a previous decision maker; or

(b) exclude evidence that would otherwise be admissible where —

(i) the evidence was not provided within the time allowed by a direction or a practice direction;

(ii) the evidence was otherwise provided in a manner that did not comply with a direction or a practice direction; or

(iii) it would otherwise be unfair to admit the evidence.

The Upper Tribunal clearly has a discretion whether to issue a witness summons. There appears to be very little authority as to the basis on which that discretion should be exercised in cases of unfairness and oppression. We agree with Mr George, that in issuing a witness summons a court or tribunal is seeking to assist litigants to secure evidence that is relevant to the determination of the issues before the court or tribunal. Rule 16 is there to ensure the fair and just determination of the proceedings. A witness summons will only be issued where the Tribunal considers that there is a real likelihood that the witness will give evidence that will materially assist the Tribunal in its determination of an issue or issues in the proceedings (see Ford and Owen v FCA [2017] UKUT 147 (TCC) at [12]).

Judge Herrington recently considered in Banque Havilland SA and others v FCA [2024] UKUT 115 (TCC) whether this Tribunal should issue a witness summons on its own initiative. The circumstances were quite different to the present case, but the decision does show that even where a party is expected to have highly relevant evidence it does not follow that a witness summons must be issued. One factor in that case taken into account by the Upper Tribunal in refusing to issue a witness summons on its own initiative was the fact that the Authority, who had invited the Upper Tribunal to issue the witness summons, did not consider it essential for the witness to give evidence in order to make good its case on the references. Evidence relevant to the disputed matters was available from other sources. Another factor was that the potential witness had "strong reasons" for not wishing to participate in the proceedings. Those reasons included the fact that he had not contested findings in a decision notice issued to him because he wished to draw a line under a painful episode for the sake of his health and his family.

Mr Herberg acknowledged the distinction between Banque Havilland, where the Tribunal was considering whether to summon the witness on its own initiative, and the present case where Barclays has applied for a witness summons. However, he submitted that Judge Herrington's approach in that case has a wider application. In particular, we should take into account his approach to the factors referred to above in determining whether Mr Varley should be summoned. We accept the proposition, which is not in dispute in the present application, that whether a witness summons is issued is not purely a question of whether the proposed witness can give relevant evidence. That is a pre-condition for a witness summons but it is not itself a sufficient condition.

Some of the factors taken into account by the Upper Tribunal in Banque Havilland echo factors in the present case. Indeed, Mr Herberg submitted that Mr Varley's case opposing the application is stronger than the potential witness in Banque Havilland. However, each case must be considered on its own merits. Whilst Banque Havilland provides a helpful illustration of how that Tribunal approached the question, it does not assist us in exercising our discretion in this case.

There is also some limited assistance to be gained from the position under the civil procedure rules where a note in the White Book at 34.3.5 states:

A witness served with a witness summons cannot have it set aside merely by swearing that they can give no material evidence... The court will also set aside a witness summons which is oppressive, for example which relates to documents disclosure of which has been refused by the court ...

The parties were all agreed that if we find that requiring Mr Varley to give evidence would be unfair and oppressive then we should not issue a witness summons. What amounts to unfairness and oppression will clearly be extremely fact sensitive. Mr Herberg and Mr Stanley agreed that it involved a balancing exercise taking into account all the circumstances including any unfairness to Mr Varley, the materiality of the evidence Mr Varley could give and the consequences for the fairness of the proceedings if Mr Varley is not required to give evidence.

Mr George submitted that we should approach Barclays' application in two stages. First to identify whether, as a matter of fairness, it is right that a summons should be issued. Secondly, to consider whether the evidence would be relevant. Absent any unfairness, he accepted that a witness summons should be issued.

We prefer the approach of Mr Herberg and Mr Stanley, although we consider that both approaches ought to give the same result. In circumstances where it is common ground that Mr Varley would be able to give relevant evidence which would assist the tribunal in determining the LP 3 issue, the question we must consider is whether it would be unfair and oppressive for Mr Varley to be required to give evidence. That question involves a balancing exercise which encompasses broad questions of fairness to Barclays and fairness to Mr Varley. The question of fairness to the Authority does not arise as such given its stance on the application, save that if we were to conclude that Mr Varley's evidence is important for a fair determination of the LP 3 case then that would be a factor to take into account. For the reasons given above, we do not take into account any risk that the Authority's LP 3 case may be struck out if Mr Varley is not required to give evidence.

