“(2) The issuer is liable in respect of an untrue or misleading statement only if a person discharging managerial responsibilities within the issuer knew the statement to be untrue or misleading or was reckless as to whether it was untrue or misleading. (3) The issuer is liable in respect of the omission of any matter required to be included in published information only if a person discharging managerial responsibilities within the issuer knew the omission to be a dishonest concealment of a material fact”; ii) Paragraph 5(2) provides: “The issuer is liable only if a person discharging managerial responsibilities within the issuer acted dishonestly in delaying the publication of the information”; and iii) Paragraph 6 explains: “For the purposes of paragraphs 3(3) and 5(2) a person’s conduct is regarded as dishonest if (and only if)— (a) it is regarded as dishonest by persons who regularly trade on the securities market in question, and (b) the person was aware (or must be taken to have been aware) that it was so regarded.”
“For the purposes of this Schedule the following are persons ‘discharging managerial responsibilities’ within an issuer— (a) any director of the issuer (or person occupying the position of director, by whatever name called); (b) in the case of an issuer whose affairs are managed by its members, any member of the issuer; (c) in the case of an issuer that has no persons within paragraph (a) or (b), any senior executive of the issuer having responsibilities in relation to the information in question or its publication.”
“(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim; (b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or (c) that there has been a failure to comply with a rule, practice direction or court order”
“55. In my view this point alone is a sufficient answer to the criticism based on Thesiger LJ’s remarks in Davy v Garrett [(1878) 7 Ch D 473 , at 489]. The principle to which those remarks were directed is a rule of pleading. As the Earl of Halsbury LC said in Bullivant v Attorney General for Victoria[1901] AC 196 , 202, where it is intended that there be an allegation that a fraud has been committed, you must allege it and you must prove it. We are concerned at this stage with what must be alleged. A party is not entitled to a finding of fraud if the pleader does not allege fraud directly and the facts on which he relies are equivocal. So too with dishonesty. If there is no specific allegation of dishonesty, it is not open to the court to make a finding to that effect if the facts pleaded are consistent with conduct which is not dishonest such as negligence. As Millett LJ said in Armitage v Nurse[1998] Ch 241 , 256g, it is not necessary to use the word ‘fraud’ or ‘dishonesty’ if the facts which make the conduct fraudulent are pleaded. But this will not do if language used is equivocal: Belmont Finance Corpn Ltd v Williams Furniture Ltd[1979] Ch 250 , 268 per Buckley LJ. In that case it was unclear from the pleadings whether dishonesty was being alleged. As the facts referred to might have inferred dishonesty but were consistent with innocence, it was not to be presumed that the defendant had been dishonest. Of course, the allegation of fraud, dishonesty or bad faith must be supported by particulars. The other party is entitled to notice of the particulars on which the allegation is based. If they are not capable of supporting the allegation, the allegation itself may be struck out. But it is not a proper ground for striking out the allegation that the particulars may be found, after trial, to amount not to fraud, dishonesty or bad faith but to negligence. 56. In this case it is clear beyond a peradventure that misfeasance in public office is being alleged. There is an unequivocal plea that the Bank was acting throughout in bad faith. The Bank says that the facts relied on are, at best for the claimants, equally consistent with negligence. But the substance of that argument is directed not to the pleadings as such, which leave no doubt as to the case that is being alleged, and the basis for it in the particulars, but to the state of the evidence. The question whether the evidence points to negligence rather than to misfeasance in public office is a matter which must be judged in this case not on the pleadings but on the evidence. This is a matter for decision by the judge at trial.”
“184. It is well established that fraud or dishonesty (and the same must go for the present tort) must be distinctly alleged and as distinctly proved; that it must be sufficiently particularised; and that it is not sufficiently particularised if the facts pleaded are consistent with innocence: see Kerr on Fraud and Mistake, 7th ed (1952), p 644; Davy v Garrett(1878) 7 Ch D 473 , 489; Bullivant v Attorney General for Victoria[1901] AC 196 ; Armitage v Nurse[1998] Ch 241 , 256. This means that a plaintiff who alleges dishonesty must plead the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent, and that facts, matters and circumstances which are consistent with negligence do not do so. 185. It is important to appreciate that there are two principles in play. The first is a matter of pleading. The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him. If the pleader means ‘dishonestly’ or ‘fraudulently’, it may not be enough to say ‘wilfully’ or ‘recklessly’. Such language is equivocal. A similar requirement applies, in my opinion, in a case like the present, but the requirement is satisfied by the present pleadings. It is perfectly clear that the depositors are alleging an intentional tort. 186. The second principle, which is quite distinct, is that an allegation of fraud or dishonesty must be sufficiently particularised, and that particulars of facts which are consistent with honesty are not sufficient. This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowing not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the court will not normally allow proof of primary facts which have not been pleaded, and will not do so in a case of fraud. It is not open to the court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.”
