Manning & Napier Fund, Inc. (a company incorporated in the United States of America) v Tesco Plc

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Hildyard
Judgment Date31 Jul 2020
Neutral Citation[2020] EWHC 2106 (Ch)
Docket NumberCase No: FL-2016-000019

[2020] EWHC 2106 (Ch)





Rolls Building

7 Rolls Buildings

Fetter Lane




THE HONOURABLE Mr Justice Hildyard

Case No: FL-2016-000019

(1) Manning & Napier Fund, Inc. (a company incorporated in the United States of America)
(2) Exeter Trust Company (a company incorporated in the United States of America) (the “MLB Claimants”)
Tesco Plc

Peter de Verneuil Smith QC, Philip Hinks and Dominic Kennelly (instructed by Morgan Lewis & Bockius UK LLP) for the MLB Claimants

Laurence Rabinowitz QC, David Mumford QC, Conall Patton QC, Michael Watkins and Henry Hoskins (instructed by Freshfields Bruckhaus Deringer LLP) for the Defendant

Hearing dates: 23 – 24 July 2020

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Hildyard

This judgment addresses two applications heard at the PTR in these proceedings which occasioned extended argument. The first is an application by the Defendant (“Tesco”) for specific disclosure of documents evidencing the supervision by the Second Claimant (“ETC”) of its investments in Tesco in accordance with ETC's duties as a trustee (“the Specific Disclosure Application”). The second is an application by the MLB Claimants for permission to rely on further evidence in relation to a claim for loss of the profits (the “Lost Profits Claim”) they allege they would or might have gained had their money not been invested and tied up in shares in Tesco.

The Specific Disclosure Application


The Specific Disclosure Application has substantially been resolved, in that a draft order which reflects my views as expressed in the course of argument has been provided for my approval.


Put briefly, the documentation sought relates to the relationship between the MLB Claimants and their investment adviser and manager (“the Advisor”) and more particularly the Claimants' case that the decision to invest in and/or retain and/or sell the shares in Tesco acquired for the MLB Claimants was in every instance made and implemented by the Advisor acting as their agent.


The legal nature of the relationship is important because the MLB Claimants do not allege that they themselves made any decisions to purchase, hold or sell Tesco shares in reliance on the published information. Instead, they allege that such decisions were made on their behalf by the Advisor, which (they allege) did rely on the published information. If there was no legal relationship of agency, the MLB Claimants cannot show either reliance or causation, and their claims will fail.


It was common ground between the parties that:

(1) There has been a pleaded issue as to the existence of the alleged agency relationship ever since Tesco first served its Defence in January 2017.

(2) However, until 8 June 2020, the MLB Claimants had not given disclosure or adduced any witness evidence in relation to the alleged agency relationship.

(3) On 8 June 2020, the MLB Claimants sought permission to rely on a witness statement from Ms Sarah Turner (“Turner 3”) which (a) explained an error as to the name and identity of the Advisor and (b) exhibited certain Advisor agreements between the investment managers and the MLB Claimants which had not previously been disclosed.

(4) The newly-disclosed documents included an Investment Advisory Agreement which makes clear that ETC, in its role as trustee of the relevant funds, had a significant supervisory and directional role over the activities of the Advisor.


It is also common ground that:

(1) although the original order for disclosure in these proceedings was made in December 2017 and thus before the Disclosure Pilot in CPR PD51U came into force, the application is governed by the Pilot: UTB LLC v Sheffield United Ltd. [2019] EWHC 914 (Ch);

(2) the original order for disclosure must be treated as if it were an order for Extended Disclosure under PD51U (see Ventra Investments Ltd v Bank of Scotland plc [2019] EWHC 2058 (Comm));

(3) what was formerly an application for specific disclosure under CPR 31.12 is treated as an application under PD51U to vary or rectify a failure to comply with an order for Extended Disclosure; and

(4) when deciding whether to allow such an application the court must consider (a) whether the application is “reasonable and proportionate having regard to the overriding objective” (see para. 6.4 of PD51U), and (b) in particular, (i) the likelihood of documents existing that will have a probative value in supporting or undermining [one party's case], (ii) the number of documents involved and (iii) the need to ensure the case is dealt with expeditiously, fairly and at a proportionate cost.


