Allianz Global Investors GmbH and Others v Barclays Bank Plc
Jurisdiction | England & Wales |
Judge | Sir Nigel Teare |
Judgment Date | 25 February 2021 |
Neutral Citation | [2021] EWHC 399 (Comm) |
Court | Queen's Bench Division (Commercial Court) |
Docket Number | Case No: CL-2018-000840 |
Date | 25 February 2021 |
[2021] EWHC 399 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Nigel Teare
Sitting as a Judge of the High Court
Case No: CL-2018-000840
Marie Demetriou QC, Colin West QC and Richard Howell (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Claimants
Mark Hoskins QC and David Heaton (instructed by Latham & Watkins (London) LLP) for the First Defendant
Max Evans (instructed by Allen & Overy LLP) for the Second and Third Defendants
Sarah Abram and Tom Wood (instructed by Norton Rose Fulbright LLP) for the Fourth Defendant
Daisy Mackersie (instructed by Slaughter and May) for the Fifth and Sixth Defendants
Sarah Love (instructed by Macfarlanes LLP) for the Seventh Defendant
Paul Luckhurst (instructed by Gibson Dunn & Crutcher LLP) for the Eighth Defendant
Stephen Wisking of Herbert Smith Freehills LLP for the Ninth and Tenth Defendants
Hearing dates: 15–17 February 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Sir Nigel Teare SITTING AS A JUDGE OF THE HIGH COURT
In this case a large number of Claimants (more than 170), almost all of which are investment funds, seek damages from a number of Defendant banks (7 groups) alleging “illegal and anti-competitive manipulation of the foreign exchange (FX) markets in the period 2003–2013.” The claims are for breach of statutory duty in respect of infringements of article 101 of the Treaty on the Functioning of the EU and section 2 of the Competition Act 1998 which are described by the Claimants as “materially similar”. The claims are in part “follow-on” claims from two decisions of the European Commission and in part “stand-alone” claims. I have been told that the alleged illegal manipulation of the FX markets took place in around 200 chat rooms and was also orchestrated by email, telephone, text and WhatsApp messages and in person meetings.
The allegations of liability are denied by the Defendants (save in so far as the Defendants are addressees of the Commission's decisions) but to the extent that they are proved and loss is established the Defendants say that the Claimants have mitigated their loss in part by passing on or transferring the loss to others. The nature of this species of mitigation has been discussed by the Supreme Court in Sainsbury's Supermarkets Ltd v Visa Europe Services LLC [2020] UKSC 24, [2020] 4 All ER 807 at paragraphs 196–226.
Thus it was pleaded by one of the Defendants that “ in so far as any benchmark manipulation caused the Claimants to suffer any loss, they must give credit for any extent to which they passed those losses on to their own clients or other counterparties. Pending disclosure and further information as to the Claimants' case, Barclays is not able to plead further to the details of any such passing on.”
In the absence of further particulars the Claimants applied on 28 January 2020 to have such pleading struck out. However, it was considered appropriate to delay the hearing of that application until after judgment had been given by the Supreme Court in Sainsbury's Supermarkets Ltd v Visa Europe Services LLC. After judgment was given in that case there was a hearing before Jacobs J. on 5 August 2020. The order made by Jacobs J. recorded at recital 3 an undertaking by the Defendants to provide to the Claimants further draft particulars of their Pass-On Defences by no later than 4pm on 30 September 2020. By paragraph 5(a) of the order the judge ordered the Claimants, by no later than 4 pm on 14 October 2020, to inform the Court and the Defendants whether they intended to pursue the application to strike-out.
The Defendants provided joint further particulars (“Further Particulars”) on 30 September 2020. They extend to some 50 paragraphs (and have since been slightly amended). On 14 October 2020 the Claimants confirmed that they intended to pursue their strike-out application. By a witness statement of Mr. Bronfentrinker dated 20 November served on behalf of the Claimants it was made clear that the Claimants only challenged paragraphs 14–28, 32–35 and 50 of the Further Particulars.
