Bull & Ors v Gain Capital Holdings Inc & Ors

The court refused applications by the first three defendants (the Gain defendants) for summary judgment or striking out the claims brought by multiple investors against them arising from investments with Cameron Farley. The claimants seek statutory remedies under the Financial Services and Markets Act 2000 (FSMA), principally relying on the general prohibition (section 19), the financial promotion restriction (section 21) and the remedial provisions in sections 26, 29 and 30.

Key legal conclusions:

• Statutory remedies under sections 26, 29 and 30 of FSMA were central to the dispute: the claimants assert rights to restitution and compensation where regulated activities or unlawful financial promotions occurred.
• Joint enterprise question: whether participation in a joint enterprise with an unauthorised UK intermediary (Cameron Farley) renders participants (the Gain defendants) liable under those statutory remedies is a novel question of statutory interpretation and not suitable for summary determination.
• Agency and authority: the claimants advanced alternative heads of claim based on agency (actual and ostensible authority). The court held that issues about actual or ostensible authority are fact‑dependent and raise triable questions; the documentary agreements between the parties do not resolve whether individuals acted inconsistently with the formal contracts.
• Procedural disposition: because there is a realistic prospect that the claimants may succeed at trial on the above issues, the court refused to determine the matters on summary judgment or striking out grounds.

Background and parties. Cameron Farley Ltd (a United Kingdom incorporated intermediary) conducted foreign exchange dealings for numerous UK investors. The claimants are a subset of those investors. The first three defendants (Gain Holdings, Gain Capital Group Inc and Gain Capital Group LLC) are Delaware/New Jersey entities providing online foreign exchange execution and clearing services. Proceedings against Cameron Farley and its director were not before this court; the claimants sued the Gain defendants (and HM Treasury, not affected by these applications) seeking to recover money paid to Cameron Farley by invoking FSMA statutory remedies.

Nature of the claim and relief sought. The claimants seek recovery of sums paid to Cameron Farley and compensation under FSMA on three statutory bases: (i) agreements made in contravention of the general prohibition (section 19) with remedies in section 26; (ii) agreements constituting deposits made in contravention of the general prohibition with remedies under section 29; and (iii) losses flowing from unlawful communications/financial promotions (section 21) with remedies under section 30. They advance two heads of common law causation/attribution against Gain: (A) that Gain and Cameron Farley were joint participants in a joint enterprise so that statutory entitlements against Cameron Farley should extend to Gain; and (B) that Cameron Farley acted as agent (actual or ostensible) for Gain so that FSMA remedies available against Cameron Farley are available against Gain.

Issues before the court. The Gain defendants applied for summary judgment or striking out the claims against them. The court framed the central issues as: (1) the joint enterprise question — whether statutory remedies under FSMA can be enforced against persons involved in a joint enterprise though they were not the other contracting party; and (2) the authority arguability questions — whether it is arguable that Cameron Farley had actual or ostensible authority to contract on behalf of Gain such that FSMA remedies could be asserted directly against Gain.

Court’s reasoning and subsidiary findings. The court noted extensive factual material: multiple written agreements between Gain and Cameron Farley (including Introducing Broker Agreements, White Label Agreement, Service Agreements, Control and Master accounts, customer application forms and Limited Power of Attorney forms), FSA and NFA enquiries, transfers between UK bank accounts and Gain accounts, and features consistent with a Ponzi scheme in the background. On the legal issues the court ruled:

• the joint enterprise question raises novel and difficult statutory interpretation issues; existing authorities did not permit a safe summary determination and the issue is best resolved at trial;
• on actual authority, although the written agreements limited agency, the court could not reject the claimants’ case that individuals on both sides may have acted inconsistently with the contractual limits; factual inquiry at trial is required;
• on ostensible authority, acquiescence by Gain in Cameron Farley’s activities could found an arguable case of ostensible authority; again the issue is fact‑dependent and triable;
• the Gain defendants’ contentions based on New York‑governed documentation and expert evidence did not justify deciding the disputes at summary stage because the evidence before the court was incomplete and the application would require factual findings inappropriate on summary disposal.

Disposition and consequences. The applications for summary judgment or striking out by the Gain defendants were refused. The judge directed the parties to seek agreement on consequential orders.

The applications by the first three defendants for summary judgment or striking out the claims were refused. The judge concluded that (i) the question whether FSMA statutory remedies extend against participants in a joint enterprise is novel and should be determined at trial, and (ii) the issues whether Cameron Farley had actual or ostensible authority to act for Gain involve fact‑intensive inquiries and are at least arguable; accordingly the court could not conclude the claimants had no real prospect of success.