Tesco submitted that these criteria were satisfied in that:

(1) Understanding the supervision exercised by ETC over the Advisor would be likely to assist in identifying the true nature of the relationship between them, and in particular whether it was that of principal and agent, which is a key issue (it being the only basis on which the relevant acts of alleged reliance are said to be attributable to ETC);

(2) Such documents are also necessary and reasonably required in relation to ETC's allegations that decisions to buy, hold or sell Tesco shares were taken (a) in reliance on the alleged misstatements and (b) by the Advisor, which would be directly relevant both (i) to the issue of why and by whom decisions were made to buy, hold or sell Tesco shares and (ii) the counterfactual question of what ETC and the Advisor would or might have done but for the alleged misstatements.


The MLB Claimants submitted that these arguments were misconceived on the grounds that:

(1) The MLB Claimants have made no allegation that ETC itself read or relied on Tesco's published information or made any relevant investment decision: only the Advisor did;

(2) It follows, they submitted, that documents evidencing consideration by ETC itself of the Tesco investment decisions can shed no light on whether the Advisor relied on Tesco's published information or on whether or how it would have acted differently if that published information had not contained misstatements;

(3) There can be no reason to suppose that any general discussions by ETC could have any relevance to the issues of reliance and causation; and

(4) The question whether the Advisor was acting as ETC's agent must turn on the nature and scope of its powers to deal in securities on ETC's behalf, which are set out clearly and definitively in the Investment Advisory Agreement, which is thus the only evidence required.

(5) In short, the documents sought by Tesco are not relevant to the issues in dispute. Moreover, producing these documents would impose a substantial and disproportionate burden on the MLB Claimants at a time when they are heavily engaged in preparing for trial. In the circumstances, the Defendant had failed to establish that the proposed order is necessary for the just disposal of the proceedings, and reasonable and proportionate: and so it should be rejected accordingly.


As I indicated during the course of the hearing, I do not agree with the MLB Claimants. In my judgment:

(1) the issue as to the true nature of the relationship between ETC and the Advisor, and in particular whether it is one of agency and whether the investment decisions made in relation to the relevant Tesco shares were taken by the Advisor in reliance on published information, is an important one capable of being determinative;

(2) the MLB Claimants' confirmation that they rely solely on the investment decisions made in relation to the Tesco shares by the Advisor without involvement by ETC highlights rather than disposes of the issues of (a) agency and (b) reliance and causation. The Investment Advisory Agreement is not necessarily definitive of the legal characterisation of the relationship;

(3) the Investment Advisory Agreement expressly stipulates that the Advisor is to be subject to the supervision of the Trustees (ETC) (see clause 2.2), that it is for ETC to set investment guidelines and procedures (see clause 2.2(a)) which the Advisor must comply with (see clause 2.3), and that ETC must establish and maintain “auditable records as to its compliance with the foregoing procedures”, including its obligation to supervise the Advisor's determination of investments (see Attachment A). Those provisions invite rather than foreclose enquiry as to how and by reference to what information, guidance or criteria the investment decisions in relation to Tesco shares were made;

(4) documentation relevant to such matters is likely to be relevant to the issues of agency, reliance and causation identified above;

(5) the requirement to establish and maintain “auditable records” should mean that there is an available corpus of documents which (though the MLB Claimants told me no-one had ever asked to see them) should be readily accessible; and more generally, I would in any event expect a trustee responsible ultimately for the supervision of the Advisor, the development of investment guidelines and procedures to be adhered to by the Advisor, and the conduct of at least annual reviews, to maintain and keep accessible the documentation necessary to enable that to be done, and record that it has been done;

(6) accordingly, it is appropriate and proportionate the MLB Claimants should collate and disclose all documents within their possession or control for the period 5 November 2009 to 31 December 2014 evidencing ETC's supervision of the...

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