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High Court decides novel issue of statutory interpretation in G4S shareholder litigation

On 10 May 2022, in three related proceedings, Miles J handed down a significant interim decision in Allianz Global Investors GmbH v G4S Ltd (former G4S plc) [2022] EWHC 1081 (Ch).

Last year, in the first of the three related proceedings, Mann J struck out 90% of the claimants’ claims on procedural grounds: https://www.oeclaw.co.uk/news/view/g4s-obtains-striking-out-of-90-of-shareholder-action-on-procedural-grounds.

The primary issue in the most recent decision related to the meaning of the expression ‘person discharging managerial responsibility’ (PDMR) in section 90A and Schedule 10A of the Financial Services and Markets Act 2000. Section 90A and Schedule 10A contain a regime for the civil liability of issuers of publicly-traded securities for publication of false or misleading or incomplete information and for dishonest delay in publication of information to the capital markets. Liability only arises where a PDMR within the issuer knew or was reckless about the offending statement or dishonestly concealed material facts or a PDMR acted dishonestly in delaying the publication.

The claimants, who had been institutional shareholders in G4S plc (‘G4S’) argued that the concept of PDMR extends, beyond the conventional categories of directors in UK law, to senior executive responsible for managerial decisions affecting the future developments and business prospects of the issuer, and its business units. G4S argued that the term PDMR was restricted, in accordance with the language of the statute, to directors of the issuer.

Miles J upheld the arguments of G4S. As submitted by G4S, the judge accepted that the concept of PDMR, in respect of issuers with directors, extends no further than de jure directors, de facto directors, and (arguably) shadow directors. In reaching this conclusion, the judge paid close attention to the legislative history of the PDMR concept in UK law, and he considered and rejected the claimants’ argument that in defining the term PDMR the legislature adopted an autonomous concept of European law. The judge accepted G4S’s submission that the definition of PDMR, in the context of the issuer liability regime, was clear and unambiguous and should be given its natural meaning.

Miles J went on to hold that it was arguable that four individuals identified by the claimants as PDMRs were de facto directors of G4S at the relevant times. He held, however, that the claimant’s pleaded case was less clear than it should be, and that it was desirable for them to spell out in clearer terms the case they advance. On this basis, the judge declined at this stage to strike out the claimants’ claims.

G4S was represented by Laurence Rabinowitz QC, Simon Colton QC and Emma Jones, instructed by Chris Bushell, Sarah Penfold and Holly McCann of Herbert Smith Freehills LLP.