“189. It is not, therefore, correct to say that if there is no specific allegation of dishonesty it is not open to the court to make a finding of dishonesty if the facts pleaded are consistent with honesty. If the particulars of dishonesty are insufficient, the defect cannot be cured by an unequivocal allegation of dishonesty. Such an allegation is effectively an unparticularised allegation of fraud …. 190. In the present case the depositors (save in one respect with which I shall deal later) make the allegations necessary to establish the tort, but the particulars pleaded in support are consistent with mere negligence. In my opinion, even if the depositors succeeded at the trial in establishing all the facts pleaded, it would not be open to the court to draw the inferences necessary to find that the essential elements of the tort had been proved.”
“The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact ‘which tilts the balance and justifies an inference of dishonesty’. At the interlocutory stage, when the court is considering whether the plea of fraud is a proper one or whether to strike it out, the court is not concerned with whether the evidence at trial will or will not establish fraud but only with whether facts are pleaded which would justify the plea of fraud. If the plea is justified, then the case must go forward to trial and assessment of whether the evidence justifies the inference is a matter for the trial judge.”
“(i) Fraud or dishonesty must be specifically alleged and sufficiently particularised, and will not be sufficiently particularised if the facts alleged are consistent with innocence: Three Rivers DC v Bank of England[2001] UKHL 16 ,[2001] 2 All ER 513 ,[2003] 2 AC 1 . (ii) Dishonesty can be inferred from primary facts, provided that those primary facts are themselves pleaded. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be pleaded: Three Rivers at [186] (Lord Millett). (iii) The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence: JSC Bank of Moscow v Kekhman[2015] EWHC 3073 (Comm) ,[2015] All ER (D) 273 (Oct) (at [20]–[23]) (Flaux J, as he then was). (iv) Particulars of dishonesty must be read as a whole and in context: Walker v Stones (2000) 2 ITELR 848 at 448,[2001] QB 902 at 944 (Sir Christopher Slade).”
“To these principles there should be added the following general points about particulars: (i) The purpose of giving particulars is to allow the defendant to know the case he has to meet: Three Rivers at [185]–[186]; McPhilemy v Times Newspapers Ltd[1999] 3 All ER 775 at 793 (Lord Woolf MR). (ii) When giving particulars, no more than a concise statement of the facts relied upon is required: McPhilemy at 793. (iii) Unless there is some obvious purpose to be served by fighting over the precise terms of a pleading, contests over their terms are to be discouraged: McPhilemy at 793.”
“Whether or not it is technically binding, I see no reason to differ from Peter Gibson LJ’s statement of principle. I do not doubt that, where an allegation of dishonesty is made against a body corporate, it is necessary to plead the relevant state of knowledge of that body at the relevant time. I do not accept, however, that a mere failure to identify at the outset the directors, officers or employees who had that knowledge means that such an allegation is liable to be struck out without further ado. Clearly such particulars should be given as soon as is feasible, and there may be situations in which the claimant’s unwillingness or inability to give such particulars when requested to do so justifies striking out; but that is another matter.”
“there is an inevitable tension in domestic procedural law between the impulse to ensure that claims are fully and clearly pleaded so that a defendant can know with some exactitude what case he has to meet (and also so that disclosure obligations can be fully understood, expert witnesses given clear instructions and so on), on the one hand, and on the other the impulse to ensure that justice is done and a claimant is not prevented by overly strict and demanding rules of pleading from introducing a claim which may prove to be properly made out at trial, but which will be shut out by the law of limitation if the claimant is to be forced to wait until he has full particulars before launching a claim.”
