Pension funds have not typically been the most litigious characters in the UK’s Financial Services landscape.
UK pension funds have had some recent success recovering losses through class actions in the US courts, for example in March of this year the Norfolk Pension Fund secured a USD $490m settlement on behalf of a group of investors in a class action case against Apple, which alleged that CEO Tim Cook had made false and misleading statements to investors.[1] The same fund also reached settlement in a similar battle against Puma Biotechnology, Inc in 2019.[2] Additionally, in June of this year, the North East Scotland Pension Fund took on the role of lead plaintiff, agreeing a USD $434m settlement with sportswear company Under Armour.[3]
Cases in UK courts, however, have been few and far between. This is in part due to general cautiousness from trustees, but also because of procedural challenges specific to UK legislation, for example the “Loser Pays” rule, which can make legal action prohibitively high-risk and expensive.
However, the rapid development of the UK legal landscape coupled with a universally growing desire for corporate accountability means that it looks as though the tide may be beginning to turn.
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Since September 2022, Wirral Council (as administering authority for Merseyside Pension Fund) has brought shareholder loss cases in the High Court against:
Of these, the cases against pharmaceuticals company Indivior and its former parent Reckitt (filed in September 2022) are the most noteworthy, because they mark the first time a group of claimants has sought to bring a section 90 and 90A / Schedule 10A Financial Services and Markets Act (FSMA) securities litigation as a representative action under Civil Procedure Rule (CPR) 19.8.
A representative action is a legal mechanism in the UK that enables a party to act as the representative of others who have the “same interest” in a claim.
The case against BT (filed in October 2022) was also brought under CPR 19.8, but has been stayed awaiting the outcome of the CPR 19.8 decision in the Indivior / Reckitt proceedings.
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Indivior (a FTSE 250 company) and Reckitt (a FTSE 100 company) were indicted in the US in April 2019 for their participation in a scheme to fraudulently market a drug used for opioid addiction treatment called Suboxone.[4]
Allegedly, according to the indictment, Indivior made false and/or misleading statements, and/or dishonest omissions in their published information. Among other things, this included making unproven claims about the lower susceptibility of the film version of Suboxone to diversion and abuse relative to other opioid use disorder drugs, and misleading statements about Indivior’s reasons for discontinuing Suboxone in its tablet form in an attempt to influence pricing and delay the entry of generic competition.
As a result of the serious misconduct, Reckitt and Indivior paid US regulators fines of ~ USD $2 billion and Indivior’s former CEO, Shaun Thaxter, and Medical Director, Timothy Baxter, pleaded guilty to criminal charges.
Indivior also pleaded guilty to one felony charge, specifically admitting to sending MassHealth (Massachusetts’ Medicaid programme) false data on the rate of accidental paediatric exposure to the Suboxone tablet in an attempt to get them to expand Medicaid coverage of Suboxone film in Massachusetts.
Wirral Council brought its claim in the UK on the basis of the fraudulent claims made by Indivior / Reckitt that a film version of Suboxone (as opposed to the tablet version) was safer for children, when they knew it could potentially, in fact, be more dangerous.
Indivior’s share price crashed 74% after publication of the indictment, accounting for half a billion pounds worth of the company’s market capitalisation.[5]
As a shareholder in both Indivior and Reckitt, Wirral Council brought two sets of proceedings in parallel as a result of this crash. One set was initiated in the normal way, by way of multi-party proceedings (with each claimant represented individually).
The other set were brought as opt-in representative actions under CPR 19.8, which would see Wirral Council act as representative for a defined group of former or existing shareholders, and any common issues between claimants tried together.[6]
Wirral Council in this case seek a “bifurcated” approach, where the liability issue would be addressed through the representative action procedure, while any determination as to the claimants' standing, reliance on the misleading promotional material, causation of loss and / or assessment of damages would be addressed on an individual basis.
In December 2023 Mr Justice Green handed down a judgment striking out the representative action claims, ruling that the case would be more fairly managed via usual multi claimant proceedings.[7] On 10th June 2024, however, the Court of Appeal gave Wirral Council permission to appeal the strike out.
The parallel multi-party proceedings are stayed awaiting the outcome of the representative action appeal.
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Although historically reluctant to get involved in litigation, it seems that pension funds in the UK may be inching towards action, whether in domestic courts or abroad. A judgment in Wirral Council’s favour on CPR 19.8 would certainly help to increase the attractiveness of bringing proceedings in the UK, where funding arrangements would become more accessible, and litigation risk could be more easily shared across multiple schemes.
In response to a Freedom of Information request submitted in January 2023, Wirral Council goes as far as to highlight this kind of action as forming part of their responsibilities under the voluntary Stewardship Code.
“In line with the Stewardship Code, Merseyside Pension Fund recognises its responsibility to ensure the diligent stewardship of its investments. […] MPF has investments in Reckitt Benckiser and Invidior and has joined in litigation with other institutional investors to hold management to account and seek redress for alleged corporate malfeasance which directly affects the value of shareholdings.” [8]
So regardless of whether Wirral Council succeed in their novel attempts to bring these shareholder cases as representative actions, they are clearly making active attempts to recover losses on behalf of their members, and to use litigation as a tool for influencing positive change in corporate governance.
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We hope you've found this article of interest.
If you'd like to discuss it, or any other matters where we may be able to assist you, please contact David Rankin on david.rankin@puntersouthallgroup.com.
[1] Norfolk Pension Fund secures £380m in class action against Apple - Pensions Age Magazine
[2] Can UK pension plans influence good governance in listed companies? - Lexology
[3] Councils pension fund settles Under Armour legal claim - BBC News
[4] Office of Public Affairs | Indivior Inc. Indicted for Fraudulently Marketing Prescription Opioid | United States Department of Justice
[5] Indivior shares crash 74% after US charge over opioid scheme | Opioids crisis | The Guardian
[6] Representative Actions - what's the way forward? (mishcon.com)
[7] Wirral Council as Administering Authority of Merseyside Pension Fund v Indivior PLC [2023] EWHC 3114 (Comm) (05 December 2023) (bailii.org)
[8] Reason for filing claim against Indivior PLC - a Freedom of Information request to Wirral Metropolitan Borough Council - WhatDoTheyKnow
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