Stewarts Law LLP

10/28/2024 | News release | Distributed by Public on 10/28/2024 12:35

Allianz & Ors v Barclays strike out is a major blow for investors in UK markets

On 25 October 2025, Mr Justice Leech handed down a pivotal first-instance summary judgment in the world of securities litigation.The judgment in Allianz Funds Multi-Strategy Trust (on behalf of Allianz Best Styles Global Equity Fund) and Others v Barclays PLC ("Allianz & Ors v Barclays") considered for the first time whether market/price reliance would satisfy the reliance requirement in section 90A/Schedule 10A of the Financial Services and Markets Act 2000 ("FSMA") and thereby give index and algorithmic funds a remedy under English law for misleading and/or material omissions made by companies in statements to the financial markets.The decision also considered for the first time how schedule 5 of Schedule 10A, concerning dishonest delay of publication of inside information, should be interpreted and applied.In this article Harry McGowan, Lorraine Lanceley and Tom Otter review the judgment's significance for the landscape of securities litigation.

Judgment in summary

Mr Justice Leech granted the defendant's applications for strike out and reverse summary judgment which disposed of:

(i) 241 claims brought by index fund claimants; and

(ii) claimants' claims for dishonest delay under section 90A/Schedule 10A of FSMA.

The judge found that:

  • in order to satisfy the reliance requirement under section 90A/Schedule 10A, claimants must prove that a person had read the publication containing the untrue/misleading statements or material omission in question (or the gist was communicated to them by third parties); and
  • in order to make a claim for dishonest delay, there needs to have been a published statement/announcement; it does not suffice that there is a continuing delay in respect of publishing the delayed information, which remains unpublished.

The decision was made in circumstances where such matters might arguably have been better and more appropriately dealt with at trial where the court would likely have benefitted from witness evidence, given the factually complex issue of reliance, and expert evidence, and in light of the various novel points of law.

Subject to any appeal, this judgment is likely to prevent a large percentage of otherwise eligible investors from obtaining redress even when the issuer has been found liable for publishing misleading information to the market resulting in losses for those investors: a large portion of investors in the UK markets (just over 30% according to the Investment Association's recent annual study) may now be deprived of a cause of action under section 90A/Schedule 10A by virtue of being automated and unable to meet this reliance threshold.

Issuers consequently may have less incentive to ensure that published information is correct and market function may likely suffer.

This is a serious blow to investor protection and market function, as well as the current government's drive to make the London Stock Exchange more competitive.

If this decision is upheld following any appeal then the government should in our view amend the legislation to address this lack of protection for these investors.

Reliance: the arguments

Barclays' case was that, on a plain reading of paragraph 3 of Schedule 10A, there could be no claim unless the investor actually read the specific statements containing the allegedly untrue or misleading statements, or omissions.

In particular, Barclays argued that:

  • The common law test for reliance in the tort of deceit should apply to s.90A/Schedule 10A and a person had to have read the publication containing the misleading statement or omission in order to have a cause of action; and
  • The legislative background supported such an interpretation of the language used in the statute.

The claimants argued "price/market reliance", i.e. if the investor relied on the company's listed share price, that should be sufficient to satisfy reliance in an efficient market.

The claimants' arguments were based on the widely accepted theory in the asset management world that in an efficient market the market price is based on the consideration of and takes account of all public information. If the claimants were correct then, as long as price reliance could be shown, investors would not have to prove that they had read the misleading document.

Dishonest delay: the arguments

Barclays argued that the dishonest delay cause of action in paragraph 5 of Schedule 10A only applied in circumstances where the defendant had actually published information but had been late in doing so.

In support of this argument, Barclays highlighted to the court that a different construction would render all omissions claims under paragraph 3 of Schedule 10A (requiring reliance) redundant thereby removing the need for claimants to prove reliance at all.

The claimants' position was that delay means not just the action of deferring or postponing something (that actually happens) but also "procrastination" or "waiting".

Moreover, the claimants pointed out that it could not be right that Barclays (or another issuer) could avoid liability for dishonest delay by failing to publish such information at all. If this was correct, the claimants argued that they would not be entitled to bring a dishonest delay claim during any period of non-disclosure and permanent silence would prevent liability from ever arising for dishonest delay.

The judgment

Mr Justice Leech determined that there were no compelling reasons as to why he should permit the claims brought by the index funds and/or for the dishonest delay claims to go to trial on the basis that he considered these claims had no real prospect of success.

The judge also felt that there was a compelling reason not to permit these claims to go to trial: namely that the resultant reduction in the scope and value of the claims ought to promote early settlement (though one could equally argue that a judgment in support of index funds and/or the claimants' dishonest delay claim could have the same result).