“at the preparatory stage the requirement is not that counsel should necessarily have before him evidence in admissible form but that he should have material of such a character as to lead responsible counsel to conclude that serious allegations could properly be based upon it. I could not think, for example, that it would be professionally improper for counsel to plead allegations, however serious, based on the documented conclusions of a DTI inspector or a public inquiry, even though counsel had no access to the documents referred to and the findings in question were inadmissible hearsay.”
“24. In July 2019, the financial press reported on whistle-blower allegations in connection with the matters which were the subject of the Initial and Further Investigations. Proceedings were filed by Brutus Trading LLC (‘Brutus’), a company incorporated by Julian Knight, the former global head of transaction banking at the Bank. The complaint alleges (among other things that): 24.1. The 2019 Settlements addressed a relatively small subset of the course of conduct by the Bank in violation of Iran sanctions (Complaint/[66]). 24.2. In fact the Bank’s course of conduct in developing its Iran business was a deliberate, concealed organisational structure, known to high level Bank officials as ‘Project Green’ [42(a)]. The mandate of those responsible for Project Green was to develop strategies to evade the Iran sanctions [42(c)]. Management Information concerning Iran client transactions and profitability was disseminated in the Bank, from low level employees up to the deputy CEO of SC plc Mike Rees [42(d)]. 24.3. Sanction evasion was achieved not only by wire stripping, but the use of the OLT3 online portal, ‘sundry’ accounts and other forms of falsification and deliberate errors in names and other customer details so as to avoid detection [43(a-c)]. The Complaint alleges that when such allegations were first raised in 2013, the Bank hired consultants to wipe the Dubai branch servers of incriminating information. 24.4. The Complaint specifies a number of transactions with named Iranian entities and customers for whom the Bank did business which (a) was unlawful, in breach of sanctions and (b) contradicted the Bank’s assurances to the US authorities in 2012 that all new business had been stopped from August 2007. Brutus advanced a conservative calculation of transactions in violation of Iran sanctions between 2009 and 2014 in the sum of$56.75bn . 24.5. The whistle-blowers provided the US authorities with the information needed to investigate the transactions involving Mr Elyassi. The whistle-blowers also provided information relating to many other clients, but the US authorities did not investigate those further. Further (and as set out in Brutus’ submissions dated23 January 2020 ), the whistle-blowers had provided evidence that senior personnel at the Bank knew about and approved multiple transactions with the companies controlled by Mr Elyassi.” 24.1. The 2019 Settlements addressed a relatively small subset of the course of conduct by the Bank in violation of Iran sanctions (Complaint/[66]). 24.2. In fact the Bank’s course of conduct in developing its Iran business was a deliberate, concealed organisational structure, known to high level Bank officials as ‘Project Green’ [42(a)]. The mandate of those responsible for Project Green was to develop strategies to evade the Iran sanctions [42(c)]. Management Information concerning Iran client transactions and profitability was disseminated in the Bank, from low level employees up to the deputy CEO of SC plc Mike Rees [42(d)]. 24.3. Sanction evasion was achieved not only by wire stripping, but the use of the OLT3 online portal, ‘sundry’ accounts and other forms of falsification and deliberate errors in names and other customer details so as to avoid detection [43(a-c)]. The Complaint alleges that when such allegations were first raised in 2013, the Bank hired consultants to wipe the Dubai branch servers of incriminating information. 24.4. The Complaint specifies a number of transactions with named Iranian entities and customers for whom the Bank did business which (a) was unlawful, in breach of sanctions and (b) contradicted the Bank’s assurances to the US authorities in 2012 that all new business had been stopped from August 2007. Brutus advanced a conservative calculation of transactions in violation of Iran sanctions between 2009 and 2014 in the sum of$56.75bn . 24.5. The whistle-blowers provided the US authorities with the information needed to investigate the transactions involving Mr Elyassi. The whistle-blowers also provided information relating to many other clients, but the US authorities did not investigate those further. Further (and as set out in Brutus’ submissions dated23 January 2020 ), the whistle-blowers had provided evidence that senior personnel at the Bank knew about and approved multiple transactions with the companies controlled by Mr Elyassi.”
