The High Court has handed down two decisions this month in relation to whether Defendants were entitled to summary judgment under CPR 24.2 and/or a strike out under CPR 3.4(2)(a) in relation to various parts of the Particulars of Claim.
This dispute is a group action and involves a shareholder dispute following the purchase in 2009 of the Halifax Bank of Scotland ("HBOS") by Lloyds TSB Plc which now forms part of the Lloyds Banking Group Plc ("Lloyds" which is the Sixth Defendant). The Claimants are persons that claim to have been shareholders in Lloyds. The First to Fifth Defendants are directors of Lloyds. Before the deal was finalised shareholders were invited to approve the deal based on information provided in a Circular which had been distributed in the November of 2008.
The dispute involves allegations as to whether the Circular contained material misrepresentations and omissions and that the directors of Lloyds were in breach of tortious and fiduciary duties owed to the shareholders. The Particulars of Claim include accusations of actual knowledge of the directors having known of the widespread manipulation of LIBOR rates and/or having been wilfully blind to such wrong doing.
The Defendants applied for the claims relating to the directors' alleged knowledge of HBOS' apparent rigging of its LIBOR submissions to be struck out and for summary judgment. The Court had to decide whether the Claimants had a realistic prospect of success that the directors of Lloyds knew of LIBOR rigging at the time of the Circular.
The Court was directed to consider various passages in the Final Notice which had been issued by the FCA when imposing substantial fines on Lloyds and HBOS for LIBOR rigging. The passages highlighted the seniority of those involved in LIBOR manipulation and the knowledge of senior managers. Whilst it was clear that senior managers were involved in instructing traders to submit rates, there was a distinction drawn between the knowledge of senior managers and the knowledge of the banks involved and their directors.
The Claimants argued that their claims relied not just on actual knowledge but also on wilful blindness.
The Judge had to consider whether the claims had "no real prospect of succeeding at trial". The Judge decided that the main LIBOR claims could remain in the Particulars of Claim. In a second decision issued at the same he again declined to give the Defendants summary judgment but did allow some parts of the claims in respect of breach of fiduciary duty and tort to be struck out under CPR 3.4(2) (a). The Judge stated that he could not say, based on the evidence before him, that the Claimants' case was fanciful or lacking in reality or was inconceivable.
A summary judgment application is not intended to be a mini trial but a sense check on whether the claims have the requisite credibility and are not merely fanciful claims. It is clear from the Judge's approach that he was not persuaded that the findings in the Final Notice issued by the FCA should be determinative of the outcome of a possible trial. The Judge was mindful that disclosure of due diligence documents may shed light on what was known at the time of the purchase of HBOS. In the absence of disclosure by both parties, the Judge was not confident that the claims being pursued lacked credibility.