SL Claimants v Tesco PLC (2019)
An investor who held securities in dematerialised form through a chain of intermediaries had an equitable property right amounting to an "interest in securities" and was entitled to make a compensation claim under the Financial Services and Markets Act 2000 s.90A for losses incurred as a result of reliance on untrue or misleading information published by the issuer.
The defendant supermarket chain applied to strike out conjoined claims to recover losses in relation to investment decisions concerning its shares.
The defendant's shares had been held in dematerialised form through a computer-based system called CREST, using custodians to acquire, hold or dispose of those shares. The legal owner of the shares was the person whose name appeared on the CREST register, who had to be a member of CREST. None of the claimants held shares as a registered member of CREST. Their shares were registered in the name of a bank or financial institution providing custodian services, and most had more than one intermediary in the custody chain. The claimants began proceedings under the Financial Services and Markets Act 2000 s.90A and sch.10A seeking compensation for losses alleged to have been suffered as a result of misleading information published by the defendant. The defendant applied to strike out the claims on the grounds that the claimants did not have standing to sue under s.90A and sch.10A because they did not have an "interest in securities", alternatively that they had not "acquired" or "disposed" of any securities.
The defendant argued that where there was more than one intermediary in a custody chain, the investor did not have an equitable or proprietary right in the securities, but merely a contractual or personal right that was insufficient to amount to an "interest in securities" for Sch.10A purposes.
Meaning of "any interest in securities" in Sch.10A - Where there was a chain of intermediaries, the investor at the end of the chain did not have any direct proprietary interest in the security, nor could it enforce any rights held in the chain of sub-trusts directly against the issuer. The phrase "any interest in securities" denoted something more than a mere personal or contractual right. The "right to the right" which the investor had via the custody chain was, or could be equated to, an equitable property right in respect of the securities. There was semantically no real doubt that the investor had an "interest" in the securities, and similarly there was legally no doubt that such interest was equitable/proprietary. Those were hallmarks of beneficial ownership and their presence sufficed to qualify as "any interest in securities" for the purposes of s.90A and Sch.10A, Lehman Brothers International (Europe) (In Administration), Re  EWHC 2914 (Ch) applied. The expression "ultimate beneficial owner" captured the position of the investor as the owner of "a right to a right" held through a waterfall or chain of equitable relationships which was unaffected by the insolvency of the investor's intermediary, and enabled the investor ultimately, even if indirectly, to enjoy the benefit of the bundle of rights which the securities represented to the exclusion of others (see paras 75, 79, 82, 85 of judgment).
Meaning of "acquisition" and "disposal" in Sch.10A - The purpose of the Act was to confer a statutory cause of action in respect of a transaction entered into in reliance on an untrue or misleading statement from the issuer. Unless the wording 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" were semantically capable of extending to a transaction which involved the destruction or termination of an interest, Akers v Samba Financial Group  UKSC 6 applied. It was also plain and obvious that the expressions "holding" and "acquisition" had in logic to be given broad corresponding remit. There was every reason to give the expressions such meaning in the instant case, to ensure the achievement of the statutory purpose. Accordingly, any process whereby, in a transaction on CREST, the ultimate beneficial ownership of securities that were, with the consent of the issuer, admitted to trading on a securities market in accordance with Sch.10A para.1, came to be vested in or ceased to be vested in a person constituted "the acquisition or disposal of any interest in securities" (paras 117, 120).
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