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The Persons Identified In Schedule 1 To the Re-Amended Particulars of Claim v Standard Chartered Plc
Factual and Procedural Background
The appeal concerns whether the Judge was correct to refuse to strike out parts of the claimants' pleadings. The defendant, Company A, a publicly listed parent company of a banking institution ("the Bank"), had entered into settlement agreements in 2012 with US authorities regarding breaches of US economic sanctions from 2001 to 2007, admitting to violations and concealment of sanctioned transactions. Subsequently, a private entity ("Relator A") filed qui tam actions in US courts alleging further misconduct by the Bank beyond the 2012 Settlements, including ongoing sanctions violations post-2007.
Company A disclosed ongoing investigations in its financial reports from 2013 onwards. In 2016, allegations emerged regarding a subsidiary company ("Company B") involved in a bribery scheme, which Company A denied and which was investigated and closed by US authorities without prosecution. Further settlements were reached in 2019 with US and UK regulators concerning additional sanctions and anti-money laundering breaches from 2008 to 2014, involving substantial financial penalties.
The present UK proceedings involve approximately 230 claimants seeking compensation under sections 90 and 90A of the Financial Services and Markets Act 2000 ("FSMA") for alleged misstatements and omissions in securities-related published information by Company A between 2007 and 2019. The claims partly rely on allegations from the bribery scheme and the Relator A's complaint, including misconduct admitted in the 2019 Settlements and misconduct alleged but denied by Company A. The trial was provisionally estimated to last 96 days.
Legal Issues Presented
- Whether the Judge erred in declining to strike out parts of the claimants' pleadings related to the Relator A's complaint and Company B's bribery allegations.
- Whether the pleadings sufficiently particularise allegations of fraud or dishonesty as required under civil procedure and FSMA provisions.
- Whether certain non-executive directors of Company B qualify as "persons discharging managerial responsibilities" ("PDMRs") within Company A for liability under FSMA.
- Whether the claimants' allegations of knowledge or dishonesty by members of Company A's Group Executive are adequately pleaded to sustain claims under FSMA section 90A and schedule 10A.
Arguments of the Parties
Defendant's Arguments
- The pleadings must disclose a solid evidential foundation for fraud or dishonesty allegations, including primary facts that tilt the balance in favour of such inferences.
- Simply adopting allegations from Relator A's complaint does not meet the standard for particularisation required to sustain fraud claims.
- The claimants failed to plead a sustainable case that any PDMR within Company A had knowledge or acted dishonestly regarding the bribery scheme, justifying strike out of related claims.
- Only de jure, de facto, or shadow directors can be PDMRs; some individuals in the Group Executive are not alleged to be such directors, undermining the claimants' case.
- It is improper to advance fraud allegations collectively ("en bloc") against multiple individuals without specifying individual knowledge or dishonesty.
- The claimants have failed to plead primary facts supporting an inference of dishonesty against any member of the Group Executive.
Claimants' Arguments
- The claimants rely on specific paragraphs of Relator A's complaint incorporated by reference, supported by declarations from former employees, providing sufficient particulars of misconduct.
- There is no requirement to plead all evidence or detailed primary facts at the pleading stage; a concise statement of facts suffices.
- Pleadings can properly "piggyback" on allegations made by credible third parties without independently detailing all evidential support.
- The claimants have adequately pleaded that members of Company A's Group Executive, including de jure or de facto directors, had knowledge of the bribery allegations before public exposure.
- It is acceptable at this stage to plead collective knowledge of the Group Executive, with individual particulars to be provided as soon as feasible.
