Tried and trusted

Mishcon de Reya partner Joanna Blackburn says all lawyers should keep an eye on the whistleblowing battle that is about to hit the Supreme Court

Supreme Court
Supreme Court

On 24 March 2014, the Supreme Court will start to hear the appeal in the case of Bates van Winkelhof v Clyde & Co. It is an appeal that all partners and members of LLPs should be watching carefully.

The issue at stake is whether partners in traditional partnerships and members of LLPs should have the protection of the Public Interest Disclosure Act (PIDA), colloquially known as whistleblowing. 

The legislation protects not only employees, but also “workers”, where a worker is a person who is party to a contract where they will perform services or do work personally for another party to the contract. 

It had long been thought clear that the legislation protected partners and members of LLPs.  However, the 2012 Court of Appeal (CoA) decision in the Bates van Winkelhof case reversed that assumption (26 September 2012).

The appeal court found that partners and members of LLP were not “workers” and therefore had no protection against expulsion from their partnerships, or other detrimental treatment, in the event that they blew the whistle in relation to matters protected by PIDA.

Its reasoning for the decision was complex, but could be encapsulated as being that partners have equal power and autonomy within their partnership, so they could not be in a subservient position to other partners or the firm itself.  If that is the case, they could not be “workers” and so could not be protected if they were whistleblowers.  Whether that determination is right is now the issue for the Supreme Court to determine.

But why should this issue matter to every partnership and LLP?

For solicitors, our professional conduct rules require us to report any breach of those rules that we discover. Our practicing certificates can depend on it.

Currently, if a partner reports that breach, as he or she is required to do, and then is expelled from their firm, or is denied pay or promotion, then the partner has no legal recourse.

This sets up a tension between self-interest – the desire not to risk personal job security – and the obligations required by the profession. 

The risk of the partner turning a blind eye is increased, even if the issue, which they have discovered could jeopardise the welfare of the whole firm. 

In the Enron disaster, we have seen how a professional services firm can be brought down virtually overnight by malfeasance by a small proportion of the workforce.  Disincentivising partners from reporting malfeasance increases the risk of another Enron. 

As trusted advisors, both lawyers and accountants will also often become privy to conduct by their won clients, which may raise concerns.  Again, if they feel inhibited from reporting their concerns within their firm, then there is an increased risk of malfeasance being allowed to continue unchecked and without the advisor being able to stop or indeed resolve the initial issue. 

There is also an inherent unfairness that the board of a FTSE 100 company would be protected by PIDA, whereas a junior partner of a global law firm would not.  Surely, it must be recognised that the directors would have greater autonomy and control over their position than a junior partner?

All partners should want the Supreme Court to overturn the CoA’s decision and give them back the protection of the whistleblowing laws.

All firms should want the same thing. If the price of knowing about malfeasance within your own firm is an obligation to protect the whistleblower, surely that is a price well worth paying?