Summaries of some recent Financial List judgments. Full details are available on the National Archives.

Loreley Financing Jersey No 30 v Credit Suisse Securities (Europe) Limited and others (Cockerill J)

Fraudulent misrepresentation – Limitation – 2008 Financial crisis

The Claimant purchased US$100 million of CDO Notes in late 2007. It lost the full sum in the ensuing financial crisis. In 2018 it sued the Defendants saying that it had been induced to buy the notes by CDO representations (inter alia of honesty and as to its ability to assess the transaction) which were falsified by the risk that some of the underlying residential mortgage backed securities were afflicted by systemic misconduct and fraud in the securitisation and sale of those RMBS’s.

The court held that the claim was time barred because the Claimants had known enough to plead essentially the case now run well before 2012. Further: (i) the CDO representations were not made. (ii) If they were made they were not relied on by the Claimants because they were unaware of them (iii) Nor was there any falsity – the alleged RMBS misconduct was not made out. The other issues relied on (negligence, unlawful means conspiracy and Irish Law) also failed.

The full judgment [2023] EWHC 2759 (Comm) may be found on the National Archives website (external link).

Palladian Partners LP & Ors v The Republic Of Argentina & Anor (Picken J)

Construction of GDP-linked Securities – Sovereign debt restructuring – GDP rebasing

The Claimants were a group of investors who held Euro-denominated Securities issued by the Defendant, the Republic of Argentina, in 2005 and 2010. The Securities were a novel form of bond, referred to as ‘GDP-linked Securities’, under which obligations to make repayment only arose where the Republic’s GDP met agreed benchmarks for level and growth within a given year.

For the purposes of the Securities GDP was measured according to a ‘Base Year’, which was 1993 at the time of issue. In 2014, the Republic rebased its measurement of GDP, changing the Year of Base Prices to 2004. Following that rebasing, the Republic concluded that the Payment Conditions had not been met for Reference Year 2013 and that no payment was due. The Claimants, conversely, argued that an obligation to make payment arose notwithstanding the rebasing, for 2013 and every year thereafter. The Claimants sought a declaration as to the proper construction of the Securities, payment of the sums due, and an order for specific performance requiring the Republic to apply the correct construction for the remainder of the Securities. The Claimants also brought an alternative case that the Republic had acted in bad faith in producing certain GDP data in March 2014.

The matter turned on the proper construction of a single provision within the Securities, the ‘Adjustment Provision’. Relying on settled principles of construction, each side proposed alternative constructions. The Claimants advanced a construction which required an annual adjustment to Base Case GDP based on the ratio between Real GDP in the old and new Years of Base Prices. The Defendants proposed two alternate constructions: one entailing a one-off adjustment to the levels of Base Case GDP, rescaling the entire series into the new year of base prices, and a second whereby the figure published yearly in the New Year of Base Prices was adjusted for inflation only.

The Court held that the Claimants’ construction was to be preferred, given that accorded with the plain meaning of the Securities. It granted the declarations sought and awarded monetary judgment of EUR 1.330 billion. Having found for Claimants on the construction point, it was unnecessary and undesirable to address the Claimants’ alternative case.

The Trustee appeared on behalf of the Securities-holders to ensure that the entire class would benefit from any judgment. It argued that difficulties with the clearing systems made payments to individual holders practically impossible. The Court dismissed this argument, holding that any of the Claimants were entitled to bring a claim for their own beneficial interest, in addition to judgment for the Trustee.

The full judgment, [2023] EWHC 711 (Comm) may be found on the National Archives website (external link).