- The claimants deny that the allegations are false and assert they will be proved following disclosure and trial evidence.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Allianz Global Investors GmbH v G4S Ltd [2022] EWHC 1081 (Ch) | Definition of "persons discharging managerial responsibilities" as directors (including de facto and shadow directors). | The Court applied this to assess whether members of the Group Executive could be PDMRs; accepted claimants' position that non-de jure directors could be de facto directors. |
| Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1 | Requirement for specific and particularised pleading of fraud or dishonesty; balance between fair notice and excessive detail. | The Court relied on the majority's approach to allow pleadings that sufficiently allege dishonesty without requiring full evidential detail at pleading stage. |
| Davy v Garrett (1878) 7 Ch D 473 | Fraud or dishonesty must be distinctly alleged and proved; pleadings must not be equivocal. | Referenced in assessing the adequacy of particularisation in pleadings for fraud or dishonesty allegations. |
| Bullivant v Attorney General for Victoria [1901] AC 196 | Pleadings must allege fraud explicitly; facts relied upon must not be equivocal. | Supported the principle that allegations of fraud require clear pleading. |
| Armitage v Nurse [1998] Ch 241 | It is not necessary to use the words 'fraud' or 'dishonesty' if the facts pleaded demonstrate such conduct. | Used to explain the sufficiency of pleading fraud through facts rather than labels. |
| Belmont Finance Corpn Ltd v Williams Furniture Ltd [1979] Ch 250 | Equivocal pleadings on dishonesty are insufficient; the court will not presume dishonesty if consistent with innocence. | Guided the Court's analysis of the clarity of dishonesty allegations. |
| JSC Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm) | At interlocutory stage, the test is whether pleaded facts justify an inference of dishonesty more likely than innocence or negligence. | Applied to determine whether primary facts pleaded sufficiently tilt the balance towards dishonesty. |
| Sofer v SwissIndependent Trustees SA [2020] EWCA Civ 699 | Principles on pleading dishonesty: fraud must be specifically alleged and particularised; primary facts must be pleaded. | Endorsed the approach to pleading fraud and dishonesty and the timing of particulars. |
| Rigby v Decorating Den Systems Ltd [1999] EWCA Civ 986 | Failure to identify individuals with knowledge at outset does not automatically justify striking out; particulars should be provided as soon as feasible. | Supported the Court's view on the timing and sufficiency of particulars regarding knowledge of individuals. |
| Nokia Corporation v AU Optronics Corporation [2012] EWHC 731 (Ch) | Balance between detailed pleading and allowing meritorious claims to proceed despite limited initial particulars. | Supported the Court's approach to allow some generosity in pleading secrecy-related misconduct. |
| Medcalf v Mardell [2003] 1 AC 120 | Professional obligation not to plead fraud without credible material; but documented public findings can suffice at pleading stage. | Referenced regarding professional standards and the sufficiency of credible material supporting fraud allegations. |
| McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775 | Purpose of particulars is to give the defendant notice of the case against them; concise statements suffice. | Applied to guide the Court's view on the adequacy of particulars in pleadings. |
| Walker v Stones (2000) 2 ITELR 848 | Particulars of dishonesty must be read as a whole and in context. | Supported the Court’s holistic approach to assessing the pleadings. |
Court's Reasoning and Analysis
The Court examined the pleading requirements for allegations of fraud and dishonesty, emphasizing the need for specific and sufficient particularisation to give fair notice to the defendant while avoiding excessive demands for detail. It acknowledged the established principles from Three Rivers and related authorities that while allegations of dishonesty must be clear and supported by particulars, the claimant need not plead all evidential details or primary facts at the outset.
The Court recognized that a claimant may rely on credible third-party allegations ("piggybacking") without independently establishing all evidential foundations at the pleading stage, provided the pleadings are not equivocal and sufficiently particularised.
Regarding the Relator A's allegations, the Court found that the claimants’ pleadings, read in conjunction with specified paragraphs of the Relator A's complaint, provided an adequate basis to proceed to trial. The Court noted the claimants’ position that they do not rely on all parts of the complaint but on specific incorporated allegations supported by declarations from former employees.
On the issue of PDMRs within Company A, the Court accepted the claimants' position that members of the Group Executive who are not de jure directors may be de facto directors, thus qualifying as PDMRs under the G4S precedent. The Court rejected the defendant’s argument that this was a fatal defect, considering it a "non-point" given the claimants’ clear intention to plead de facto directorship.
Concerning the claimants’ collective ("en bloc") pleading of knowledge or dishonesty against multiple individuals in the Group Executive, the Court held that while particulars identifying individual knowledge should be provided as soon as feasible, the pleadings were not liable to be struck out solely on this basis at this stage.
The Court found that the claimants had adequately pleaded knowledge of the bribery allegations by members of the Group Executive, supported by whistle-blower reports, media articles, and consultancy reports, thus sustaining a credible case for trial.
Overall, the Court balanced the need for proper particularisation against the practical realities of pleading complex fraud claims where full evidence may not yet be available, endorsing a generous approach in favor of the claimants at this interlocutory stage.
Holding and Implications
The Court DISMISSED THE APPEAL.
The Judge's decision to refuse striking out the claimants' pleadings related to the Relator A's allegations and the bribery scheme was upheld, except for the limited striking out of allegations that certain non-executive directors of Company B were PDMRs of Company A, which was not challenged on appeal. The claimants are permitted to proceed to trial on their claims under FSMA sections 90 and 90A based on the pleaded misconduct.
This decision allows the complex fraud and dishonesty claims to be fully examined at trial, without imposing unduly onerous pleading requirements at the interlocutory stage. No new precedent was established beyond the application of existing principles regarding pleading fraud, dishonesty, and the definition of PDMRs.
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