Persons Identified In Schedule 1 of the Claim Form (The "SL Claimants") v Tesco Plc (Rev 1)

For the purposes of section 90A and Schedule 10A of the Financial Services and Markets Act 2000, an ultimate investor holding securities through a chain of custodians may have an “interest in securities”. The interest may consist of an equitable proprietary right, described as a “right to a right”, even though the investor cannot directly enforce the underlying securities against the issuer. “Acquisition” and “disposal” are construed broadly. They include transactions through which ultimate beneficial ownership becomes, or ceases to be, vested in the investor, where the transaction was made in reliance on published information. The statutory remedy is therefore available to investors in intermediated securities.

Two groups of investors brought claims against Tesco under section 90A and Schedule 10A of the Financial Services and Markets Act 2000 for losses allegedly suffered after relying on false or misleading published information. Their Tesco shares were held in dematerialised form through CREST and, in most cases, through chains of custodians and sub-custodians.

Tesco applied to strike out the claims. It argued that investors at the end of a custody chain had no qualifying “interest in securities” and had not “acquired” or “disposed of” such an interest. The central issues were the meaning of those expressions and whether the claims could proceed on the assumed facts.

1. Strike-out application dismissed. The claimants had pleaded facts capable of establishing standing under section 90A and Schedule 10A of the Financial Services and Markets Act 2000.
2. “Any interest in securities” denotes more than a personal, contractual or purely economic interest. An ultimate investor in a custody chain has an equitable proprietary interest through a series of trusts and sub-trusts. The investor has a “right to a right”, enabling it ultimately and indirectly to enjoy the benefit of the bundle of rights represented by the securities, unaffected by the insolvency of an intermediary.
3. The fact that the investor cannot directly enforce rights against the issuer, and that the subject matter of each sub-trust is the intermediary’s beneficial interest rather than the underlying securities, does not prevent the investor from having a qualifying interest. The court nevertheless declined to decide whether more remote interests, such as interests arising through a separate trust or through a company holding the shares, would qualify.
4. “Acquisition” and “disposal” in Schedule 10A are not confined to a dealing in the precise legal interest held by the claimant. A transaction or series of transactions through which ultimate beneficial ownership becomes vested in, or ceases to be vested in, a person may constitute the acquisition or disposal of an interest in securities. This includes transactions instigated by the investor and completed through CREST.
5. Akers v Samba Financial Group and Vandervell v Inland Revenue Commissioners did not require a narrower construction. Those decisions concerned different statutory contexts and did not govern the interpretation of Schedule 10A. Paragraph 8(3)(b) principally addresses executory contracts and rights relating to securities not yet issued.
6. The claims should not be struck out. Any consequential order, including the question of declaratory relief, was left for further consideration.