We also accept Mr Herberg's submission that on an application to set aside a witness summons under the CPR there is a burden on the party seeking a witness summons to justify the need for it (see Morris v Hatch [2017] EWHC 1448 (Ch)). The same principle should apply in this Tribunal. We consider that Barclays has satisfied that burden in the present case because all parties accept that Mr Varley would be able to give relevant evidence. It does not follow in our view that Barclays must also satisfy us that it would be fair to summon Mr Varley to give evidence. Indeed, Barclays' position is that it would be unfair and oppressive to require Mr Varley to give evidence. In circumstances where Mr Varley has objected to the application for a witness summons, we consider that there is a burden on Mr Varley to establish that it would be unfair and oppressive for him to be required to give evidence. In any event, we are able to determine that issue without resorting to the burden of proof.

The balancing exercise requires consideration of all the circumstances of the case. Three factors are particularly relevant in considering whether Mr Varley should be required to give evidence:

52.1. The value of the evidence Mr Varley could give;

52.2. The impact on Mr Varley of being required to give evidence; and

52.3. The effect of the Discontinuance.

We shall address these factors separately at this stage before conducting the overall balancing exercise. In conducting the balancing exercise, the question is whether in all the circumstances it would be unfair and oppressive for Mr Varley to be required to give evidence. If so, then we should not issue a witness summons.

The value of Mr Varley's evidence

The parties are divided as to whether Mr Varley's evidence is necessary for a fair determination of the LP 3 issue. Mr Herberg and Mr Stanley both submit that Mr Varley's evidence is not essential for the Tribunal to determine the LP 3 case. There is other admissible evidence including what Mr Varley has previously said in interviews, in his defence statement in the criminal proceedings and in evidence in the PCP proceedings from which the Tribunal will be able to determine the LP 3 issue. Mr George submits that Mr Varley's evidence is essential for Barclays' defence of the LP 3 issue.

We must therefore consider the nature of the LP 3 allegation in more detail. We have summarised above the Authority's LP 3 case against Barclays. The statement of case gives further particulars of that case at [86]:

86. Mr Varley was aware of the risk that the October Announcement, the October Prospectuses and the Circular were misleading, false, or deceptive, or omitted something likely to affect the import of the information they communicated. The Authority will rely on the following matters to support the inference that Mr Varley was aware of that risk...

The matters relied upon in support of that allegation include the following at [86(d)(iii)], [87] and [87(c)]:

(iii) On 24 October 2008, Mr Varley spoke to Mr Harding [Barclays Group General Counsel] about the proposed October Agreement and said that it was to be a separate commercial agreement and "at market". By the time the October Agreement was concluded, if not before, no reasonable person could have believed that that was an accurate description of the October Agreement but Mr Varley did not correct his previous statement.

87. Mr Varley acted recklessly in that he authorised the October Announcement and the Prospectuses when on the facts as he understood them to be Barclays had taken no or no adequate steps to address that risk. The Authority will rely on the following matters in support of that allegation...

(c) Mr Varley did not satisfy himself that legal advice from fully informed lawyers had been provided in relation to whether the fee payable under the October Agreement and its connection to the October Capital Raising should be disclosed in the October Announcement and the Prospectuses in accordance with Barclays' obligations...

It is clear from Seiler v FCA [2023] UKUT 133 (TCC) at [47] that the Authority's case on recklessness must be founded on Mr Varley's subjective knowledge and belief:

47(1) A person who recognises a risk of morally objectionable action which is unreasonable to take and ignores it lacks integrity precisely because they consciously take a risk, which is in fact unreasonable, of unethical conduct occurring. It does not matter whether the person appreciates that the action is morally wrong: if they do not appreciate the moral character of the action, their ethical compass is defective.

(2) On the other hand, a person who does not appreciate that there is a risk of action being taken which would objectively be considered wrong is not reckless and does not lack integrity. They are not aware of a risk that the action in question may happen. Their ethical compass is not defective. That is the case whether or not someone else might have identified a risk of the relevant action occurring...

