EWJ FEB 59 2025 web - Flipbook - Page 45
The judgment appears limited to ‘unsophisticated
consumers’ but whether it is limited to individual
customers, rather than for example SMEs or sole
traders, is unclear. Pending clarity from the Supreme
Court, lenders and brokers should implement clear
disclosure practices and their insurers will be keen to
understand that steps are being taken to mitigate risks
of claims.
investors, who lose out on the potential to claim under
section 90A.
Authors: Maneeka Sangha, Donald McDonald
Related item: Listed securities claims averted as passive investors are struck out
The Court highlights the need for robust defences
when considering the awarding of costs:
Afan Valley Ltd v Lupton Fawcett (a firm) & Others
[08.10.24]
Authors: William Hanwell, Jenny Boldon
Reaffirming the reliance requirement under Section
90A of the Financial Services and Markets Act 2000
Various Investors v Barclays plc [25.10.2024]
Lupton Fawcett LLP successfully defended a
professional negligence claim brought against them
by 43 liquidating companies with a combined deficiency to creditors totalling over £68 million. The
claimants alleged the defendant’s negligent advice was
the cause of this substantial deficiency. The claimants
argued that, but for the allegedly negligent advice,
they would not have promoted inappropriate investment schemes, accepted investment monies or taken
on unsuitable loans. The High Court dismissed these
claims, striking them out entirely, however, Lupton
Fawcett’s victory was not all-encompassing.
The High Court clarified the application of the
reliance requirement in section 90A of the Financial
Services and Markets Act 2000. It was held that reliance cannot be established where the claimants did
not read or consider the published information.
Section 90A allows investors to bring claims if they
have suffered a loss as a result of a dishonestly misleading statement in certain published information relating to listed securities. The relevant published
information includes annual accounts and regulatory
news releases.
In October 2024, the presiding judge (Mr Justice
Sheldon) in a consequential matters judgment held
that it would be inappropriate for Lupton Fawcett
LLP to receive an award for all of its costs as ‘this
would not reflect the overall justice in this case’. Mr
Justice Sheldon identified a number of flaws in the defence’s arguments, which were deemed to reflect the
need for a significant reduction in recoverable costs.
Resultingly, Lupton Fawcett were only awarded 75
percent of recoverable costs. These weak arguments
specifically centred around the fact that the defendants were unable to convincingly justify claims surrounding its conduct. It was submitted that:
In November 2020, 460 institutional investors who
held shares in Barclays Bank, issued a claim for over
£500 million. The complaints related to a ‘dark pool’
share trading system that Barclays operated. In June
2014, the New York Attorney-General had filed a securities fraud lawsuit against Barclays in connection
with this trading system, causing its share price to
drop.
The claimants alleged that untrue and misleading
statements were made by Barclays in its published information concerning the trading system. In reliance
on this information, they acquired or held onto
Barclays shares, and suffered a loss when the share
price fell.
“There were points on which (Lupton Fawcett LLP) lost at the
hearing before me in February that were not merely legal
arguments that required little in the way of evidence or submissions, but were matters that were wholly independent of the
successful no loss argument and put the claimants to significant cost and effort in preparing witness evidence and written
argument.”
The claimants were divided into three categories:
l Category A claimants read and directly relied on
the published information;
l Category B claimants indirectly relied on the published information by reviewing alternative sources,
such as broker or press reports; and
Although 75 percent of costs allowed for a significant
reimbursement of the defendants’ expenses, the
judge’s decision to not award full costs highlights important issues for the professional liability sector to
take heed of. For example, this costs decision emphasises the requirement for robust and comprehensive defences to all aspects of a claim, reminding
professional liability solicitors that victory at trial,
whereby a claim is struck out, does not necessarily
ensure full recovery of costs if a defence contains
significant deficiencies.
l Category C claimants indirectly relied on the published information by dealing in the shares at a certain market price according to the efficient market
hypothesis.
The court agreed with Barclays that the common law
test of reliance for the tort of deceit should apply to
section 90A claims. Therefore, claimants must prove
that “they read or heard the representation, that they understood it in the sense which they allege was false and that it
caused them to act in a way which caused them loss.”
Authors: Isobelle White, Kate Courtman
Contact
Fleur Rochester, Partner
Fleur.Rochester@kennedyslaw.com
Ann Dingemans, Corporate Affairs Lawyer
Ann.Dingemans@Kennedyslaw.com
www.kennedyslaw.com
As the Category C claimants could not establish that
they had directly read and relied on the published
information, their 241 claims were struck out. This
decision represents a significant setback for passive
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