The reliance issue

In particular, the judge was persuaded by Barclays that Parliament must have intended the inclusion of the "reliance" requirement in section 90A/Schedule 10A to operate as a means of limiting the recovery of compensation to only active investors who are able to prove something more than that they suffered loss as a consequence of a misleading statement or material omission being made to the market.

The judge stated that the appropriate reliance test is that used in the tort of deceit, which requires a claimant both to prove inducement and causation as separate ingredients of the tort. He stated that in order to prove reliance, as it applies to express representations (whether made orally or in writing), this requires the claimant to prove that "they read or heard the representation, that they understood it in the sense which they allege was false and that it caused them to act in a way which caused them loss".

As regards omissions and the fact that claimants cannot prove active reliance in circumstances where the relevant information was not published, the judge stated that the statute only required investors to prove they had relied on the published information itself (i.e. by reading/considering the incomplete statement - or having the gist of it communicated by third parties) when deciding whether to acquire, hold or dispose of the shares (so long as it was reasonable for investors to rely on it in that way).

The judge appears to have been concerned that allowing the reliance test in section 90A/Schedule 10A to be satisfied by price/market reliance would open the floodgates to claims by large numbers of investors and this appears to have weighed heavily in his decision-making. This is notwithstanding that a statute designed to protect investors may naturally apply to a large number of investors given the size of some publicly traded companies.

Given that investors have to show that persons discharging managerial responsibility (eg directors) had knowledge of the misleading statements / omissions to succeed in s90A/Schedule 10A claims it seems arguably strange that limiting the number of investors that may be able to bring claims against companies with alleged fraudulent/dishonest directors could be considered relevant by the court.

In contrast, the judge appeared to give little consideration to the 30% plus of investors in the UK markets that invest in index funds which, unless they can be distinguished from those struck-out in this judgment, are now likely left without a remedy when the listed companies in which they have invested mislead the market.

This is something that is likely disproportionately to impact retail investors who have significantly shifted investments to index funds over the last decade.

Dishonest delay

Mr Justice Leech concluded that he was satisfied that paragraph 5 of Schedule 10A FSMA only imposes liability upon an issuer of securities in relation to information which has been published on a RIS and does not impose liability where no publication has taken place.

He stated:

"In my judgment, therefore, Paragraph 5 only imposes liability upon an issuer of securities in relation to published information whether one adopts a literal construction of the words used or a purposive construction of the schedule as a whole. The Bank can be liable for misleading or untruthful statements in its published information and for deliberately omitting to include facts in that published information or for delaying the publication of information which was accurate but doing so late. Schedule 10A does not impose liability on the Bank for misleading statements or omissions or delay unless and until it has published information to which Schedule 10A applies" (emphasis added).

On the basis that certain of the claimants' claims based on dishonest delay did not result in any publication or announcement, the judge determined that he was satisfied that those claims had no real prospect of succeeding under paragraph 5 of Schedule 10A at trial.

One unanticipated consequence of this judgment may be that companies will now be disincentivised to make any subsequent announcements to the market that could otherwise trigger liability under paragraph 5 of Schedule 10A for dishonest delay.

Further, from a practical perspective, dishonest delay has become a much more difficult - arguably impossible - cause of action to establish if a company simply never publishes, for example, a corrective statement which would otherwise give rise to a claim for dishonest delay.

Final thoughts

The judge's decision to allow the strike out and reverse summary judgment application seems bold given the novel points of law and the result which deprives around 60% of the claimants in Allianz v Barclays of a cause of action under section 90A/Schedule 10A FSMA, regardless of whether or not Barclays misled the markets.

Subject to the results of any appeal, this judgment is likely to have significant ramifications for securities claims as a whole and investor protection in England more broadly.

A significant and growing number of investors in the UK stock markets are tracker funds or automated in some way shape or form and, given the emergence of AI and shifting approaches by major asset managers, this number only looks set to increase as traditional "active" management at scale continues to decline.

It seems counterintuitive that Parliament intended to shut out such a significant group of investors when introducing this piece of investor protection legislation yet that will likely be the effect of this judgment.

Consequential issues are due to be heard at the third case management conference ("CMC") on or around 25 November 2024, and time for any application for permission to appeal this first-instance decision has been extended to 21 days after such CMC.

If the judge's decision stands, one glimmer of hope for similar claimants is the possibility that these claimants may be distinguishable from the Barclays index fund/sub-fund claimants on the facts. In this regard, Mr Justice Leech drew a distinction between the claimants he was prepared to strike out and those which may have some human involvement in the investment decision-making process, notwithstanding that they represent index/tracker funds.

It remains to be seen whether the claimants will appeal the decision, although their counsel's comments noted at paragraph 148 of the judgment suggests this is "overwhelmingly likely". Any such appeal will be hugely important.

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