The claimants purchased dematerialised securities which had been issued by the defendant company via a computer-based share transfer system. The securities were required to be registered in the name of a member of the system, and so an intermediary bank providing custodian services was appointed. The securities were held by the bank on trust for an additional intermediary, with the claimants’ entitlement to the securities surviving by way of a sub-trust at the end of a chain of intermediaries. The claimants subsequently brought a claim against the defendant under section 90A of and paragraph 3(1) of Schedule 10A to the Financial Services and Markets Act 2000, seeking compensation for losses sustained as a result of their reliance on misleading or untrue statements or omissions in information published by the defendant relating to the securities. The defendant applied to strike out the claims, contending that: (i) none of the claimants had an “interest in securities”, within paragraph 8(3) of Schedule 10A, since they had no proprietary interest in the securities, having only rights which could be asserted against the person immediately preceding them in the chain; and (ii), in any event, none of the claimants could be said to have “acquired” or “disposed” of an interest in securities, within paragraph 3(1), since at the very most their interest in the securities had been created or extinguished, but not acquired or disposed of.
On the application—
Held, application dismissed. (1) It was true that where there was a chain of intermediaries, the investor at the end of the chain did not have any direct proprietary interest in the underlying security, nor could it enforce any rights held in the chain of sub-trusts directly against the issuer. However, it did not follow that the interest of such an investor was merely personal or economic. The “right to a right” which the claimants had via the chain of intermediaries was, or could be equated to, an equitable property right in respect of the securities. This was sufficient to constitute an “interest” in the securities for the purposes of the interpretative provisions of paragraph 8(3) of Schedule 10A to the Financial Services and Markets Act 2000 (paras 79, 82–88, 93).
(2) The whole purpose of Schedule 10A to the 2000 Act was to confer a statutory cause of action in respect of a transaction entered into in reliance on an untrue or misleading statement or omission in information from the issuer of securities. Unless the wording of Schedule 10A was without any semantic doubt entirely deficient to apply in such circumstances, ordinary principles of statutory construction required the court to ensure that the statutory purpose was not thwarted. The expressions “disposal” or “disposition” in Schedule 10A were semantically capable of extending to a transaction which involved the destruction or termination of an interest; and “holding” and “acquisition” should in logic be given a broad corresponding remit, to ensure the achievement rather than the negation of the statutory purpose. Accordingly, the claimants had sufficient standing to make claims under the Act (paras 117, 120, 124).
Neil Kitchener QC, Richard Mott and Simon Gilson (instructed by Stewarts) for the SL claimants.
Peter De Verneuil Smith QC, Philip Hinks and Dominic Kennelly (instructed by Morgan Lewis Bockius UK llp) for the MLB claimants.
David Mumford QC, Michael Watkins and Niranjan Venkatesan (instructed by Freshfields Bruckhaus Deringer llp) for the defendant.