Extending limitation in section 90A FSMA claims: reasonable diligence to discover fraud
In Allianz Global Investors GmbH & Ors. v RSA Insurance Limited  EWHC 2950 (Ch), the English High Court rejected a strike out and summary judgment application by the defendant, RSA Insurance Limited, on the grounds that some of the claims had been brought outside the usual 6 year limitation period. The Court held that the claimants had a realistic case that they did not have sufficient information, nor was there sufficient information within the public domain, to be able to plead a case under section 90A of the Financial Services and Markets Act 2000 within 6 years. This judgment will be welcomed by claimants who wish to rely on section 32(1) of the Limitation Act in circumstances where they did not have sufficient information to discover and plead a case in fraud prior to the expiry of a limitation period.
This claim involved a claimant group of over 70 institutional investors, making allegations as to RSA Insurance’s published statements, or omissions to disclose matters relating to financial conduct and corporate governance. These specifically related to RSA Insurance’s involvement in inappropriate accounting practices and the alleged deliberate manipulation of insurance claim reserves. The claimants’ case is that:
- from 2009 to 2013, RSA Insurance: published statements that were untrue or misleading in relation to financial misconduct and inadequate corporate governance within RSA Ireland; and omitted to disclose such matters and/or (c) delayed publishing information in respect of them; and
- various senior executives within the RSA Insurance knew or were reckless as to the falsity of the published statements and/or knew the omissions to be dishonest concealment of a material fact and/or acted dishonestly in delaying the publication of relevant information.
The claim was first issued in November 2019, and additional related claims were issued in May and June 2021. RSA Insurance’s position was that the claims issued in May and June 2021 (the New Claims) were time barred, as they fell outside of the primary 6-year limitation period under the Limitation Act 1980. The new claimants relied on section 32(1)(a) of the Limitation Act on the basis that the limitation period did not begin to run until they had discovered RSA Insurance’s fraud, or could have discovered it with reasonable diligence.
In contesting the new claimants’ case on jurisdiction, RSA Insurance relied on various media reports dating back to 2013 and its own announcements to the media in January 2014, which included references to the suspension of certain key individuals in connection with wrongdoing within RSA Ireland and an investigation by PwC regarding financial and claims irregularities. RSA Insurance argued that by mid-January 2014, a reasonably attentive investor was on notice of the need to investigate a claim under section 90A of the Financial Services and Markets Act 2000 (FSMA), and the facts stated in these publications were more than enough to alert a reasonably attentive investor of the need to do so.
The claimants took the position that summary determination of the limitation issue could not fairly be carried out, given the various factual differences which required further investigation and the need for disclosure on various relevant issues. They also argued that the various media reports and announcements relied on by RSA Insurance were insufficient to enable it to plead a claim in fraud. Instead, the claimants were only able to plead their claim after the publication of a judgment by the Employment Appeals Tribunal in June 2015, which enabled the claimants to make specific allegations about the relevant misconduct and the knowledge of the relevant individuals within RSA Ireland.
The Court held that the claimants had a realistic case that the contents of the announcements would not have put them on notice of a possible claim against RSA Ireland and of the need to investigate further, let alone to plead a claim in fraud. The Court was critical of attempts to characterize the information that was available to a reasonable investor prior to the expiry of the limitation period with the benefit of hindsight. Instead, the Court focused on the importance of considering whether a reasonable investor, reviewing the information available at the time, would have had sufficient information to investigate a possible claim against the defendant or plead a case in fraud. Accordingly, the Claimants had a realistic prospect of arguing that a reasonable investor would not have had sufficient information to do so at the time. The Court also identified various areas in which evidence would potentially assist the Court which might well be in a better position to assess the Claimants’ position on limitation at trial.
Key points to take away from this case include:
- Issues of discovery and reasonably discoverability under section 32 of the Limitation Act 1980 are factual and a careful factual investigation should be undertaken by the Court.
- The Court considered how a reasonably attentive institutional investor would monitor information about the issuers of shares held by it, and the steps it would have taken to investigate possible claims.
- The Court took the view that it would be assisted by disclosure and witness evidence on this issue, which mitigates against summary judgment/strike out.
- The Court was unwilling to assume that a reasonably attentive institutional investor would read official market announcements made by issuers of shares, or the various media articles identified by RSA Insurance. Indeed, no evidence was presented to support RSA Insurance’s contention that it would be market practice for an institutional investor to do so.
- The Court took the view that it would have been assisted by evidence regarding the reaction of RSA Insurance’s shareholders generally to the various publications and press reports relied on by RSA Insurance, but there had been no disclosure on this issue.
- Regardless of whether the claimants had been aware of the relevant media reports and announcements relating to financial irregularities within RSA Insurance in 2013 and 2014, these documents, on their own, would not have provided sufficient information for the claimants to plead a case in fraud.
This case provides important guidance on how the English courts will undertake an assessment of claims both under section 90A of FMSA and in fraud generally, of this kind brought outside the usual limitation periods in the summary judgment and strike out context. Defendants will not succeed in striking out claims at this stage where information in the public domain at the relevant time was insufficient to prompt a reasonable investor to investigate matters further. In this case it was reasonable for investors to assume that RSA Insurance had taken proper steps to investigate allegations of misconduct and to report accurately to its investors following that investigation. The claimants were not expected to embark on further investigations into potential claims based on the information available at the time.
Where a claim such as under section 90A of FMSA requires fraud or concealment to be pleaded, claimants must often tread a fine line between not delaying, and not beginning proceedings without sufficient information to plead fraud and survive any strike-out application. This judgment is a welcome indication that claimants under section 90A of FMSA will be given a degree of latitude by the Court when limitation defences are raised.