Trial split in group claims under FSMA s90A: a further recent development

Following on from Jonathan Nash KC and Judy Fu’s interesting and insightful article on trial splits in group claims under FSMA ss.90 & 90A, which the interested reader is invited to revisit, there has been a further recent case management conference in California State Teachers’ Retirement System v Boohoo Group PLC [2026] EWHC 335 (Comm), before Mr Justice Michael Green, which considered the appropriate split in a FSMA s90A claim.

Background

In California State Teachers’ Retirement System v Boohoo Group PLC [2026] EWHC 335 (Comm), the s90A FSMA claim is brought by institutional and consumer investors against the well-known fashion company, Boohoo Group PLC. The claim arose following an article published by the Sunday Times on 5 July 2020 in which it alleged that a factory in Leicester which made garments for Boohoo was unlawfully underpaying workers and making them work in unacceptable conditions. Boohoo’s share price fell by approximately 42 per cent between the close of trading on 3 July 2020 and 8 July 2020.

Boohoo subsequently announced that it had commissioned a KC-led independent review, and Boohoo voluntarily published an open version of a report by Ms Levitt KC following her independent report. In summary, Ms Levitt concluded that the allegations in the Sunday Times article were substantially true and that both underpayment of workers and unacceptable working conditions were endemic in Boohoo’s Leicester supply chain. She also concluded that Boohoo’s monitoring of its Leicester supply chain was inadequate, and that this was attributable to weak corporate governance. She noted that the most senior management “had the least appreciation of the fact that there were problems, let alone the seriousness of those problems”.

During the period from 1 January 2017 to the 25 September 2020, Boohoo published annual reports, interim results, ad hoc announcements on the RNS, and modern slavery statements, together called the “Published Information”, with most of the Published Information constituting information to which Sch.10A of FSMA applied.

It will be recalled that in broad terms, liability arises under s90A where:

• the published information contains an untrue or misleading statement or omits a matter required to be included, or its publication is delayed;
• a “person discharging managerial responsibilities” or “PDMR” (essentially a director, including de facto or shadow, of the issuer) acted fraudulently in relation to the misstatement/omission/delay;
• the claimant acquired, continued to hold or disposed of the issuer’s securities in reasonable reliance on the published information; and
• it suffered loss as a result.

In summary, it is alleged that the Published Information contained statements which were untrue or misleading; alternatively, the Published Information omitted the alleged true state of affairs; or delayed the publication of the alleged true state of affairs. The Claimants allege that relied upon the Published Information and have suffered loss and claim compensation pursuant to s.90A and paras.3 and/or 5 of Sch.10A FSMA. The claim is denied.

The main issues which require determination are as follows:

1. The Claimants have to prove under para.3 of Sch.10A FSMA that the Defendant’s Published Information contained untrue or misleading statements or omitted something that should have been published.
2. A PDMR has to have had knowledge that the statements were untrue or misleading or been reckless as to the same.
3. Under para.5 of Sch.10A FSMA, the Claimants have to show that there was delay in publishing correct information and that PDMRs were acting dishonestly in delaying publication.
4. Under para.3 of Sch.10A FSMA each of the Claimants has to show that they acquired, continued to hold, or disposed of securities in reliance on the Published Information, and it was reasonable for them to have done so.
5. The Claimants also have to prove that they suffered loss as a result.

At the CMC, the parties agreed that that the reliance issue should be tried by reference to sampling of claimants and that there should be a split trial, but disagreed where the split should fall. The Claimants, as is usual, contended that the Claimants’ standing and the Defendant’s liability issues should be heard in trial 1, with the issues of reliance, causation and loss to be heard in trial 2. The Defendant, also as is usual, argued that the reliance issue should be in trial 1.

The Decision

The CMC was before Mr Justice Michael Green (who was also the Judge in Wirral Council v Indivior plc and Reckitt Benckiser Group plc [2023] EWHC 3114 (Comm) and Various Claimants v Standard Chartered plc [2024] EWHC 1108 (Ch)).

Mr Justice Michael Green rejected any suggestion that following Allianz Global Investors GmbH and Ors. v RSA Insurance Group Limited [2021] EWHC 2950 (Ch) ; Various Claimants v G4S Limited (formerly G4S PLC) and Various Claimants v Serco Group plc [2022] EWHC 2052 (Ch), there was now an orthodox position that the issue of reliance should be hived off to trial 2.  Although the claimants were required to progress some of the Claimant-side issues, those decisions have been widely perceived to be Claimant-friendly, as trial 1 would focus almost exclusively on the Defendant’s alleged wrongdoing, with scrutiny of Claimant-side issues deferred to trial 2. The Judge’s view was in part informed by the fact that cases have not gone to trial or a concluded trial and there is an absence of evidence, therefore, as to whether any previous case management decisions have been proven to have worked (see [18]).

The Judge held that the starting point “should be, like in most other forms of litigation, that, save perhaps in respect of quantum, the parties should expect to have all aspects of the claim tried at a first trial” (at [44]).  Therefore, where reliance can be dealt with at Trial 1, and it is reasonable for the parties to be ready to do so, that that should be the norm (see [45]).

The Judge rejected some of the usual arguments including that there is an overlap between the issues of reliance and causation such that they should be heard together as part of trial 2. He acknowledged that there is an overlap between those issues but held that the overlapping issues would need to be heard as part of trial 1 and the remaining issues of causation will be shaped by the outcome of trial 1 (see [37]).

Accordingly, the Judge directed that the reliance issues should be tried at trial 1 along with the Claimants’ standing and the Defendant-side issues.

Discussion

Some key points to take away:

1. The decision highlights that where more issues can be accommodated at a first trial, it is likely that the Court will favour accommodating them even if there are principled arguments – such as the overlap between the issues of causation and reliance, potential costs savings and the problem of potential appeals – about deferring certain claimant-side issues until after a determination issue on liability.
2. The Judge was partly influenced by the fact that this claim is considerably smaller than other s90A claims, such as Investors in Barclays v Barclays plc [2024] EWHC 2124 (Ch D) and Various Claimants v Standard Chartered plc [2024] EWHC 1108 (Ch), both of which included reliance or a part of the reliance issue in Trial 1 (see [44]).
3. Therefore, parties should expect to prepare for CMCs having in mind that (i) the court is not going to be overly influenced by where the case management split has been set in previous decisions; (ii) at present, there is no presumed approach to splits; and (iii) the court will have in mind the desire to accommodate as many issues into trial 1 as possible.
4. In particularly large cases, the approach focusing primarily on the Defendant-side issues at trial 1, as per RSA/G4S/Serco, may still be the preferred approach.