“25. The claims concern the misconduct described above, insofar as it formed the subject matter of the 2019 Settlements and the Brutus complaint (‘the Relevant Misconduct’). 26. The Claimants are reliant on the publicly available documents referred to above in understanding the nature and detail of the Relevant Misconduct, and reserve their right to plead further following disclosure. 27. Without prejudice to the generality of the foregoing, the Relevant Misconduct comprised, in summary: 27.1. The deliberate and/or systemic course of conduct in the Bank developing its Iran business in breach of sanctions with a view to evading them; 27.2. The use of online and/or fax banking and/or other techniques as specified in the Brutus Complaint, by the Bank and/or its clients to evade sanctions laws and regulations; 27.3. Wholesale failures in AML controls, in particular in the Middle-East, and as applicable to customers which might pose financial crime and sanctions risks; 27.4. The continuation of Iranian business in breach or potential breach of sanctions from mid-2007, contrary to the impression given to the US authorities in 2012; 27.5. The misleading of the US authorities during the Initial Investigation to the effect that the Bank had ceased engaging in the transactions complained of in 2007 when it had not done so.” 27.1. The deliberate and/or systemic course of conduct in the Bank developing its Iran business in breach of sanctions with a view to evading them; 27.2. The use of online and/or fax banking and/or other techniques as specified in the Brutus Complaint, by the Bank and/or its clients to evade sanctions laws and regulations; 27.3. Wholesale failures in AML controls, in particular in the Middle-East, and as applicable to customers which might pose financial crime and sanctions risks; 27.4. The continuation of Iranian business in breach or potential breach of sanctions from mid-2007, contrary to the impression given to the US authorities in 2012; 27.5. The misleading of the US authorities during the Initial Investigation to the effect that the Bank had ceased engaging in the transactions complained of in 2007 when it had not done so.”
“In my view, and despite the unfortunate inconsistencies hitherto in the definition of ‘Group Executive’, the allegation that the individuals within the ‘Group Executive’ are PDMRs for the purposes of the Bribery Scheme allegations is adequately pleaded at this stage. The Claimants fall within Miles J’s definition of PDMR in G4S by alleging that the individuals were either de jure or de facto directors of SC plc.”
“I consider that these are adequately pleaded at this stage and that the Claimants advance a credible case that members of the Group Executive must have known about the bribery allegations from the whistleblowers and that this was before the Bribery Scheme was exposed by journalists. They are entitled to take their s.90A FSMA claim in relation to the Bribery Scheme and Maxpower forward to trial insofar as it relies on the knowledge of alleged de jure or de facto directors of SC plc.”
“(1) An article published in a global regulatory and financial news agency called MLex Market Insight on25 April 2016 that referred expressly to the Bank being ‘aware of the alleged wrongdoing’ at Maxpower. Mr Beltrami KC pointed out that this was a reference to individuals at the Bank, not SC plc, but [75] of the Amended Particulars of Claim says that it should be inferred that this is a reference to the awareness of the Group Executive. Mr Chapman KC submitted that that was because those persons were the Bank’s senior decision makers, and if a report of bribery had been made it is likely they would have been informed. (2) Two whistle-blowers raised concerns about the Bribery Scheme directly to the Bank (including but not limited to the Group’s Legal & Compliance Department and Group employees on the board of Maxpower) prior to the MLex article. The reports made by each whistle-blower are pleaded in [75.2] of the Amended Particulars of Claim and [24] of the Amended Reply. Again, the Claimants allege that it is to be inferred that the Group Executive would have been made aware of such whistle-blower allegations. (3) Sidley Austin prepared a report in December 2015 which recorded that remedial anti-bribery measures were initiated at Maxpower in March 2015 when SCPE [i.e. Standard Chartered Private Equity Limited] ‘became more involved in the Company’s operations’, but improper payments continued and Group employees on Maxpower’s board did nothing to address serious whistle-blower allegations which had been made. Further, King & Spalding were also instructed to carry out investigations, and PwC were also involved. The Claimants allege that it should be inferred, particularly given the 2012 Settlements and monitoring period which accompanied the 2012 Settlements, that international legal and accountancy firms would not have been instructed and/or Group employees would not have failed to act on serious whistle-blower allegations without the Group Executive’s knowledge. (4) In December 2015, Maxpower terminated the contracts of employment of its three founding members. Again, the Claimants infer that such steps would not have been taken without the Group Executive’s knowledge.”
“Further, each member of the Group Executive was either a de jure director of SC plc or a de facto director of SC plc by virtue of their position on the Group Management Committee and/or the board of the Bank in addition to the non-exhaustive list of general matters set out at paragraphs 2.3.1 to 2.3.6 above.”