Macquarie Bank Limited v Phelan Energy Group Limited (Foxton J)

ISDA Master Agreement – whether notice of Potential Event of Default given in effective manner – effect of error in calculation of Early Termination Amount on when obligation to pay Early Termination Amount became due and/or payable

For an Event of Default under section 5(a)(i) of the 2002 ISDA Master Agreement to occur, a notice had to be served which communicated clearly, readily and unambiguously to the reasonable recipient in the context in which it is received the failure to pay or deliver in question (such that the reasonable recipient will clearly understand the trade under which the obligation to pay or deliver had arisen, and the particular obligation which it is said has not been performed). Provided that it met this requirement, a notice was not invalid or ineffective merely because it contained an error as to the amount payable or in the reference given for the trade. The notice in this case was effective, with the result that the claimant had been entitled to designate an Early Termination Date. The assumed error in the calculation of the Early Termination Amount did not prevent the defendant’s debt to the claimant in respect of the Early Termination Amount from accruing. However, there had not been sufficient argument on the question of whether such an error presented the accrued debt becoming payable. The claimant’s application for summary judgment was adjourned to allow an alternative calculation to be served, and to address an issue of a potential credit raised in the course of argument.

The full judgment, [2022] EWHC 2616 (Comm), may be found on the National Archives website.

Various Claimants v G4S Ltd (formerly G4S Plc) (Falk J)

Collective proceedings under s90A and Sch10A of the Financial Services and Markets Act 2000 (FSMA) – split trial – liability trial – reliance trial – sampling – material to be provided by sample Claimants in advance of the liability trial.

At the 1st CMC of 3 sets of claims, the Court determined there should be a split trial where liability would be decided before reliance issues.  In order to mitigate potential unfairness, all Claimants must provide the Defendant with a minimum amount of information in relation to their reliance cases, limitation arguments and disclosure before the start of the liability trial. This would enable reflective sampling to occur and should ensure that their reliance cases were properly particularised.   The Court would then hold a further CMC before the liability trial to take stock and decide what, if any, witness statements should be taken from the Claimants’ witnesses, which might go beyond the sample Claimants.

The full judgment, [2022] EWHC 1742 (Ch), may be found on the National Archives website (external link).

Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd (Robin Knowles J)

Disclosure – Legal professional privilege – Litigation privilege – Company officers

The litigation concerned the Claimant’s purchase of notes from the 3 Defendant in 2007 for US$100 million. Although a company, the Claimant was a special purpose vehicle with no employees. Its directors were “supplied” by a professional services company. A CPR Part 18 Request from the 3rd Defendant asked the Claimant to confirm who had decided to pursue this litigation and who was providing instructions in relation to this litigation. The Defendants challenged the Claimant’s resulting claims to legal professional privilege, the central question being “Is the identity of the persons who are authorised to give instructions to solicitors on behalf of a corporate client in ongoing litigation a matter which is covered by litigation privilege?” The Claimant accepted that this question was relevant [as a small building block] for Credit Suisse’s contention that the claims against it are time barred. The sole issue was, therefore, legal professional privilege. For litigation privilege, the answer to the question whether the identity of a person communicating with the lawyer is privileged lies in whether the communication itself is privileged and whether the privilege will be undermined by the disclosure of identity sought. There was nothing in the present case to show that the privilege would be undermined by the disclosure of identity sought.

The full judgment, [2022] EWHC 1136 (Comm), may be found on the National Archives website (external link).

Allianz Global Investors GmbH v G4S Ltd (formerly GS4 Plc) (Miles J)

S 90A Financial Services and Markets Act 2000 (FSMA) – de facto Directors – false statements – striking out

The Defendant issued an application for strike out or summary judgment on the grounds that its Subsidiary Directors were not de jure, de facto or even shadow directors of G4S and therefore fell outside the scope of s90A and Sch 10A FSMA. These provide a mechanism for shareholders to sue UK-listed companies where they suffer loss as a result of the company publishing false or misleading statements ,omitting relevant information from published information or delaying the publication of certain information. The Claimants argued that for the purposes of civil liability, the term person discharging managerial responsibilities (PDMR) was not limited to directors in the usual English company law sense but included senior executives responsible for managerial decisions affecting the future developments and business prospects of the issuer and/or those business units.  The Court held that the statutory definition of PDMR set out in Sch 10A was clear and unambiguous and to expand the scope of this definition to include senior executives would be contrary to legislative intent.  Paragraph 8(5)(c) of Sch 10A makes clear that senior executives may be considered PDMRs where there are no directors (and therefore that senior executives do not otherwise fall within the definition of PDMR). A wider definition of PDMR would also “sidestep[…] the legislative history” of section 90A: when section 90A was enacted, there was a broader definition of PDMR in Part 6 of FSMA, which was not adopted.

