Tesco can’t withdraw admission over misleading profit statement

Tesco has been refused permission to withdraw an admission it made after being accused of overstating its expected level of profit.

The admission related to an allegation that its trading statement made in August 2014 was untrue and/or misleading in that it misstated the level of trading profit expected to be achieved for the first half of the 2014/15 financial year.

In regulatory proceedings, Tesco had accepted the Financial Conduct Authority’s findings of market abuse in relation to the trading statement.

It later wanted to withdraw the admission and put forward a defence that its statement that trading profit was expected to be “”in the region of £1.1 billion”” was not untrue or misleading.

It wished to argue that the figure for trading profit was overstated by £76 million, rather than the greater sum of £250 million which it had originally announced; that the resulting correct figure for expected trading profit for the relevant period was £1.024 billion; and that £1.024 billion was indeed in the region of £1.1 billion.

The High Court rejected Tesco’s application because it was not based on any change in its knowledge or newly available evidence but on a reappraisal of its case, and to permit the amendment at this stage would lead to a round of further pleadings and expert evidence close to trial.

Another important point was that even if Tesco was permitted to contest the plea that its trading profit, though £76 million short, was still “”in the region of”” the forecast of £1.1 billion, it would nevertheless be bound to accept that the trading statement was false and/or misleading in its overall effect.

Please contact Jon Alvarez if you would like more information about the issues raised in this article or any aspect of company law and financial regulation.

[2019] EWHC 3312 (Ch)

SL CLAIMANTS (IDENTIFIED IN SCHEDULE 1 OF CLAIM FORM) v TESCO PLC : (1) MANNING & NAPIER FUND INC (A COMPANY INCORPORATED IN THE UNITED STATES) (2) EXETER TRUST CO (A COMPANY INCORPORATED IN THE UNITED STATES) (MLB CLAIMANTS) v TESCO PLC (2019)

Ch D (Hildyard J) 03/12/2019