The burden of proof in market abuse cases

Published date07 October 2013
Date07 October 2013
AuthorAndrew Haynes
Subject MatterAccounting & Finance,Financial risk/company failure,Financial crime
The burden of proof in market
abuse cases
Andrew Haynes
Department of Law and Social Sciences, University of Wolverhampton,
Wolverhampton, UK
Purpose – The purpose of this article is to determine the burden of proof that is applicable in the
range of activities covered by the civil offence of market abuse. It also considers the approach adopted
in the USA and discusses the extent to which that approach may be worth applying in this country.
Design/methodology/approach – The methodology adopted is a mixture of black letter law in
analysing the nature of the burden of proof and the relevant market abuse issues, historical research in
examining how the modern law relating to the burden of proof has evolved and comparative research
through the consideration given to the US approach.
Findings – The findings are that the burden of proof in market abuse cases is unclear, that the
burden may well not be the same in all cases, that clarification is needed on the point and that the
approach adopted in the USA offers the advantage of clarity. Therefore, its adoption should be
Practical implications – The main practical implication is that cases are currently being brought
without this key issue being properly considered and clarified.
Originality/value – The author can find no other research that has been published in this specific
Keywords Burden of proof, Marketabuse
Paper type Research paper
It is commonly known that the burden of proof required in criminal cases operates at a
standard “beyond all reasonable doubt” and that in civil cases it rests “on a balance of
probabilities”. In the latter instance if the evidence suggests to the court that it can say if
“we think it more probable than not the burden is discharged, but, if the probabilities
are equal, it is not”[1]. There is the additional principle that “everyone charged with
a criminal offence shall be presumed innocent until proved guilty”[2], though there are
areas where there are limits on this[3]; and in addition the same principle applies in civil
cases where the party bringing the action is the one who must prove it. This article
considers this and how the burden of proof operates in the context of market abuse. It also
briefly considers whether the alternative US approach of an “an alternative burden of
proof”[4] offers any solutions.
Dennis (2007, p. 438) made a classic definition of the issue where he stated:
The term “burden of proof”, also known as the “onus of proof”, refers to the legal obligation
on a party to satisfy the fact finder, to a specified standard of proof, that certain facts are true
[...]. The term “standard of proof”, also known as the “quantum of proof”, refers to the degree
of probability to which facts must be proved to be true.
He continued Dennis (2007, pp. 439-450) “there is more than one type of burden known
to the law” Denning (1945) but the case law seems opaque on what precisely this is.
The current issue and full text archive of this journal is available at
Journal of Financial Crime
Vol. 20 No. 4, 2013
pp. 365-392
qEmerald Group Publishing Limited
DOI 10.1108/JFC-05-2013-0036
The burden of
A useful starting point from which to analyse the current law on this point is the 1951
case of Bater v. Bater. Here, Lord Denning said[5]:
A civil court, when considering a charge of fraud, will naturally require a higher degree of
probability than that which it would require if considering whether negligence were
established. It does not adopt so high a degree as a criminal court, even when it is considering
a charge of a criminal nature, but still it does require a degree of probability which is
commensurate with the occasion.
In a later case[6] he added:
The case, like any civil case, may be proved by a preponderance of probability, but the degree
of probability depends on the subject-matter. In proportion as the offence is grave, so ought
the proof be clear.
This ties in with Ungoed-Thomas J’s remark in Re Dellow’s Will Trusts[7] that “The
more serious the allegation the more cogent is the evidence required to overcome the
unlikelihood of what is alleged and thus to prove it”.
An alternative approach can be traced back to Hornal v. Neuberger Products[8]
where Morris LJ said:
Though no court and no jury would give less attention to issues lacking gravity than to those
marked by it, the very elements of gravity become a part of the whole range of circumstances
which have to be weighed in the scale when deciding as to the balance of probabilities.
Unfortunately, this does not provide a full explanation and nor does the later case of
Thomas Bates and Son v. Wyndhams (Lingerie) Ltd[9] where Buckley LJ remarked that:
[...] in civil proceedings a fact must be proved with that degree of certainty which justice
requires in the circumstances of the particular case. In every case the balance of probability
must be discharged, but in some cases the balance may be tipped more easily than others”.
However, is this distinction one that the judiciary are agreed on? As Lord Carswell
pointed out, it is apparent from Morris LJ’s analysis in Hornal v. Neuberger Products
Ltd[10] that he did not regard it as laying down a more exacting standard than the
balance of probabilities. He said[8]:
Though no court and no jury would give less careful attention to issues lacking gravity than to
thosemarked by it,the very elementsof gravity becomea part of thewhole range of circumstances
which have to be weighed in the scale when deciding as to the balance of probabilities.
There is the possibility that although later cases (see below) have interpreted this as
being a distinct line of reasoning from earlier cases such as Bater v. Bater[8] it may not be
the case. Is a “higher degree of probability” a different legal concept than “the balance
(being) tipped more easily”[9] or are they just different ways of conceptualising
something that has the same effect? What is clear is that in a run of cases the logic started
to take on a slightly different direction. This approach, which provides an alternative
way of analysing the situation seems currently to be in the ascendancy, though it is not
one that is universally accepted by later courts (Pattenden, 1988; McBride, 1999; Alcock,
2007; Mirfield, 2009). The logic developed in Re H (Minors) Sexual Abuse: Standard of
Proof[11] where Lord Nichols raised the suggestion that the issue of the balance of
probability should be examined in the context of the likelihood of the events having
occurred. He went on to say:

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT