TF Global Markets (UK) Ltd (t/a Thinkmarkets), R (On the Application Of) v Tan & Ors

A contractual discretion must be construed by reference to the agreement as a whole and its objective meaning, rather than by a literal reading of one clause. A financial-services firm may rely on contractual provisions permitting intervention where it reasonably suspects price-latency arbitrage or market manipulation, subject to the duty not to act arbitrarily, capriciously or unreasonably. An ombudsman determining what is fair and reasonable must correctly construe the contract and consider all relevant provisions. A judicial review court may quash an erroneous determination but should remit the assessment of whether the discretion was reasonably exercised.

TF operated an online foreign-exchange and derivatives trading platform. It suspended the accounts of three traders and withheld profits, suspecting that they had exploited price latency through arbitrage strategies or market manipulation.

The traders complained to the Financial Ombudsman Service. The Ombudsman upheld their complaints, applying a balance of probabilities approach and concluding that the contractual provisions required more than a possibility of prohibited trading. TF sought judicial review of the three final decision letters, arguing that its contractual discretion arose upon reasonable suspicion and that the Ombudsman had misconstrued the terms.

1. Judicial review allowed. The three final decision letters dated 28 June 2019, 10 July 2019 and 11 September 2019 were quashed.
2. Contractual interpretation is a unitary exercise directed to the objective meaning of the language used. The contract must be read as a whole, with the wider context and commercial consequences considered where appropriate. A literalist focus on a single word or clause is impermissible. The court also corrected obvious drafting errors in the terms, consistently with Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19 and Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28.
3. Clause 7.8 gave TF a contractual discretion to refuse trades judged to be outside the prevailing market price. The reference to stale, incorrect or broken price feeds was separate from manifest error and could encompass price latency. The discretion remained subject to the Braganza v BP Shipping Limited [2015] UKSC 17 duty to act fairly and not arbitrarily, capriciously or irrationally.
4. Clause 7.10 was a specific example of trading outside the prevailing market price and did not require TF first to establish, on the balance of probabilities, that arbitrage had occurred. Its discretionary wording was consistent with intervention based on reasonable suspicion. Clause 18.2.3 likewise permitted action where TF had grounds for suspecting breach of the market-abuse warranties. In that context, market abuse included market manipulation and was not confined to conduct producing an artificially distorted external market.
5. The Ombudsman had erred by concentrating on clause 7.10, failing to read the contract as a whole, and treating a balance of probabilities finding as a precondition to the exercise of TF’s contractual powers. The court did not determine whether TF had exercised those powers reasonably. The matter was remitted to the Ombudsman to assess, in each case, whether TF acted reasonably by reference to the evidence available when the accounts were closed and profits withheld.

First-instance judicial review proceedings. The judgment does not state any prior merits decision by another court.