Securities litigation: reliance and liability

On 25 October 2024, the High Court delivered a significant judgment in the case of Allianz Funds Multi-Strategy Trust (on behalf of AllianzGI Best Styles Global Equity Fund) and Others v Barclays PLC ([2024] EWHC 2710 (Ch)). The judgment, delivered by Mr Justice Leech, addresses key issues in securities litigation.

Applications and background

The judgment primarily dealt with two applications: (i) the Strike Out Application by Barclays; (ii) and the Amendment Application by the claimants. Barclays sought to strike out 241 claims brought by the claimants under section 90A and Schedule 10A of the Financial Services and Markets Act 2000 (FSMA), arguing that the claims disclosed no reasonable cause of action or had no real prospect of success. The claimants, on the other hand, sought permission to amend their Particulars of Claim and Particulars of Quantum.

Key issues addressed in the judgment

1. Reliance on published information (Paragraph 3 of Schedule 10A)
   
   One of the central issues in the judgment was the interpretation of "reliance" under Paragraph 3 of Schedule 10A. The court considered whether the claimants needed to prove that they had read or considered the specific published information containing the alleged misleading statements or omissions.
   
   Mr Justice Leech concluded that the common law test for reliance in the tort of deceit applied to Paragraph 3. This test requires claimants to prove that they read or heard the representation, understood it in the alleged false sense, and that it caused them to act in a way that resulted in loss. The judge agreed with the decision in ACL Netherlands BV v Lynch ([2022] EWHC 1178 (Ch)) that reliance cannot be satisfied in respect of published information which the claimants did not read or consider at all.
   
   Please click here for our coverage of that decision.
    
2. Liability for omissions
   
   The judgment also addressed liability for omissions. The court held that claimants do not need to prove that they consciously considered whether matters had been omitted from published information. Instead, they must prove that they relied on the published information itself. The materiality of the omitted facts and whether they would have influenced the investment decision are questions of causation and the quantification of loss.
    
3. Claims based on price/market reliance
   
   The court examined the claims based on "Price/Market Reliance," where claimants argued that they relied on the market price of Barclays' shares, which was influenced by the published information. Mr Justice Leech rejected this argument, stating that it would render the concept of "reliance" meaningless and would apply universally to every section 90A claim. The judge emphasised that claimants must prove that they or their representatives read and considered the published information or relied on an agent or third party who did so.
    
4. Liability for dishonest delay (Paragraph 5 of Schedule 10A)
   
   Another critical issue was the interpretation of Paragraph 5, which deals with liability for dishonest delay in publishing information. The court held that Paragraph 5 imposes liability only where the issuer has published the relevant information by recognised means or announced its availability by recognised means. The judge concluded that Schedule 10A does not apply, and there can be no liability for delay in publishing information unless it falls within Paragraph 2 and has been published.

Given the above, the judge held that the claimants’ Particulars of Claim disclosed no reasonable claim for dishonest delay. He also found that the claims for loss arising from Barclays’ share price movements had no real prospect of succeeding at trial. Consequently, the judge granted reverse summary judgment in respect of those claims.

Conclusion

The High Court's judgment in Allianz Funds Multi-Strategy Trust v Barclays PLC provides further clarity on the interpretation of reliance and liability under sections 90A and Schedule 10A of the FSMA. The decision underscores the importance of proving actual reliance on published information and sets a high bar for claimants seeking to establish liability for omissions and dishonest delay. This judgment will undoubtedly have significant implications for future securities litigation in the UK, particularly in cases involving allegations of misleading statements and omissions in published information. Please click here for a copy of the judgment.