Wirral Council as administering authority of Merseyside Pension Fund (the Representative Claimant) v Indivior Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Michael Green |
| Judgment Date | 05 December 2023 |
| Neutral Citation | [2023] EWHC 3114 (Comm) |
| Year | 2023 |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case Nos: FL-2022-000018 |
[2023] EWHC 3114 (Comm)
THE HON Mr Justice Michael Green
Case Nos: FL-2022-000018
FL-2022-000020
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
FINANCIAL LIST
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Graham Chapman KC, Alex Barden and Joseph Leech (instructed by Mishcon de Reya LLP) for the Representative Claimant
Conall Patton KC (instructed by Freshfields Bruckhaus Deringer LLP) for Indivior PLC
Helen Davies KC, Tony Singla KC and Jonathan Scott (instructed by Linklaters LLP) for Reckitt Benckiser Group PLC
Hearing dates: 20 & 21 November 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on Tuesday 5 December 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
The Supreme Court in Lloyd v Google LLC [2022] AC 1217 (“ Lloyd v Google”) shone a light on the availability of representative proceedings under (what is now) CPR 19.8. This led the Representative Claimant in both these proceedings, Wirral Council as administering authority of Merseyside Pension Fund (“ Wirral”), to begin “ Representative Proceedings” against each Defendant, Reckitt Benckiser Group plc (“ Reckitt”) and Indivior plc (“ Indivior” and collectively the “ Defendants”), to pursue claims under ss.90 and 90A and Schedule 10A of the Financial Services and Markets Act 2000 (“ FSMA”). The Defendants have issued applications to strike out the Representative Proceedings (or that Wirral may not act as a Representative Claimant, but this amounts to the same thing) on the basis that the Representative Proceedings are not the appropriate procedure for these claims under FSMA. The Defendants say that the claims should be brought in the usual way by ordinary multi-party proceedings with each purportedly represented person being a claimant.
This is the first time that this has been attempted for securities claims under ss.90, 90A and Schedule 10A FSMA. There have been a number of such claims brought by way of ordinary CPR Part 7 proceedings in recent years and these have been actively case-managed by Judges sitting in the Financial List, in a largely consistent way. In fact multi-party claim forms have been issued against both Defendants by many of the investors who have opted-in to the Representative Proceedings alleging the same causes of action under FSMA (“ the Multi-party Proceedings”). Those proceedings have been stayed pending resolution of these applications.
There is no dispute that the applications are to be resolved by the exercise of a discretion so as to give effect to the overriding objective. The Defendants' main point is that if the Representative Proceedings are allowed to continue they would prevent the Court from case-managing the proceedings in the manner it has done in other similar cases and will allow Wirral, the Representative Claimant, to dictate the structure of the proceedings, in particular as to what issues are to be tried at the bifurcated first stage trial and whether there should be some preparation for the next stage in the process before that first trial. Wirral says that it is entitled to issue such claims and that Lloyd v Google effectively endorses such an approach. Unless the Defendants can show some fundamental flaw in the route it has decided to follow, Wirral maintains that the Court should not strike out the claims.
Ms Helen Davies KC, leading Mr Tony Singla KC and Mr Jonathan Scott, appeared for Reckitt and made the bulk of the submissions on behalf of the Defendants. Mr Conall Patton KC appeared for Indivior and largely adopted Ms Davies KC's submissions. Mr Graham Chapman KC, leading Mr Alex Barden and Mr Joseph Leech appeared for Wirral. I am grateful to them and their teams for their clear and helpful submissions.
Background
It is unnecessary to explain in great detail the factual basis for the claims. They are founded on the allegation that there was a “ Scheme” in which the Defendants participated, through a US subsidiary called Reckitt Benckiser Pharmaceuticals, Inc, (“ RBP”) in relation to the marketing of a drug under the brand name “ Suboxone” for the treatment of opioid addiction. In 2002, the US Food and Drug Administration approved an application by RBP for the sale of Suboxone in tablet form and it was granted a 7-year period of orphan drug exclusivity.