By application notices dated 20–22 January 2021 the Defendants sought permission to amend their Defences by incorporating the Further Particulars into their Defences. It was explained as follows in part C of Barclays' application: “ The Claimants have accepted in their evidence on the Strike-Out Application that the Voluntary Particulars are arguable in part. If the Court otherwise dismisses the Strike-Out Application, it will follow that the Voluntary Particulars are arguable in full. Permitting the amendments proposed is the other side of the coin to the Claimants' abandonment of most of the Strike-Out Application and, if the Court does so, its dismissing the limited aspects pressed.” The other Defendants' applications contained similar wording.
In those circumstances it seems to me that counsel for the Defendants were correct to observe that “ the Defendants' application to amend merely flows as a sensible piece of house-keeping from the resolution of that strike-out application.” The court is therefore concerned, essentially, with the Claimants' strike-out application. But even if it were correct to focus upon the application to amend the question would be the same, namely, whether those paragraphs of the Further Particulars which are challenged give rise to a real prospect of a “pass-on Defence” succeeding at trial.
In respect of a discrete matter concerning tax there is a question as to whether the plea has been properly particularised. Finally, there are some miscellaneous issues.
Pass-on in the context of redemptions and withdrawals
Paragraphs 14–17 of the Further Particulars state as follows:
“(i) Investors
(a) Redemptions or withdrawals
14. The Defendants understand that many of the Investment Funds, including at least the 3rd to 16th, 25th to 27th, 32nd, 40th, 43rd to 49th, 51st, 53rd, 58th to 67th, 71st to 141st, 143rd to 148th, 151st, 152nd, 154th, 155th, and 157th to 172nd Claimants, and the investment funds on behalf of which the 56th, 57th, 68th, 150th and 153rd Claimants are claiming, made provision for their investors' investments to be redeemed or withdrawn in specified circumstances.
15. The investments of investors in any such Investment Fund may have been redeemed or withdrawn during the life of the Investment Fund at or by reference to the prevailing net asset value (“NAV”) of the Investment Fund at or around the time of redemption or withdrawal. If the effect of any less advantageous FX transaction was to lower the NAV of the Investment Fund, and an investor's investment was redeemed or withdrawn in whole or in part at a price affected by the less advantageous FX transaction, that Investment Fund will have avoided all or part of its loss, or alternatively passed on all or part of its loss to the investor
16. Further or alternatively, any Investment Fund does not have standing to sue in respect of any loss which was avoided by being transferred, or alternatively passed on, from the Investment Fund to a former investor.
17. Further or alternatively, in such circumstances, it would be necessary to avoid the risk of recovery by both the redeeming or withdrawing investor and the Investment Fund, which would result in double recovery.”
Paragraphs 18–24 make a similar allegation in relation to “master funds” and paragraphs 25–28 make a similar allegation with regard to liquidations of funds or share classes.
The typical example of “pass-on” mitigation in a competition case is where a cartel, as a result of unlawful anti-competitive practices, overcharges a purchaser of certain products and that purchaser passes on the overcharge to its sub-purchaser; see for example the facts of Sainsbury's at paragraph 192. As a result the purchaser has mitigated or avoided the loss which it suffered as a result of the unlawful anti-competitive practices by passing on the overcharge to its sub-purchaser. It is accepted by the Defendants that the application of these principles “ ensures that all parties who have suffered loss are able to claim, that no party may seek to be overcompensated, and that a defendant is not subjected to double recovery”. It was apparent from the manner in which the Defendants presented their arguments (and expressly accepted by leading counsel for the Defendants in his oral submissions) that a successful plea of pass-on required that the person to whom the loss had been passed on had his own right to sue in respect of that loss. This is not a feature of other types of mitigation but is a feature of “pass-on” mitigation.
The present case is not the typical case of pass-on. It does not involve the sale and purchase of goods in a supply chain. Instead it involves, in the main, investment funds which seek to generate a return for their investors and in so doing make use of foreign exchange services provided by banks. “Pass-on” is said to occur when an investor redeems or withdraws his investment. However, whenever a wrong is alleged to have caused loss the innocent party cannot recover in respect of loss which it has avoided. Damages are compensatory....
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