Despite rejecting the Claimants’ submissions on the definition of a PDMR, Miles J refused the Defendant’s application for strike out and summary judgment, as he considered that the Claimants had a real prospect of persuading the Court at trial that the Subsidiary Directors were de facto directors of the Defendant. He emphasised that the question of whether an individual is a de facto director is intensely fact-sensitive and requires a careful examination of the relevant company’s governance structure.

The full judgment, [2022] EWHC 1081, (Ch) may be found on the National Archives website (external link).

Bilta (UK) Ltd (In Liquidation) v SVS Securities Plc (Marcus Smith J)

Tort- Breach of fiduciary Duty – Dishonest Assistance – Fraudulent Trading – Limitation

In 2009, the Claimant companies (now in liquidation) took part in a MTIC fraud involving the purported importation and onward sale of carbon credits. The liquidators (appointed by HMRC) claimed that the 5th Defendant had dishonestly assisted the former directors of the Claimant companies in breach of their fiduciary duty by acting as a broker to the carbon credit trades, thereby assisting the directors’ fraud.  By doing so, it claimed that they had also engaged in fraudulent trading, contrary to s213 Insolvency Act 1986. The 5th Defendant pleaded that the dishonest assistance claims were time-barred as they had been brought over 6 years after the conduct complained of. They contended that the s213 claims should fail as a matter of law because they fell outside the terms of that section. The Court found that the liquidators had not discharged the burden of proof that they could not with reasonable diligence have discovered evidence relating to these claims within the limitation period.   The Court provided a detailed analysis of the relevant legal principles applicable to limitation defences, including the issue of deemed knowledge of a company whilst struck off the register pursuant to s.1032 Companies Act 2006. As a result, all dishonest assistance claims were time-barred (as were a number of the s213 claims where time ran from the appointment of the liquidators). The remaining s 213 claims would not fail as a matter of law.

The full judgment, [2022] EWHC 723 (Ch), may be found on the National Archives website (external link).

Allianz Global Investors GmbH v RSA Insurance Group Ltd (formerly RSA Insurance Group Plc) (Miles J)

Financial Regulation – Annual Reports – False Statements – Limitation Act s 32

Between  8 November 2019 and  18 June 2021, the Claimant brought 3 sets of claims pursuant to s 90A Financial Services and Markets Act 2000 (FMSA) , which made  materially identical allegations that they had suffered loss as result of placing reliance  on material published by the Defendants which contained  false or misleading statements, omitting relevant information from published information or delaying the publication of certain information. The Defendants argued that the claim which had been issued in June 2021 should be struck out as time-barred under s 32 Limitation Act 1980.  The issue for the Court  was whether the new Claimants could not with reasonable diligence have discovered before 11 May 2015 sufficient facts to enable them to plead the claim. The Court had to decide whether the Claimants had a realistic case under s 32, meaning that the case has reality and was not fanciful. The Court held that s 32 issues in this case were not properly amenable to summary determination and there were reasonable grounds for believing that a fuller investigation of the facts at trial might affect the Court’s determination. The Court applied the 2 analytical stages suggested by Males LJ in OT Computers Limited (in liquidation) v Infineon Technologies AG and Micron Europe Limited . It was satisfied that the Claimants had a realistic case that the announcements of late 2013 and early 2014  and 2015 press articles were not enough to require them to investigate a possible claim against the Defendant.

The full judgment, [2021] EWHC 2950 (Ch), may be found on the National Archives website (external link).

