In the claims brought by shareholders of Tesco under section 90A Financial Services and Markets Act 2000 (“FSMA”) relating to false and misleading statements allegedly made by Tesco regarding its commercial income and trading profits in 2014, the High Court has ordered that the claimants must provide disclosure of documents that will assist the court in determining whether their investment decisions were made in reliance on the defective publications: SL Claimants v Tesco plc; MLB Claimants v Tesco plc  EWHC 3315 (Ch).
In summary, the court considered, amongst other matters, an application by Tesco for disclosure relating to the claimants’ investment decisions.
The court found that the claimants must take additional steps to search for documentary evidence which would allow the defendants to test whether their investment decisions were made in reliance on defective publications. The court made the points that “reliance will ultimately have to be established in the case of each investor” and “the documents seemed to be as necessary for the purposes of establishing as they are for rebutting the reliance case”.
The decision is significant because of the approach that the court took to the question of reliance under section 90A FSMA. There have been steps taken by claimants in section 90A cases (including in the Tesco case) to argue that there are alternatives to the requirement that each claimant must individually prove reliance. In the Tesco case, for example, an argument based on the US ‘fraud on the market’ theory was pleaded but then abandoned at an early Case Management Conference. This latest decision, in the context of a disclosure application, appears to suggest that attempts to circumvent the reliance requirement will continue to be difficult.
The additional implication of this disclosure order is that future shareholder class actions are likely to be more costly to pursue. If exhaustive searches for documents are ordered, the shareholders (and the litigation funders who typically support these claims) may need to invest significantly more funds to get the claim through to trial.