Hall v Cable and Wireless Plc

The Defendant applied for summary judgment or, alternatively, strike out on the basis that the Claimants had no real prospect of success. The Claimants, former shareholders, alleged failure to disclose a contractual "Ratings Clause" giving rise to loss through statutory breach of listing rules under the Financial Services and Markets Act 2000 (FSMA), market abuse, negligent misrepresentation and negligence.

The judge held that the FSMA regime (including the scheme of penalties, restitution orders and specifically the distinctions in sections such as 71, 90, 91, 150, 382 and 384) showed Parliament did not intend breach of the listing rules or market abuse provisions to give rise to a private civil cause of action in these circumstances. The Misrepresentation Act 1967 claim had no real prospect because the Claimants did not contract with the defendant as required by section 2(1).

By contrast, a negligence claim based on a duty to publish full and accurate information about the Ratings Clause was not doomed at this stage. On limitation the court accepted the conventional analysis that a purchaser who pays an inflated price ordinarily sustains immediate loss (citing Nykredit) but allowed that a factual case might be run that damage first crystallised on 6 December 2002. Section 32 (deliberate concealment) could not assist because no allegation of the defendant's awareness of deliberate wrongdoing would be made. Applying causation, two claimants (Hall; Mr and Mrs Parry) had sold before the 6 December 2002 disclosure and therefore had no real prospect of proving loss attributable to the defendant; Mr Martin, who sold after the disclosure, retained a negligence claim limited to loss caused by the December 2002 announcement.

Background and procedural posture:

The defendant company sold its interest in One2One in August 1999 and agreed an indemnity and a contingent obligation (the Ratings Clause) to provide a £1.5 billion bank guarantee or escrow if its debt rating fell below a trigger. From about March 2000 to December 2002 the companys share price fell and on 6 December 2002 the defendant publicly disclosed the escrow obligation after its rating fell; the share price fell further. Three claimants issued proceedings on 10 November 2008 alleging wrongful non-disclosure and loss. The defendant sought summary judgment or striking out for lack of any real prospect of success.

Nature of the application (relief sought):

• The defendant applied for summary judgment or, alternatively, an order striking out one or more causes of action for no real prospect of success.

Issues framed and decided:

• Whether breach of listing rules (the Part 6 "listing rules") and market abuse under FSMA give rise to a private civil cause of action.
• Whether a misrepresentation claim under the Misrepresentation Act 1967 can succeed where the claimant did not contract with the defendant.
• Whether the defendant owed a duty of care in negligence to publish full and accurate information about the Ratings Clause and whether such a claim was time-barred or defeated on causation.
• Whether, if relevant facts were deliberately concealed, section 32 of the Limitation Act 1980 would postpone the start of limitation.

Courts reasoning (concise):

• On statutory causes: the court analysed the FSMA enforcement scheme and concluded that Parliament had provided particular enforcement mechanisms (penalties, restitution orders and specific actionable provisions) and had not intended an express private right of action for breaches of the Part 6 listing rules or for market abuse by private plaintiffs in the generality pleaded. Section 90 (liability for untrue or misleading listing particulars) was found to apply to pre-listing "listing particulars" and not to the post-listing announcements relied on by the claimants; no amendment was advanced to plead a section 90 claim.
• On misrepresentation: the Misrepresentation Act 1967 s.2(1) requires the claimant to have entered into a contract with the representor; the purchases were contracts with third parties, not the defendant, and any separate membership contract on registration did not satisfy section 2(1) for the purchases relied upon.
• On negligence: a duty of care might arise in respect of misleading public statements and the defendants failure to disclose could in principle give rise to negligence, so the negligence cause was not struck out at this stage. Caparo v Dickman was considered but did not dictate dismissal because a duty might arise by reason of previous misleading statements.
• On limitation and causation: the court accepted the orthodox analysis (drawing on Nykredit) that a purchaser paid an inflated price suffers immediate loss at purchase, so many claims based on purchase would be time-barred; however the court accepted that a factual case might be run that damage first crystallised when the Ratings Clause was disclosed on 6 December 2002. Section 32 (deliberate concealment) would not assist where it was not alleged that the defendant was aware of its own deliberate wrongdoing (with authority from Cave v Jarvis): s.32 requires either active concealment or deliberate wrongdoing unlikely to be discovered for some time. On causation, two claimants who sold before 6 December 2002 could not show loss caused by the December disclosure; the third claimant who sold after that date might show loss limited to the fall caused by the December announcement.

Outcome: The defendants summary judgment/strike-out application was allowed in part: summary judgment was entered for the defendant against Mr Hall and Mr and Mrs Parry; as to Mr Martin the defendants application was refused on the negligence claim but the statutory duty, market abuse and misrepresentation causes were struck out. The court therefore dismissed the non-negligence causes and permitted a limited negligence claim to proceed for Mr Martin.

This is a first-instance disposal. The defendant's application is granted in part and refused in part. Summary judgment is entered for the defendant against Mr Hall and Mr and Mrs Parry because they have no real prospect of establishing breaches of statutory duty, market abuse or negligent misrepresentation, and because they cannot show loss caused by the defendant (they sold before the 6 December 2002 disclosure). As to Mr Martin the defendant is not entitled to summary judgment: the causes of action for breach of statutory duty, market abuse and negligent misrepresentation are struck out, but Mr Martin's negligence claim is allowed to proceed (subject to limitation and causation issues at trial) because negligence may exist and may have caused loss on and after the 6 December 2002 announcement.