Deutsche Bank AG London v Comune di Busto Arsizio (Cockerill J)

Banking and finance – Swap Agreements – Hedging – Foreign Law – Contractual Estoppel

In 2007, Defendant Italian Local Authority entered into a mirror swap and interest rate swap agreements with the Claimant to restructure its existing indebtedness and interest rate hedging arrangements. The International Swaps and Derivatives Association (ISDA) Master Agreement and transactions were governed by English law and subject to the exclusive jurisdiction of the English courts. The Claimant sought declarations that, amongst other things, the Defendant had capacity and authority to enter into the swaps. The case raised issues of Italian law arising out of the 2020 decision of the Italian court of Cassation in Banco Nazionale del Lavoro v Cattolica.  The Defendant argued that it was not bound by the swaps, including that the decision in Cattolica held that Italian Public Bodies (IPBs) do not have capacity to enter into derivative transactions which (i) do not disclose the mark-to-market, probabilistic scenarios and hidden costs of the derivative and (ii) are ‘speculative’ rather than for the purposes of ‘hedging’. It also argued that the Cattolica decision required the City Council to approve derivative instruments such as the swaps. The court held that it was open to the English court to diverge from an authority of the highest court in a foreign legal system if satisfied on the evidence that an authority does not represent the law. The Judge found that, absent Cattolica, the Italian constitution did not limit the capacity of IPBs to enter into derivatives. It rejected the argument that Cattolica had recognised a limit on the capacity of IPBs to enter into derivatives, absent disclosure of the mark-to-market, probabilistic scenarios and hidden costs. Insofar as such disclosures were required under Italian law, they imposed limits on the material validity of derivatives, which had no application to these swap agreements which were governed by English law. Even if the Cattolica decision had introduced limits on capacity by requiring the disclosure of certain matters, those limits were not violated on the facts of this case. As regards the question of whether the transactions were speculative, the court found that the cash flow swap was a classic form of hedging rather than speculation. The transactions did not require City Council approval as they did not significantly modify the Defendant’s existing borrowing or incur any future expenditure commitments.

The full judgment, [2021] EWHC 2706 (Comm), may be found on the National Archives website (external link).

PJSC Bank “Finance and Credit” v Zhevago (Flaux CHC)

Jurisdiction – tort – Waiver – Forum non Conveniens – Ukraine

Claims in tort were made against the Defendants alleging that that the defendants had engaged in fraudulent schemes to extract large sums of money from the bank. D1 resident in Dubai  service on him at the registered address of a company controlled by him, which he had given as his usual residential address, was invalid. Other defendants applied for stays or disputed jurisdiction on the ground of forum conveniens and also sought to strike out part of the claim. It was held that the effect of s.1140 Companies Act 2006 was that a director who had provided a registered address within the jurisdiction could be served at that address even if he was not physically present within the jurisdiction at the time of service. There had been no unequivocal submission by applying for strike out at the same time as disputing jurisdiction; such conduct was at best equivocal. However Ukraine was the forum conveniens.

The full judgment, [2021] EWHC 2522 (Ch), may be found on the National Archives website (external link).

Various Claimants v G4S Plc [2021] 4 WLR 46 (Mann J)

Group litigation – addition of parties – mistake

The court struck out claims representing around £92 million in an action for £102 million brought under s 90A of the Financial Services and Markets Act 2000 (FSMA) in relation to statements made in the Defendant’s  annual reports. The large majority of these Claimants had purportedly been added to the claim form after it had been issued but before service, without the court’s permission being sought or obtained. A number of the originally-named Claimants sought to amend their names, after the limitation period had arguably expired. The court accepted CPR 17.1(1) applies only to permit the amendment of claims by an existing Claimant; it does not apply to permit the addition of new Claimants to an existing claim form. The court further accepted that, since the purported addition of these Claimants had fallen outside the scope of CPR 17.1(1), the Defendant was right not to have challenged the amendment under CPR 17.2, but rather under CPR 3.4, such that the 14 day period specified in CPR 17.2(2) did not apply. The court went on to consider the applications of numerous Claimants to amend their names after the limitation period had expired. The Court considered the applicability of CPR 17.4(3) and CPR 19.5(3)(a) and (b) to 7 categories of proposed amendment, seeking to reconcile a number of prior authorities on these rules with the explanations given for the naming of these particular Claimants. The court would exercise its discretion to permit 1 of 14 potential single amendments. The court struck out an attempt by the Claimants to expand the scope of their claims from alleged misstatements from September 2011 to include alleged misstatements dating back to 2005.

