Various Claimants v Standard Chartered Plc

Hearing dates: 3, 4, & 5 October 2023

Approved Judgment

This judgment was handed down remotely at 10.30am on 8 November 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

THE HON Mr Justice Michael Green

Introduction

Between 3 and 5 October 2023, I heard the first Case Management Conference (“CMC”) in these proceedings that had been started some three years earlier. The bulk of the hearing was concerned with the Defendant's applications for certain parts of the case to be struck out and/or for reverse summary judgment to be entered; and for the Claimants to provide further information of their case pursuant to CPR Part 18. This is my reserved judgment on those applications.

I am pleased to say that the other issues on the CMC, including in particular the structure of the proceedings going forward in relation to whether there should be a split trial and if so where the split should be, were resolved by agreement between the parties and I have made an Order dealing with that. It essentially defers a decision on those matters to a second CMC to be held in Spring 2024 when the parties and the Court should be in a better position to deal with them.

There are four claims before the Court brought by a total of 230 Claimants against Standard Chartered plc (“ SC plc”) under sections 90 and 90A of and Schedule 10A to the Financial Services and Markets Act 2000 (“ FSMA”). SC plc is the parent of Standard Chartered Bank (the “ Bank”) and its subsidiaries (collectively, the “ Group”). Although there are four claims, there is a single consolidated set of pleadings and I have directed that the claims are to be managed and tried together.

The Claimants allege that SC plc made untrue and misleading market statements in 3 prospectuses and some 45 other items of published information over a period of 12 years (2007 to 2019) relating to non-compliance with sanctions against Iran, financial crime control failures and alleged bribery by members of the Group. The Claimants, as institutional investors in SC plc, say that they relied on those representations in acquiring, disposing or continuing to hold their securities issued by SC plc and have suffered loss as a result.

The Claimants were represented before me by Mr Graham Chapman KC, leading Mr Shail Patel and Mr William Harman. SC plc was represented by Mr Adrian Beltrami KC, leading Mr Dominic Kennelly. I am grateful to them for their clear and well-crafted submissions, both in writing and orally.

Mr Beltrami KC had a number of complaints about the claim, some of which were specifically related to the application to strike out, and others in relation to proper case management. These included issues about the standing of individual Claimants about whom he said that there had been inadequate investigation as to whether they were properly Claimants or even whether they exist as a matter of law. Mr Beltrami KC also complained about the lack of information provided by the Claimants as to important parts of their case, including, standing, reliance, loss and limitation. One of the applications I will be dealing with later in this judgment is SC plc's CPR Part 18 Request for Further Information.

The main application is SC plc's application to strike out and/or for reverse summary judgment in relation to the following parts of the claim:

(1) The so-called “ Brutus Allegations” which are to the effect that the Group's non-compliance with the sanctions were far wider and more systematic than it had admitted to in its two settlements with the US authorities in 2012 and 2019;

(2) The allegation that there were “ person[s] discharging managerial responsibility” (“ PDMR”) in SC plc who knew of or were reckless as to the alleged bribery scheme in a Singaporean company called Maxpower Group PTE (“ Maxpower”) which was approximately 47% owned by the Group; and

(3) The Claimants' individual reliance claims.

Before turning to the application I should set out some more factual background and the legal context of the issuer liability regime.

Factual Background

There is an agreed summary of the factual background to this dispute set out in the Case Memorandum and List of Common Ground and Issues. The facts and matters set out below are largely derived from those documents.

As I said above, the Claimants are 230 institutional investors who claim to have acquired securities in SC plc, via 1,646 individual funds and/or accounts during the period February 2007 to April 2019. SC plc is a public company listed on the main market of the London Stock Exchange and the Hong Kong Stock Exchange. It is the parent company of the Bank which is a company incorporated by Royal Charter. The Group operates as a global retail, wholesale and investment banking institution through a network of branches and subsidiaries.

In September and December 2012, the Bank entered into settlement agreements with various US authorities relating to historic sanctions non-compliance (the “ 2012 Settlements”). As part of the 2012 Settlements, the Bank agreed to forfeit $227 million and admitted that “ [s]tarting in early 2001 and ending in 2007” it had violated US and New York State law by illegally sending payments through the US financial system on behalf of entities subject to US economic sanctions. The Bank admitted that it sought to conceal the involvement of sanctioned counterparties by manipulating and falsifying electronic payment information. The 2012 Settlements also stated that the Bank “ made the decision to exit the Iranian business” in October 2006, ended its US-dollar business for Iranian banks by March 2007, and suspended all new Iranian business in any currency by August 2007.

On 17 December 2012, Brutus Trading LLC (“ Brutus”) filed a “ qui tam” action in the US District Court for the Southern District of New York (the “ First Brutus Action”). Qui tam actions are claims brought by private individuals or entities (known as “ relators”) on behalf of the US Government seeking monetary recovery which is shared between the US Government and the relators. Brutus was founded by a former employee of the Bank called Mr Julian Knight and an individual who previously worked with (but not for) the Bank called Mr Robert Marcellus. In the First Brutus Action, Brutus alleged, among other things, that the Bank had misled the US authorities in the run up to the 2012 Settlements by failing to disclose sanctions violations involving Iranian clients after 2007.

From March 2013, SC plc's annual and half-year reports and other announcements contained disclosures, the adequacy of which is disputed by the Claimants, about, amongst other things, the ongoing investigations by the US and UK authorities.

In October 2014, media outlets reported that US authorities had reopened investigations into the Bank in respect of sanctions violations. Further, in November 2015, SC plc announced that the investigations related to the period after 2007 and the completeness of the Bank's disclosures to the US authorities at the time of the 2012 Settlements.

From April 2016, global news agencies reported allegations that Maxpower had engaged in a corrupt scheme between 2012 and 2015 to bribe Indonesian government (and other) officials to win or renew contracts or obtain other advantages such as quicker payments (the “ Bribery Scheme”). SC plc does not admit that Maxpower engaged in the Bribery Scheme and denies that the Group or its employees made, directed or condoned any improper payments. Maxpower was not a subsidiary or member of the Group. The Bank voluntarily disclosed to the US and UK authorities the alleged Bribery Scheme. It was investigated by the US Department of Justice, which closed its inquiry without bringing any prosecution against any member of the Group. SC plc understands that there are no ongoing investigations in relation to this by any authority.

In February and April 2019, the Bank and various US and UK authorities entered into further settlement agreements in respect of non-compliance with US sanctions law and in respect of UK anti-money laundering breaches (the “ 2019 Settlements”). By the 2019 Settlements, the US authorities imposed a further financial penalty of some $947 million and the UK Financial Conduct Authority (the “ FCA”) imposed a penalty of £102 million. The Bank admitted that, from at least November 2007 to 2014, the Bank and its New York branch facilitated payments worth $600 million in violation of US sanctions from clients resident in Iran, and payments worth $20 million involving entities from other sanctioned countries. The FCA found that there were “ serious and sustained” shortcomings in the Group's financial crime controls, customer due diligence and ongoing monitoring.

In September 2018, Brutus sought (and obtained) voluntary dismissal of the First Brutus Action and, in November 2018, filed a new qui tam action in the US District Court for the Southern District of New York (the “ Second Brutus Action”).

Brutus' case in the Second Brutus Action is summarised in a Complaint which was most recently amended on 20 September 2019, and was supported by Declarations dated 10 January 2020 from Mr Knight and Mr...