London Executive Aviation Ltd v Royal Bank of Scotland Plc

I have before me an application by the claimant, London Executive Aviation Limited (or “LEA”), for permission to call expert evidence.

The question of whether it is appropriate to have expert evidence has been live in these proceedings for quite some time. The particular evidence that it is proposed I should give permission for is now helpfully identified in a schedule to the skeleton argument of Mr Paul Marshall, who appears for LEA. In broad terms, the matters listed are concerned with suitability requirements, the risks associated with the products sold to LEA and whether those products were suitable and/or potentially appropriate to it.

LEA’s application is opposed by Mr Paul Sinclair, who appears with Mr Laurie Brock for the defendant, the Royal Bank of Scotland. According to Mr Sinclair, there is no warrant for allowing expert evidence in the circumstances of the present case.

In terms of authority, two very well-known cases bearing on the point I have to determine are the decision of Oliver J in Midland Bank Trust Co Ltd v Hett, Stumps & Kemp [1979] Ch 384 and that of Evans-Lombe J in Barings plc v Coopers & Lybrand (No 2) [2001] Lloyd’s Rep Bank 85. In the former case, which concerned a claim for solicitors’ negligence, Oliver J explained that he had heard evidence from a number of practising solicitors and said that he doubted the value or even the admissibility of that sort of evidence. He went on:

“The extent of the legal duty in any given situation must, I think, be a question of law for the court. Clearly, if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received. But evidence which really amounts to no more than an expression of opinion by a particular practitioner of what he thinks that he would have done had he been placed, hypothetically and without the benefit of hindsight, in the position of the defendants, is of little assistance to the court; whilst evidence of the witnesses' view of what, as a matter of law, the solicitor's duty was in the particular circumstances of the case is, I should have thought, inadmissible, for that is the very question which it is the court's function to decide.”

So far as the Barings case is concerned, Evans-Lombe J there said this about expert evidence in paragraph 45 of his judgment:

“In my judgment the authorities which I have cited above establish the following propositions: expert evidence is admissible under section 3 of the Civil Evidence Act 1972 in any case where the Court accepts that there exists a recognised expertise governed by recognised standards and rules of conduct capable of influencing the Court's decision on any of the issues which it has to decide and the witness to be called satisfies the Court that he has a sufficient familiarity with and knowledge of the expertise in question to render his opinion potentially of value in resolving any of those issues. Evidence meeting this test can still be excluded by the Court if the Court takes the view that calling it will not be helpful to the Court in resolving any issue in the case justly. Such evidence will not be helpful where the issue to be decided is one of law or is otherwise one on which the Court is able to come to a fully informed decision without hearing such evidence.”

With regard to whether it is appropriate to have expert evidence in swaps cases, I was taken to two decision of Judge Havelock-Allan QC, sitting as a High Court Judge in the Mercantile Court: Battrick v Royal Bank of Scotland[2013] EWHC 4848 (QB) and St Dominic’s Ltd v Royal Bank of Scotland[2015] EWHC 3822 (QB). Both cases involved allegations of mis-selling, and in each Judge Havelock-Allan decided that it was appropriate to give permission for expert evidence. Judge Havelock-Allan noted in his judgments that there appeared to have been a division of opinion and practice amongst judges as to the desirability and appropriateness of expert evidence in mis-selling cases. He explained that he had himself case-managed 47 swaps mis-selling cases and had tended to give permission for expert evidence. In contrast, certain other judges had, Judge Havelock-Allan explained, declined to grant such permission. Judge Havelock-Allan went on to observe that each case has to be approached on its own facts.

One thing that is clear (and was recognised by Judge Havelock-Allan) is that construction of relevant legal rules is a matter for the court. That means, as Judge Havelock-Allan himself noted, that an expert’s opinion on what, for example, a COB or COBS rule means is inadmissible. It is further clear that evidence from an expert that amounts to no more than saying what he or she would have done in the same circumstances is of no value and should not be admitted.

On the facts of the St Dominic’s case, Judge Havelock-Allan nevertheless concluded that he should give permission for expert evidence to be called. Among other things, he said this:

“While construction of the applicable rules and interpretation of the ambit of the duty of reasonable skill and care is the Court’s function and not the function of an expert, the process of construction and interpretation takes place in a context. An expert can give evidence about that context. If the meaning of the rule and/or ambit of the duty is clear without such evidence, the evidence is likely to be of assistance in determining whether the rule has been broken or the duty breached. It will provide a yardstick either to assist in determining what the duty encompasses or to assist in resolving whether the defendant’s conduct fell short of the required standard.”