The full judgment, [2021] EWHC 524 (Ch), may be found at on the National Archives website (external link).

Leeds City Council v Barclays Bank Plc (Cockerill J)

Misrepresentation – Banking – Striking Out

A number of Claimant councils brought claims against the Defendant seeking rescission of long term loans on the basis that the terms of those loans had been misrepresented to them due to the manipulation of LIBOR. The Claimants argued that they had been induced to enter into the loans by the misrepresentations to the effect that the LIBOR rates were being set honestly and properly and that the Defendant was not acting improperly. The Claimants argued that had they known of such dishonesty, they would not have entered into the loans. It was the Defendant’s position that the claim should be struck out as the Claimants could not establish that they were actively aware of the representation at the time that it was being made to them. The court rejected the argument that an assumption as to a state of affairs was enough to satisfy the test for reliance, noting there is a clear disparity between awareness and assumption. Therefore, it is clear that to establish reliance in a misrepresentation claim, awareness of the representation must be actively present in the Claimant’s mind and any assumption of representation would not be satisfactory.

The full judgment, [2021] EWHC 363 (Comm), may be found on the National Archives website (external link).

Financial Conduct Authority v Arch Insurance (UK) Ltd (Flaux CHC and Butcher J)

Contract – construction – business interruption insurance – Coronavirus

This test case was brought by the Financial Conduct Authority (FCA) on behalf of policyholders and a sample of 8 insurers  under the Financial Markets Test Case Scheme in order to determine whether 21 non-damage clauses commonly used in business interruption property insurance policies would cover losses caused by the cessation of business due to the Covid-19 pandemic. In order to establish liability under the representative sample of policy wordings, the FCA argued for policyholders that the disease and/or denial of access clauses in the representative sample of policy wordings provide cover in the circumstances of the Covid-19 pandemic, and that the trigger for cover caused policyholders’ losses. The court found that most, but not all, of the disease clauses in the sample provided cover.  Certain denial of access clauses in the sample provided cover, but this would depend on the detailed wording of the clause and how the business was affected by the Government response to the pandemic, including for example whether the business was subject to a mandatory closure order and whether the business was ordered to close completely. The test case also clarified that the Covid-19 pandemic and the Government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover.  The case removed the need for policyholders to resolve many key issues of contractual uncertainty and causation individually with their insurers.

The full judgment, [2020] EWHC 2448 (Comm), may be found on the National Archives website (external link).

NB: On a leapfrogged appeal, the Supreme Court dismissed the appeal made by 6 of the 8 insurers and upheld the FCA’s appeal, subject to a wider the interpretation of the requirements of the disease clauses, prevention of access and hybrids of the above-mentioned clauses.

Burford Capital Ltd v London Stock Exchange Group PLC (Andrew Baker J)

Allegation of conspiracy to manipulate the London AIM unlawfully (via spoofing and/or layering) so as to affect the Claimant litigation funder’s share price on two dates in August 2019 – Norwich Pharmacal claim against the Defendant Stock Exchange for an order requiring the provision of information as to the identity of those trading in the Claimant’s shares on the key dates – claim dismissed

The Claimant contended that there was strong reason to think that on 6 August 2019, after 1.30 pm, and across the day on 7 August 2019, its share price was affected by spoofing or layering either directly on the AIM or via the Turquoise trading platform.  It said that the ends of justice demanded that it be assisted, by the provision of information in the Stock Exchange’s possession, to know who was responsible for any such unlawful behaviour, and that as a matter of discretion the Court should allow the Norwich Pharmacal claim.  The Stock Exchange contended that there was no real reason to consider that spoofing or layering occurred, that there was no serious argument that the Claimant would have a tort claim if there had been spoofing or layering and that a desire to provoke a criminal prosecution or stimulate regulatory action was not a purpose served by the Norwich Pharmacal jurisdiction (at all events where the relevant prosecuting and regulatory authority had not been inert), and that there were powerful reasons why as a matter of discretion the claim should be refused.  The Court considered but did not need to resolve various issues about the scope or limits of the Norwich Pharmacal jurisdiction.  Upon a careful assessment of the material relied on by the Claimant, it did not support the proposition that there was any serious cause for thinking that there had been unlawful market manipulation affecting the Claimant’s share price on 6/7 August 2019.  The claim of unlawful activity was speculative.  Norwich Pharmacal relief was not to be granted in such circumstances.

