Allianz Global Investors GmbH and Others v Barclays Bank Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Phillips,Lady Justice Carr,Lord Justice Peter Jackson |
| Judgment Date | 23 March 2022 |
| Neutral Citation | [2022] EWCA Civ 353 |
| Docket Number | Case No: CA-2021-000556 (formerly A4/2021/0726) |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 353
Lord Justice Peter Jackson
Lord Justice Phillips
and
Lady Justice Carr
Case No: CA-2021-000556 (formerly A4/2021/0726)
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
SIR NIGEL TEARE
Royal Courts of Justice
Strand, London, WC2A 2LL
Marie Demetriou QC, Colin West QC and Richard Howell (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Appellants
Mark Hoskins QC, Sarah Abram, David Heaton and Tom Wood (instructed by Latham & Watkins (London) LLP, Allen & Overy LLP, Norton Rose Fulbright LLP, Slaughter and May, Macfarlanes LLP and Gibson, Dunn & Crutcher UK LLP) for the Respondents
Hearing dates: 8 and 9 December 2021
Approved Judgment
This judgment was handed down remotely at 10.30 am on 23 March 2022 by circulation to the parties or their representatives by email and by release to BAILII and the National Archives.
On 23 March 2021 Sir Nigel Teare (“the Judge”) made an order dismissing an application by the appellants (“the Funds”) to strike out the case pleaded by the respondents (“the Banks”) that the Funds have avoided or “passed on” all or part of the losses they claim against the Banks in these proceedings. The Funds appeal that decision with permission granted by Males LJ.
Background
The Funds are investment funds structured as trusts, companies or limited partnerships, most of them permitting their investors to redeem or withdraw their investment in specified circumstances by reference to the net asset value (“the NAV”) of the Fund in question. The Funds comprise most of the claimants 1 in these proceedings, brought against the Banks for damages for the illegal anti-competitive manipulation of foreign exchange (“FX”) markets to the claimants' detriment between 2003 and 2013. The claims are for breach of statutory duty in respect of infringements of Article 101 of the Treaty on the Functioning of the European Union and section 2 of the Competition Act 1998, certain infringements being established by decisions of the European Commission addressed to the Banks, the remainder being “stand-alone” allegations.
The Banks deny liability (save in so far as they are addressees of the Commission's decisions) and further assert (to the extent that liability is accepted or established), that the Funds have avoided or “passed on” losses incurred as a result of the alleged infringements to the extent that investors in the Funds have subsequently redeemed or withdrawn their investment at a net asset value (“NAV”) which was lower than it would have been but for the alleged infringements (“the Redemption Argument”). If sustainable as a matter of law, the Redemption Argument would require the parties (and particularly the Funds) to engage in a very substantial disclosure and evidential exercise, involving an investigation and assessment of every redemption of an investment in each Fund going as far back as 2003 (and continuing right up to trial of the claims) and a determination of the extent (if at all) to which the NAV at which each redemption occurred was lower by reason of such infringements as are ultimately accepted or proved than it would otherwise have been.
The application to strike out
On 28 January 2020 the Funds applied to strike out the Redemption Argument pursuant to CPR 3.4(2)(a) as disclosing no reasonable grounds for defending the claim. Following the service of draft Joint Further Particulars of Avoided Loss, Mitigation and Pass-On by the Banks on 30 September 2020, the Redemption Argument under challenge by way of the Funds' application was formulated as follows:
“15…. 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 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.”
The application and a cross-application by the Banks for permission to amend their Defences to reflect the draft Joint Particulars were heard by the Judge from 15 to 17 February 2021.
The Funds' contention was that it is not arguable that losses suffered by an investment fund are “passed on” to investors who subsequently redeem at a lower value. They contended that the proper claimant in respect of such losses is at all times the investment fund, whether structured as a trust, a company or a partnership. To the extent that an investor suffers a diminution in the value of its investment by virtue of the wrong committed against the fund, the investor does not have standing to sue for such diminution. In the case of a company, it is well established that such loss is treated as merely reflective of the loss of the company and does not give rise to a separate claim.
The Banks, in paragraph 4 of their joint skeleton argument for the hearing before the Judge, labelled the Redemption Argument as “pass-on”, stating that it “encompasses also avoided loss”. After explaining that redemptions at a lower value resulted in the Funds' losses being avoided or passed on to the investors, the Banks addressed the Funds' objections based on the reflective loss principle in the case of companies and related principles in the case of trusts and partnerships. In each case the Banks' answer was that the principles do not apply to former shareholders, beneficiaries or partners, and that, in any event, such investors must be entitled, pursuant to the EU principle of effectiveness, to a remedy for losses suffered by an infringement of Article 101.
In a reserved judgment handed down on 25 February 2021 the Judge accepted the Redemption Argument, determining that as a matter of law the defence of pass-on was available on the basis alleged and was not defeated by the trust principle, the reflective loss principle or the partnership principle (without resort to the principle of effectiveness, which he held was inapplicable). Accordingly, and to that extent, the Judge dismissed the strike out application and allowed the amendment application. Given the arguments raised on this appeal by the Banks (considered below) it is necessary to set out in some detail, by reference to the judgment, the Judge's understanding of the parties' positions on the strike-out application and the issues he determined as a result.
The judgment
At [11] the Judge noted that the typical example of “pass-on” mitigation in a competition case was where anti-competitive conduct resulted in overcharging a purchaser, who then passes on some or all of the overcharge to sub-purchasers. The Judge recorded that:
“It was apparent from the manner in which [the Banks] presented their arguments (and expressly accepted by leading counsel for [the Banks] 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.”
After noting at [12] that pass-on and the principle of compensatory damages apply also to claims for breach of statutory duty (referring to the decision in Sainsbury's Supermarkets Ltd. v Visa Europe Services LLC [2020] UKSC 24, [2020] 4 All ER 807 at [196]), at [13] the Judge summarised the dispute between the parties as follows:
“In essence [the Funds] say that whenever an investor redeems or withdraws his investment the only legal entity with title to sue in respect of the alleged wrongdoing by [the Banks] is the investment fund, not the investor. The suggested “pass-on” would therefore entitle [the Banks] to escape liability. This is not accepted by [the Banks] who say that the investors to whom a loss has been passed on have their own cause of action.”
The Judge then (at [15]) listed the Funds' arguments in support of the strike-out application, described as “the trust issue”, “the company issue” and “the partnership issue” (a further issue as to contractual terms not being relevant on this appeal). At [17] the Judge stated that “the crucial point at issue is whether an investor who redeems or withdraws his investment has a cause of action in damages against a wrongdoing bank. If the investor does not have such a cause of action it is accepted that the pass-on plea cannot be sustained”.
The Judge explained his concern that evidence as to precisely how the alleged wrongdoing of the Banks impacted on the Funds, how that affected their NAVs and how that affected the sum payable to the investors might be relevant to the determination of the issues of law raised by the Funds. However, the Judge noted at [47] that counsel for the Banks did not suggest that such evidence was relevant to those issues (save for evidence of the foreign law applicable to the structure of those Funds not domiciled in this jurisdiction) and did not raise the need for evidence as a reason not to determine the issues of law on the strike-out...
To continue reading
Request your trial
-
Umbrella Interchange Fee Claimants v Umbrella Interchange Fee Defendants
...cases were cited in argument or were referred to in the skeleton arguments:Allianz Global Investors GmbH v Barclays Bank plc [2022] EWCA Civ 353; [2023] 1 All ER (Comm) 20, CAArkin v Borchard Lines Ltd [2000] Eu LR 232Civil Aviation Authority v Ryanair DAC [2022] EWCA Civ 76; [2022] 2 Lloyd......
-
James Lonsdale v Wedlake Bell LLP
...between him and the solicitor was of the special nature recognised in that case.” 63 Ms Haren referred to the decision in Allianz Global Investors GmBH v Barclays Bank [2022] EWCA Civ 353 and submitted that this represented a mistaken understanding of the decision in Yudt which only allowe......
-
E D & F Man Capital Markets Ltd v Steven Kai Shing Kao
...a point also made by Lord Justice Phillips in another competition case concerned with the passing on of losses, Allianz Global Investors GmbH v Barclays Bank Plc [2022] EWCA Civ 353. Identifying the transaction 55 Mr Davies submitted that it is inherent in Lord Browne-Wilkinson's formulati......
-
Lucy Burnford v Automobile Association Developments Ltd
...at that point in time are adventitious happenstance and have nothing to do with the operation of the rule.” 29 In Allianz Global Investors GmbH v Barclays Bank plc [2022] EWCA Civ 353 (“ Allianz”), the Court of Appeal proceeded on the basis that, as the Privy Council had held in Primeo, th......
-
Court Of Appeal Strikes Out Pass-On Defence In Forex Manipulation Claim
...losses by cashing out of investments. The Court of Appeal judgment in Allianz Global Investors GmbH and Others v Barclays and Others [2022] EWCA Civ 353 is a welcome ruling for claimants in competition damages claims. If successful, the defendants' arguments would have had wide-ranging cons......
-
Lessons From Burnford: Investors, Creditors And Recovering Reflective Losses
...of considering it when making investment decisions. Footnote 1. On this point, see also Allianz Global Investors v Barclays & others [2022] EWCA Civ 353 in which the Court of Appeal reached a similar The content of this article is intended to provide a general guide to the subject matter. S......