Mr Herberg fairly acknowledged that Mr Varley's subjective mental state is an issue in the proceedings, and in the ordinary course the Tribunal would want to hear from Mr Varley.

Mr Varley's previous accounts as to the circumstances in which Barclays came to enter into the advisory services agreements do not address all the matters on which his evidence would be relevant in this case. For example, it is true that the PCP proceedings involved the "same deal representation" and centred on the true nature of the fees payable under the advisory services agreements and the nature and extent of the services Barclays expected to receive from Qatar. However, those proceedings and the other material which might be relied on to rebut the allegations of recklessness do not address Mr Varley's subjective state of mind as to the risk that the announcement and prospectus for the October Capital Raising were misleading, false, or deceptive, or omitted something likely to affect the import of the information they communicated.

Mr George acknowledged that Mr Varley has previously stated that he relied on legal advice. However, he has not been interviewed since Barclays accepted that they had waived privilege in the legal advice material referred to above. That material includes, for example, a note of a telephone call between Mr Harding and Mr Varley following a conference with counsel about the advisory services agreements. PCP had access to the material prior to cross-examination of Mr Varley.

We are satisfied that to some extent Mr Varley's knowledge of the legal advice was canvassed in his evidence in the PCP proceedings. The issue of whether the advisory services agreements represented market value for Barclays was a subject of questioning in those proceedings. Mr Varley explained the value to Barclays. He was challenged about the commercial decision to enter into the advisory services agreements and the benefit to Barclays. Indeed, Waksman J found at [435] of his judgment in the PCP proceedings as follows:

435. As to what can be drawn from the evidence that is before the Court, first, and notwithstanding the deficiencies in his evidence I am not prepared to find that Mr Varley did not think that the ASA 2 was a legitimate commercial bet. I do not accept that he intended Barclays not to be bound by it or, more importantly, since there was a clear obligation to pay the £280m, that he intended that Barclays would not take the services being offered to it, or seek them out. I take the same view of Mr Jenkins' position. Their evidence that in truth ASA 2 was all about "preferred provider status" was criticised, but in fact it is not obvious to me that this appellation was wholly outwith the description of the services given in ASA 2.

That finding was in the context of PCP's primary case that ASA 2 was a sham. It does not answer the question of whether Mr Varley was reckless in the context of the Authority's LP 3 case. The issue is not simply a question of whether Mr Varley was reckless in concluding that the advisory services agreements were at market value. Nor can the issue be resolved simply by considering Mr Varley's commercial judgment, which Mr Varley has previously addressed in interviews and evidence. The issue includes whether Mr Varley was aware of a risk that the legal advice could not be relied upon and whether Mr Varley was aware of a risk that ASA 2 should have been disclosed in the announcement and prospectus for the October Capital Raising.

Further, Barclays intend to adduce evidence from those who gave advice to Mr Varley, including Mr Harding. We accept Mr George's submission that only Mr Varley can speak to the issue as to whether he believed that the lawyers were properly and fully informed and if so on what basis.

In those circumstances, we consider that Mr Varley's evidence would be important in the context of the LP 3 allegation. We agree with Mr George that subject to the question of fairness and oppression it is important for Barclays' defence of the proceedings to have Mr Varley's evidence. We do not consider that transcripts of interviews and previous evidence are a realistic alternative to Mr Varley's oral evidence on the allegation of recklessness.

Mr Herberg did not dispute that the legally privileged material may be highly relevant to Barclays' defence of the LP 3 allegation. His principal point was that oral evidence from Mr Varley was unlikely to be important given the passage of time. In his witness statement, Mr Varley says that he was not involved in obtaining or receiving legal advice and that the evidence he can give about the legal advice was "very limited".

We acknowledge that there may be limits to what Mr Varley is likely to be able to recall as to the circumstances in which Barclays entered into the advisory services agreements and what was in his mind at the time. We are now some 16 years after the events in question. It may be difficult for Mr Varley to identify what is his independent recollection and what amounts to reconstruction from documents and from his interviews and previous evidence in the PCP proceedings. Mr Varley speaks to those difficulties in his witness statement for the purposes of the CMH. However, as Mr George says, the purpose of oral evidence is partly to establish and test what a witness does or does not recall.

