Court of Appeal clarifies level of particularisation required for civil fraud claim

The judgment (25 pages / 347 KB) found that fraud claims based on inferences are allowed provided that the primary facts on which those inferences are based are particularised. In addition, fraud claims may be based on allegations made by third parties. In this case, the claimants’ claims survived the defendant’s strike-out application.

Andrew Herring, commercial litigation expert at Pinsent Masons, said: “This judgment strikes a balance between protecting defendants from ‘vexatious, scurrilous or obviously ill-founded’ allegations of fraud but recognising that some fraud victims cannot know the full scheme of wrongdoing used against them at the time they commence litigation to recover their losses. It also clarifies the bar that must be met for any applications that defendants may issue to try and strike-out fraud claims for want of particularity.”

In this case, 230 claims were made pursuant to section 90 and 90A of the Financial Services and Markets Act 2000 (FMSA) (1,260 pages / 26 MB). These sections provide for compensation to be payable in situations where there have been misstatements or omissions in prospectuses or other published information regarding securities. This applies to a wide range of published information, including annual and half-year reports.

This dispute arose between Standard Chartered PLC and a group of institutional investors who held interests in securities issued by Standard Chartered. The investors alleged that Standard Chartered made misleading market statements over a period of 12 years, resulting in significant financial losses. The allegations focused on three prospectuses and 45 other published items, argued to have contained false information regarding the bank’s compliance with sanctions against Iran, financial crime controls, and alleged bribery within the group.

The Court of Appeal upheld the High Court’s decision, which had dismissed Standard Chartered’s applications to strike out parts of the claim. The court agreed that the claims should proceed to trial, emphasising the seriousness of the allegations and the need for a thorough examination of evidence.

In civil damages claims involving allegations of fraud, the fraud victim commonly faces the challenge that it knows it has been defrauded but it does not know the precise details because the alleged wrongdoing had been deliberately concealed from it by the alleged wrongdoers. This often leads to fraud victims either using interferences to plead a claim in fraud or allegations made by third parties at the beginning of High Court litigation

“The challenge for defendants to such claims is they are defending a claim which may not be particularised to the level of detail that you would except in a case where the primary facts are more clear-cut,” said Herring.

“The decision is a preliminary victory for the investors, the claimants, as it allows their case to move forward. It also serves as a reminder to listed companies in the UK about the importance of transparency and accuracy in their public statements, underscoring the court’s role in holding companies accountable for their actions and ensuring that investors are protected from misleading information.”