Hall v Cable and Wireless Plc

A breach of listing rules or market-abuse provisions under the Financial Services and Markets Act 2000 does not create a private damages action where Parliament has provided regulatory penalties and restitutionary remedies but no express private right. A claim under section 2(1) of the Misrepresentation Act 1967 requires loss resulting from entering into a contract with the representor. Negligent non-disclosure may nevertheless give rise to a duty of care where the pleaded circumstances include misleading statements and the issue depends on facts requiring evidence. Loss from purchasing shares at an inflated price is suffered on purchase, although later realisation may crystallise its amount. Summary judgment is inappropriate where causation and the date of damage remain genuinely arguable.

Three shareholder claims arose from Cable and Wireless Plc’s alleged failure to disclose a contractual ratings clause requiring a £1.5 billion bank guarantee or escrow payment if its credit rating fell below a specified level. The claimants alleged breach of statutory duty, market abuse, misrepresentation and negligence, claiming losses calculated by reference to share purchases and later sales.

The defendant applied for summary judgment or strike-out, arguing that the claims had no real prospect of success, were time-barred and could not satisfy causation. The central issues were whether the statutory and common-law causes of action were available, when loss was suffered, whether limitation could be extended for deliberate concealment, and whether the pleaded negligence claims disclosed a real prospect of proving causation.

1. The defendant was entitled to summary judgment against Mr Hall and Mr and Mrs Parry. Their negligence claims had no real prospect of establishing loss caused by the alleged non-disclosure because they sold their shares before the ratings clause was disclosed and therefore avoided the subsequent fall in price.

2. The defendant was not entitled to summary judgment against Mr Martin. His negligence claim was capable of proceeding, although any recoverable loss would be limited to the fall in market value on and after 6 December 2002 caused by disclosure of the ratings clause. His claims based on statutory duty, market abuse and misrepresentation were struck out.

3. The statutory-duty claim failed. The statutory scheme showed that Parliament had deliberately provided penalties, restitution orders and specified private causes of action. It had not created a private action for breach of listing rules. The court could not infer such an action without undermining that scheme.

4. The market-abuse claim likewise failed. Sections 123 and 383 of the Financial Services and Markets Act 2000 provided penalties and restitutionary relief, and the absence of an express private action indicated that none was intended.

5. Section 2(1) of the Misrepresentation Act 1967 required the claimant’s loss to result from entering into a contract with the representor. The claimants purchased shares through the market, not under a contract of purchase with the defendant. Any separate membership contract with the defendant was not the contract said to have caused the loss.

6. The negligence claims were not doomed at the summary-judgment stage. Although Caparo v Dickman [1990] 2 AC 605 was relied on concerning statutory accounts, the pleaded case also alleged misleading statements and a failure to correct them. Whether those circumstances created a duty depended on facts and evidence.

7. On the assumption that the shares were bought at an inflated price, loss was suffered immediately on purchase. Later sale did not create the loss, although it could crystallise its amount, applying the reasoning in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd. (No.2) [1997] 1 WLR 1627.

8. There was no real prospect of extending limitation under section 32 of the Limitation Act 1980. The claimants did not allege that the defendant knew of deliberate wrongdoing. However, the court could not finally conclude that the negligence claims were time-barred because the claimants might argue that damage first occurred when the ratings clause affected the market in December 2002.

9. The causation issues concerning Mr Martin required evidence. It remained arguable that earlier non-disclosure caused him to retain the shares and that disclosure in December 2002 then caused the relevant fall. The evidential tension in that case could not be resolved summarily.