Mr George also pointed out that the Authority intends to challenge Mr Varley's credibility. For example, in his defence statement in the SFO proceedings Mr Varley stated as follows:

Mr Varley knew that legal advice was taken from internal and external counsel about the ASAs, and, later, the loan, about their relationship with the capital raises and about their treatment in the respective prospectuses. Although not directly party to it, Mr Varley relied upon the fact that it was taken and had no cause to doubt it.

The Authority will seek to challenge that statement. The Authority will also seek to establish that Mr Varley has previously given untruthful and evasive accounts which he must have known were untrue. For example, a statement in interview that the advisory services agreements and the Capital Raisings were unconnected.

We accept that it may be unfair if Barclays cannot call Mr Varley to rebut such allegations. Having said that, in relation to this aspect of the Authority's case any unfairness to Barclays in the absence of Mr Varley could be dealt with by way of case management at the final hearing, for example by limiting the scope of allegations the Authority could make in relation to Mr Varley's general credibility.

Mr Varley acknowledges that in not giving evidence he runs a risk that the Tribunal will make adverse findings in his absence that he was reckless and thereby demonstrated a lack of integrity. However, that does not assist Barclays in their defence of the LP 3 allegation.

Overall, we are satisfied that Mr Varley would be an important witness who, in the absence of reasons to the contrary, would be expected to give evidence. When we come to conduct the balancing exercise, it is a question of balancing the importance of Mr Varley's evidence together with all other relevant factors.

The impact on Mr Varley

Mr Varley sets out in his witness statement the impact he considers it would have if he were required to give evidence. The Capital Raisings took place some 16 years ago in 2008 when Mr Varley was chief executive of Barclays. He retired as chief executive in 2010. The regulatory proceedings commenced in 2012 and we have summarised the history of those proceedings, the SFO prosecution and the PCP proceedings.

Mr Varley addresses the overall impact of the twelve years of regulatory, criminal and civil proceedings on his personal, family and professional life. It is fair to say and we accept that those proceedings have had a huge impact on Mr Varley's career. He has not looked for other roles. When he was charged by the SFO, he resigned his non-executive directorships and his roles with major charities. He felt able to start looking for new roles following the Discontinuance, however he has put that search on hold given the possibility that he might have to give evidence in these proceedings.

We have no reason to doubt that the proceedings over the past 12 years have been all-consuming for Mr Varley, placing a heavy burden on himself and his family. It has been an extremely difficult time for Mr Varley and led to an extended period of stress. This was exacerbated by an inadvertent disclosure by the Authority at the time of the last CMH of the fact that the warning notice to Mr Varley proposed a fine of £1m and a prohibition from performing any function in relation to regulated activities. That disclosure led to fresh media exposure. We accept that if Mr Varley is required to give evidence in these proceedings then it will give rise to a further period of media exposure and mental strain. We should make clear, however, that Mr Varley does not rely on any physical or mental ill-health caused by these events or likely to be caused by having to give evidence.

The Discontinuance

It is convenient to deal first under this heading with a submission by Mr George that it is irrational and inconsistent for the Authority to pursue its LP 3 case against Barclays. That is because the LP 3 case requires Mr Varley to give evidence which Mr George says is inconsistent with the Authority's stated position on the Discontinuance - that fairness requires finality for Mr Varley. The Authority is said to be pursuing identical allegations against Mr Varley to those which it discontinued on the grounds of fairness. Mr George equated this to a "breach of promise" argument. He submitted that we should not issue a witness summons because to do so would be permitting the Authority to act in breach of its well-established duty as a public authority to act rationally and consistently and to treat like cases alike.

Mr George submitted that there is no sensible basis on which the Discontinuance can be read as permitting the Authority to advance and effectively re-litigate the same LP 3 allegation against B Plc. There was a representation or a promise of finality to Mr Varley in the Discontinuance. The present proceedings involve Mr Varley's integrity being expressly and directly impugned in a public forum. The only way Mr Varley could defend his integrity would be by giving evidence and being cross-examined over many days. That cannot be considered to be finality.

