Latest split trial decision in securities class action under s.90A FSMA

At a recent Case Management Conference (CMC), where a split trial was proposed by the claimants in a claim brought pursuant to Section 90A and Schedule 10A of the Financial Services and Markets Act (FSMA), the High Court has held that reliance issues should be heard at the second trial, with defendant liability issues to be heard in the first: Various Claimants v G4S Limited [2022] EWHC 1742 (Ch).

In securities class actions, claimants will often seek to postpone issues involving reliance, causation, quantum and limitation to a second trial. This has the double advantage of (a) enabling the claimants to postpone incurring a significant portion of their costs until after the question of liability has been determined; and (b) making the defendant's conduct the sole focus of the first trial.

Defendants will generally seek to resist this split, noting the potential for unfairness in the allocation of the litigation burden, as well as the potential for the claimants' witnesses to be influenced by the findings in respect of liability when preparing their evidence in relation to reliance. Furthermore, to the extent findings are made against the defendant in the first trial, the overall length of the process would likely be significantly longer than if there was no split.

Ultimately in this case, although the court held that there should be a split trial, and that reliance issues ought to be heard at the second trial (noting, in particular, the complexity of the claimants' reliance cases), it acknowledged the potential unfairness to the defendant if disclosure and witness statements were not provided by the claimants in advance of the first trial. In order to seek to mitigate the potential unfairness, the court determined that:

1. All claimants must provide the defendant with a minimum amount of information in relation to:
   1. Their reliance cases, including (a) whether it is said that particular named individuals reviewed the relevant published information and relied on it or whether, for example, the only evidence a particular claimant can provide in that respect is of a general practice; and (b) whether the claimant relies only upon the most recently published information, or also upon historic information;
   2. Their limitation arguments, such as whether it will be alleged that there is something particular to a specific claimant that means that they could not with reasonable diligence have discovered something, as compared to another claimant;
   3. Information about whether a claimant claims to have relied upon meetings with the defendant (noting that liability under section 90A and Schedule 10A is by reference to "published information" only and not to comments in meetings); and
   4. Disclosure, such as the document retention policies each claimant has in place.
2. That information must be provided in order to ensure that the claimants' reliance cases are properly particularised, and also to enable effective sampling to occur, so that the parties can minimise the risk that more than two trials will be required (as would be necessary, for example, if the sample selected did not fully reflect the characteristics of all claimants).
3. Sample claimants, once selected, must give disclosure in advance of the first trial (including in relation to all aspects of their reliance case).
4. A further CMC will be held after the claimants have provided the defendant with the further information outlined in (1) above, at which the court will determine which claimants will be required to provide witness evidence in relation to their reliance cases in advance of the first trial. The court indicated that this would be likely to include claimants bringing specific reliance claims.
5. That CMC will also consider whether there are any further points of law which might sensibly be disposed of at the first trial.
6. To the extent that any claimants wish to rely upon meetings with the defendant in relation to their claims, evidence in relation to those meetings must be provided in advance of, and will be heard at, the first trial.

Such an approach will help to balance the litigation burden, alleviate concerns over the influence that any findings from the first trial may have upon witness recollections, and will mean that, to the extent a second trial is required, it can be heard relatively soon after judgment is given in the first, mitigating the defendant's timing concerns.