In Hincks v Sense Network Ltd, the High Court stressed that the duty of a reference giver to provide a true and accurate reference in respect of regulatory breaches or other concerns does not extend to analysing whether or not a reasonable investigation was undertaken into any alleged breaches. It also does not cover whether there was a reasonable belief that the individual had carried out the acts alleged.
Mr Hincks, a well-regarded independent financial advisor, became subject to a 100% pre-approval process due to concerns about his conduct. As a result of issues arising from his failure to obtain pre-approval for some client transactions, Financial Conduct Authority authorisation for his "customer function" (CF30) was terminated. When providing a reference, the authorising entity, Sense Network, set out details of the various issues around Mr Hincks’ conduct including the circumstances of the 100% pre-approval requirement and the subsequent termination of his CF30. Mr Hincks brought a claim arguing that this reference was misleading as the investigation into his actions was a sham and the outcome had been pre-determined. The court did not agree that a reference giver was obliged to consider the reasonableness of any investigation when disclosing information in a reference, although he or she should be alert to “red flag” issues that would require further investigation eg a failure to obtain key witness statements.
This is an important reminder of the obligations of a reference giver, particularly in those sectors regulated by external authorities such as finance and education. Specific regard should be given to the obligation to report matters to external regulatory authorities, and it is unlikely that a standard factual reference will be appropriate in circumstances where concerns have been raised regarding an individual’s conduct. Employers should ensure that an employee has the opportunity to answer such concerns to avoid any issues arising over references in the future.