We should record at the outset that Mr Herberg did not rely on the principle of irrationality or inconsistency in putting forward Mr Varley's objection to the witness summons. The significance he attached to the Discontinuance was limited to the fact that he said it recognised, as we should now recognise, the unfairness to Mr Varley if he is required to respond to an allegation that his conduct demonstrated a lack of integrity. That unfairness is said to be compounded by events since the Discontinuance. Namely Mr Varley's understanding that the Discontinuance meant that his involvement in the matter was at an end, and the fact that he has now also been required to give evidence in the PCP proceedings.

Mr George relied on the decision in Carrimjee v FCA [2015] UKUT 79. The facts of Carrimjee involved enforcement action taken by the Authority against Mrs Parikh and Mr Carrimjee. Warning notices were issued to them and both made representations to the RDC. The warning notice to Mrs Parikh alleged that she willingly participated in a plan by a client to commit market abuse and acted deliberately, intending to manipulate the market in certain shares. The warning notice to Mr Carrimjee alleged similar deliberate conduct involving market abuse.

In the event, the RDC decision notice characterised Mrs Parikh's conduct as negligent rather than deliberate. A financial penalty was imposed but her approvals were not withdrawn. Mrs Parikh decided not to challenge the decision notice.

A separate decision notice to Mr Carrimjee characterised his conduct as reckless rather than deliberate. It found that he suspected the client intended market manipulation but turned a blind eye to the risk. Mr Carrimjee referred his decision notice to the tribunal. In those proceedings, the Authority put its case against Mr Carrimjee on the basis that he and Mrs Parikh had a common assumption that the client planned to manipulate the share prices. The Authority maintained that it was entitled to advance a case against Mr Carrimjee which was inconsistent with its findings against Mrs Parikh that she did not suspect market manipulation.

A question arose in the tribunal as to the extent to which the tribunal should regard itself as being bound by the Authority's findings in relation to Mrs Parikh when considering the position of Mr Carrimjee. The Upper Tribunal recorded the submissions of Mr Carrimjee's counsel at [87] and [88] of the decision:

87. In his submission this situation arises because it is the Authority's public law duty to act rationally. Consequently, he submits, it must treat like cases alike; it should apply the same disciplinary approach consistently to all whom it regulates and it cannot advance inconsistent factual positions in different proceedings. It is no longer open to the Authority to challenge the findings in Mrs Parikh's Final Notice.

88. He cites as authority for this proposition the dicta of Lord Hoffmann in the Privy Council case of Matadeen v Pointu [1999] 1 AC 98 where at page 109 he said:

".....treating like cases alike and unlike cases differently is a general axiom of rational behaviour. It is, for example, frequently invoked by the courts in proceedings for judicial review as a ground for holding some administrative act to have been irrational."

The Upper Tribunal accepted those submissions at [104]:

104. We therefore accept Mr Hunter's submissions, based on the dicta of Lord Hoffmann in Matadeen v Pointu that it would be a breach of the Authority's public law duty to act rationally were it to seek to advance a position which is factually inconsistent with the conclusions it had reached with regard to the behaviour of the subject of a Final Notice on the same evidence in respect of the same subject in that Final Notice.

Mr George submitted that this principle applies in the present circumstances. The Authority must treat Mr Varley consistently. Having accepted that fairness required finality for Mr Varley in the Discontinuance, the Authority cannot now act inconsistently with that finality and put forward a case against Barclays which requires Mr Varley to answer the same allegations. It is irrelevant that the allegation is now being made against Barclays, based on an attribution argument that Barclays is responsible for Mr Varley's lack of integrity.

Mr George further submitted that Carrimjee established that where a duty on the part of the Authority to act rationally is engaged, the Tribunal should take steps to prevent the Authority from breaching that duty. On the facts of the present case, that involves refusing the application for a witness summons so as to ensure that Mr Varley receives the finality to which it is said he is entitled.

Mr Stanley described this as essentially an argument based on legitimate expectation. In other words, Barclays are asserting that Mr Varley had a legitimate expectation following the Discontinuance that he would not be required to give evidence in relation to allegations against him asserting a lack of integrity. Mr George did not object to his argument being characterised in this way, although he did not consider that his submissions relied on the public law principle of legitimate expectation.

