Allianz Global Investors GmbH & Ors v Barclays Bank Plc & Ors

A pass-on defence should not be struck out where it has a realistic prospect of success. In claims for compensation for competition-law infringements, pass-on is ordinarily a factual question requiring investigation of causation and loss, but legal issues may be determined summarily where the court has the necessary material and submissions.

A beneficiary, former shareholder or former partner may have a personal claim where a breach of competition law owed a duty to that person and the loss was crystallised on redemption or withdrawal. The reflective-loss rule does not bar the former shareholder’s claim in the particular context where the company has transferred its loss and there is no risk of concurrent claims or double recovery.

More than 170 investment funds claimed damages from banks for alleged manipulation of the foreign-exchange markets, relying partly on European Commission decisions and partly on stand-alone claims. The defendants pleaded that any loss had been mitigated or passed on when investors redeemed or withdrew their investments, and sought permission to amend their defences to incorporate further particulars.

The claimants applied to strike out parts of the pass-on defence. The principal issues concerned trusts, companies, partnerships and contractual terms governing net asset value. The court also considered tax, foreign law, liquidation, closed-end funds and indirect investors.

1. The court accepted that a pass-on allegation raises a question of fact. Nevertheless, it was appropriate to decide the trust, company and partnership issues on the application because the parties had made full submissions, no factual evidence apart from possible foreign law was said to be necessary, and the law had recently been authoritatively addressed. The contracts issue was left for trial because the court lacked a sufficient understanding of the sample contracts and the proposed implied term and remedy.

2. In trust cases, the general rule is that the trustee, as legal owner of the trust property, has title to sue. That rule does not prevent a beneficiary suing in his own name where a duty is owed directly to him and he suffers loss. Article 101 of the Treaty on the Functioning of the EU and section 2 of the Competition Act 1998 were capable of supplying such a duty. A beneficiary’s reduced redemption or withdrawal payment was capable of constituting a personal loss which became crystallised on redemption. The pass-on defence therefore had a real prospect of success.

3. The rule in Prudential Assurance Co Ltd v Newman Industries Ltd, as affirmed and limited in Marex Financial Ltd v Sevilleja, applies to a shareholder’s reflective loss and to diminished distributions received in the capacity of shareholder. In the particular case of a former shareholder whose loss had been transferred by the company, the rule did not apply. The justifications based on Foss v Harbottle, concurrent claims and double recovery had little or no force. The company pass-on allegation therefore had a real prospect of success.

4. A limited partner who redeems or withdraws an investment may sue in respect of loss thereby crystallised. The rule against reflective loss applies only to companies and did not bar an ex-partner’s claim. The partnership pass-on allegation therefore proceeded to trial.

5. The tax allegation was allowed to stand, but standard disclosure was not required until the defendants identified the taxes and jurisdictions relied upon and the parties discussed proportionate disclosure. The general liquidation plea was permitted subject to information being provided about liquidation processes. The closed-end-fund issue was left for factual investigation. The plea concerning indirect investors was struck out because only pass-on to the direct investor was relevant. The defence concerning Elsina was not struck out at that stage.