The Scheme is said to have taken place between 2006 and 2013 when the Defendants carried out a plan to switch the market for Suboxone from the tablet form to a sublingual film version. This is alleged to have been done because the tablet form was losing its protection, allowing in generic competition, whereas it was hoped that the sublingual film version would have an added period of protection. The Scheme was effected by making allegedly fraudulent claims that the film version was safer for children when the Defendants knew that it was potentially more dangerous. The Scheme did have the effect that competition from generic manufacturers of Suboxone tablets was thwarted, despite their tablets being cheaper and probably safer for children (although neither Particulars of Claim contain any allegation to this effect).
On 9 April 2019, the US Department of Justice publicised details of a federal indictment brought against RBP (then known as Indivior Inc) and Indivior. (Indivior had demerged from Reckitt in December 2014.) Wirral says that this revealed details of the Scheme. There were also related Federal Trade Commission lawsuits. In or around July 2019 (in the case of Reckitt) and July 2020 (in the case of Indivior), settlements were reached by the Defendants with the US authorities whereby Indivior agreed to pay US$600m and Reckitt US$1.4bn in settlement of their liabilities. A US subsidiary of Indivior, Indivior Solutions, Inc, and Indivior's former CEO and medical director all pleaded guilty to certain criminal charges brought against them in relation to the Scheme.
The Defendants will apparently deny that they engaged in the Scheme. They will say that the settlements were entered into without any admission of liability. They have not yet put in a Defence to the claims because of these applications.
The claims brought against the Defendants
The Representative Proceedings were issued on 21 September 2022. On the same day and the day after, there were three Claim Forms issued against the Defendants (two against Reckitt and one against Indivior) on behalf of a large number of Claimants in the Multi-party Proceedings. Those Claims Forms have not been formally served and, as stated above, they have been stayed by consent pending resolution of these applications. The Claimants have however provided (not by way of service) draft Particulars of Claim in the Multi-party Proceedings.
Under s.90A and Schedule 10A FSMA issuers of securities are potentially liable to investors who have suffered loss as a result of misleading statements or dishonest omissions in certain “ published information” relating to the securities or a dishonest delay in publishing such information. Wirral's case is that the facts and potential consequences of the Scheme were information that the Defendants were required to disclose in published information (and in a prospectus issued by Indivior which is also subject to a claim under s.90 FSMA) and the Defendants knew that disclosure of the information would cause huge damage to their market capitalisation, as happened on the day the US indictment became public.
It is a condition of liability under s.90A and Schedule 10A FSMA that a person discharging managerial responsibility (a “ PDMR”) within the issuer knew the published information contained an untrue or misleading statement or was reckless as to the same. In relation to omissions from the published information, a PDMR within the issuer has to have known that this was a dishonest concealment of a material fact. A PDMR means essentially a director of the issuer, including an alleged de facto director – see Allianz Global Investors GmbH & Ors v G4S Ltd [2022] EWHC 1081 (Ch). It is clear that a case under s.90A and Schedule 10A FSMA requires the dishonesty of a PDMR to be proved.
Further, the effect of paras 3(1) and 3(4) of Schedule 10A FSMA is that an issuer is only liable to pay compensation to a person who acquires, continues to hold or disposes of the securities in reasonable reliance on published information to which Schedule 10A applies and suffers loss in respect of the securities as a result of any untrue or misleading statements in that published information or the omission from that published information of any matter required to be included in it.
By the Representative Proceedings, Wirral seeks to try what it calls the “ common issues”, which are those related to the Defendants and which are not dependent on any issue that is particular to any individual investor. Therefore issues such as an investor's standing to sue, reliance, causation and quantum are not common or defendant-side issues and are not therefore part of the Representative Proceedings. This can be seen from the declarations that Wirral seeks as set out in the Reckitt Claim Form that:
“(a) The Defendant's published information between 2006 and the present (i) omitted information which it was required to include, including a full and fair description of the Scheme, and/or (ii) contained statements that were untrue or misleading in...
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