The full judgment, [2020] EWHC 1183 (Comm), may be found on the National Archives website (external link).

Madison Pacific Trust Ltd v Shakoor Capital Ltd (Zacaroli J)

Loan Notes – Trust Deed – Trustee’s duty to distribute pari passu – recovery under arbitral award on condition that by reason of illegality payment made only to ‘innocent’ noteholders – interpretation of Trust Deed 

An arbitral panel held that a loan to a bank, held by a Trustee as security for repayment of Notes, was tainted by illegality perpetrated by former owners of the bank, and that the illegality infected certain of the Notes, being those held by the former owners of the bank. The tribunal held that the bank was liable to repay only that part of the loan which was held by the Trustee for the benefit of innocent noteholders. The Trust deed contained provisions requiring pari passu distribution among all noteholders.  The Court determined that the trustee’s duty to act in the interests of all noteholders did not preclude it from enforcing the security on terms that required it to pay the proceeds only to the innocent noteholders, where the only practical alternative was that, as a result of the tribunal’s finding of illegality,  no recovery could be made at all. 

The full judgment, [2020] EWHC 610 (Ch), may be found on the National Archives website (external link).

SL Claimants v Tesco PLC (Hildyard J)

FSMA Schedule 10A – compensation payable to “a person who acquires, continues to hold or disposes of securities in reliance on published information” where that published information contained a misleading statement or there was a dishonest omission from it – whether anyone but the legal owner of the securities would have standing to maintain a claim – whether a Claimant which had never directly acquired, held or disposed of the securities but held shares in dematerialised form through CREST had a an “interest in securities” such as to confer standing to bring a claim – danger of multiple Claimants in respect of same transaction

The Court held that the Claimants had an “interest in securities” sufficient to give them standing to pursue claims under Schedule 10A of FSMA even though the shares in the Defendant to which the investment decisions for which they were seeking compensation related were all held in “dematerialised form” through a custody chain of intermediaries in CREST and none of the Claimants had ever directly acquired, held or disposed of a legal interest in any of such shares. Any process whereby, in a transaction or transactions on CREST, the ultimate beneficial ownership of securities that are, with the consent of the issuer, admitted to trading on a securities market in accordance with paragraph 1 of Schedule 10A of FSMA, comes to be vested in a person constitutes (respectively) “the acquisition or disposal of an interest in securities”.

The full judgment, [2019] EWHC 2858 (Ch), may be found on the National Archives website (external link).

Omers Administration Corporation & Ors v Tesco PLC (Hildyard J)

Disclosure of documents – documents obtained by SFO by compulsion- whether relevance to the proceedings outweighed confidentiality – whether safeguard to protect confidentiality should be imposed

The Court refused an application made by certain third parties to prevent the Defendant disclosing documents in proceedings with the Claimants which were confidential to those third parties, had been obtained from them by or in anticipation of compulsion and which were only in the Defendant’s possession and control because the SFO had provided them to it for the purpose of negotiations about a deferred prosecution agreement which had been concluded between the SFO and the Defendant’s wholly-owned subsidiary. The documents were not only relevant but likely to be of material litigious advantage to the Claimants as it seemed likely that they already had been to the Defendant itself: they should be disclosed. However, although there was no sufficient reason to prevent disclosure, the Court directed certain safeguards as to the form of their production to mitigate the adverse effect on the third-party applicants.

The full judgment, [2019] EWHC 109 (Ch), may be found on the National Archives website (external link).