Mr Stanley submitted that Mr Varley has no legitimate expectation that he will not be required as a witness. In particular:

86.1. There was no express assurance or representation that the allegations would not be raised in future proceedings or existing proceedings against third parties.

86.2. There was no implicit assurance that Mr Varley would not be required to give evidence about the underlying events such as to give rise to a legitimate expectation.

86.3. Mr Varley has long been aware that there were continuing proceedings against Barclays and that he might get "pulled back" into those proceedings.

It is worth noting at this stage that legitimate expectation in public law requires a clear, unambiguous representation devoid of relevant qualification. The requirement is described as follows in De Smith's Judicial Review 9^th ed. at 7-022:

To give rise to a legitimate expectation, a representation must be "clear, unambiguous and devoid of relevant qualification". Both the meaning of an assurance and the extent to which an assurance meets the requisite standard of clarity is to be assessed by asking how it could reasonably be understood by the person to whom it was communicated. This is an objective, and not a subjective, standard.

The issue between Barclays and the Authority on this aspect of the application involves an objective reading of the Discontinuance. In short, Mr George argued that the reference to "finality" must mean finality in relation to the allegations which had been levelled at Mr Varley in support of the Authority's case that he lacked integrity. Mr Stanley submitted that finality was limited to the regulatory proceedings brought against Mr Varley, as to which he did have finality. The proceedings had been discontinued. He also relied on the words of qualification appearing in the last paragraph of the Discontinuance. The finality was qualified and it cannot be said that the Discontinuance should prevent the Authority from pursuing the LP 3 allegation against Barclays.

Mr George submitted that the words of qualification were not intended to exclude the present proceedings from finality. Firstly, the proceedings against Barclays were not "future" proceedings. They were already extant at the time of the Discontinuance. Secondly, the qualification clearly related to future regulatory assessments or proceedings effectively instigated by Mr Varley applying for authorisation under the Financial Services and Markets Act 2000. As such, the qualification did not cover the Authority's regulatory proceedings against Barclays.

Mr George relied on the judgment in FCA v Papadimitrakopoulos & Gryparis [2023] Ch 101 in support of his argument that the qualification or caveat should not be construed as widely as the Authority contends. In that case, the Authority was claiming compensation on behalf of investors for alleged market abuse by the defendants. An application to strike out the claim was made on the basis that the Authority had used certain material obtained through mutual legal assistance requests ("the MLA Material") without first obtaining consent from the relevant overseas authorities. An issue arose as to the standard wording in the Authority's requests for such material. Mrs Justice Joanna Smith considered the point of construction at [66] and [67]:

66 The FCA contends (in Williams 3) that standard wording (the FCA Standard Wording) contained in its MLA requests to the Greek and Swiss Authorities conferred "sufficient consent" for the use of MLA Material for the purpose of these civil Proceedings. The FCA Standard Wording reads as follows:

"Unless you indicate otherwise, any evidence obtained pursuant to this request may be used in any criminal prosecution or other judicial proceedings connected with this investigation, including any restraint or confiscation proceedings, whether relating to the above named subject(s) or any other person who may become a subject of this investigation."

67 I am bound to say that whilst superficially attractive, I do not consider this argument can withstand scrutiny, primarily because of the context in which the FCA Standard Wording is used in the FCA's letters of request and therefore the way in which it would have been understood by a reasonable recipient of the request.

The Judge then set out various factors which supported the defendants' construction. Essentially, the mutual assistance request was made in relation to a criminal investigation in the context of intended criminal proceedings. The criminal context was made plain in the requests for material. Seen against that background, the reference to "other judicial proceedings" could only be understood as a reference to judicial proceedings connected to the criminal investigation.

The case is helpful in identifying the correct approach to construing the Discontinuance. In particular, for the purposes of Mr George's argument we are concerned with identifying how the Discontinuance would have been understood by a reasonable recipient in the position of Mr Varley. Further we must construe the Discontinuance in its context.

The evidence of Mr Varley briefly sets out in his witness statement how he understood the Discontinuance and the qualification. His evidence was:

... it never for a moment crossed my mind that the FCA would consider themselves able to advance proceedings against others in which allegations of regulatory breaches by me were central, let alone in which I should be called on to give evidence.