A little later in his judgment, in a passage which Mr Marshall stressed, the judge said:

“The second factor is that in the overwhelming majority of swaps cases the defendant bank is able to call witnesses of fact who have considerable experience in the practice and procedure employed in selling IRHPs. These often include senior executives from the derivatives selling division and sometimes executives responsible for regulatory compliance. They have no difficulty explaining the systems put in place by the bank to ensure the discharge of its duties to the customer. The customer, by contrast, has no evidence with which to challenge the adequacy of these systems by reference to practice elsewhere unless it comes from an expert. The background of the players means that there is not a level playing field. Therefore unless there are reasons to suppose that any expert evidence will not be credible or is bound to lack utility, the claimant should be permitted to call it. Fairness then dictates that the bank should be given similar permission since evidence from an independent source that its practice is up to industry standards and compliant with the regulatory regime will carry more weight than evidence pointing in the same direction from its employees.”

Judge Havelock-Allan’s decisions notwithstanding, Mr Sinclair, as I have said, opposes the present application. He argues that, in so far as questions may arise as to the risks associated with a product, those can be explained by reference to the documentation in submissions; no expert evidence is required. Again, says Mr Sinclair, there can be no question of expert evidence being necessary or appropriate to explain the legal implications of, for example, the COBS rules. So far as the application of such rules to the facts is concerned, Mr Sinclair argues that that will inevitably be very fact-specific and not something on which expert evidence is likely to be of utility.

In the end, I have concluded that Mr Sinclair is right. In the first place, I agree with him that there can be no question of expert evidence being needed to expand on the risks related to a product. Those will be apparent from their terms and can be explained, so far as necessary, by counsel. Mr Marshall mentioned that his client has already had the assistance of expert input and I can well see how that might be useful in alerting LEA and its legal representatives to particular matters, but it does not follow that expert evidence is required. LEA’s representatives can be expected to be able to pursue the points without putting expert evidence before the Court.

I also agree with Mr Sinclair that there can be no need for expert evidence to explain the legal standards and, in particular, the standards required by COBS 9. Indeed, Judge Havelock-Allan noted that expert opinion on, for example, a COB or COBS rule would be inadmissible, and I did not understand Mr Marshall to argue to the contrary.

The key point, I suppose, is whether expert evidence is justified on the application of the rules and standards in the particular circumstances. There, of course, Mr Marshall has support from Judge Havelock-Allan. While, however, Judge Havelock-Allan had in Battrickraised the possibility of his views being informed by experience gained as he heard swaps cases, it seems that even by the time of his St Dominic’s judgment he had not in fact had the chance to learn from experience because, in the way of these things, the cases where expert evidence might have been called had settled.

That of course is by no means determinative, but my own experience leads me to believe that evidence as to the application of the rules and standards on the facts of the present case is not likely to be helpful to the trial judge. That application will inevitably, as Mr Sinclair said, be very fact-sensitive. That means that it is difficult for an expert to prepare evidence in advance because he cannot reliably anticipate what the facts will prove to be, and the judge will be well placed himself to decide how on the particular facts that he finds the rules and standards apply. Any “expert” evidence would be all too likely to amount to no more than evidence as to what the expert might have done in comparable circumstances rather than evidence as to the implications of “a recognised expertise governed by recognised standards and rules of conduct”.

It is perhaps worth noting that the causes of action now asserted by LEA are, as I understand it, deceit, breach of fiduciary duty and negligence, albeit that LEA’s contention is that the content of RBS’s duties will have been informed by the regulatory rules. It is, of course, ultimately a matter for a judge to determine whether such causes of action have been made out, and no expert can helpfully express a view on whether there has been deceit or, indeed, in circumstances such as these so far as I can see, whether there has been breach of fiduciary duty or negligence.

I bear in mind, too, both that the Civil Procedure Rules require the court to restrict expert evidence to that which is reasonably required to resolve the proceedings and the costs to which the grant of permission for expert evidence might give rise. I suggested to Mr Marshall that, having regard to the experts’ fees and the potential lengthening of the trial, letting in expert evidence would be likely to put up the costs of the proceedings substantially. Mr Marshall did not demur. I simply do not think that expenditure of that kind is proportionate in the context of the present case. I doubt whether the evidence would prove to be of significant usefulness to a judge at all. I certainly do not think that any conceivable usefulness would be in keeping with the cost.

I ought to mention specifically Judge Havelock-Allan’s concern, which was echoed by Mr Marshall, that there should be a level playing field. As Mr Marshall elaborated on the point, the suggestion was that his client might not have confidence that there had been a level playing field and be fully aware of the issues absent expert evidence. At the end of the day, however, the question is essentially one of whether the issues arising in the case can be properly and fairly resolved on the basis of factual evidence and without expert evidence. The fact, if it be one, that LEA might feel more comfortable with an expert to explain matters cannot justify me in giving orders that would, as I have said, prolong the trial and substantially increase the costs if the evidence in question is not in truth reasonably required.

While therefore I would not wish to express any view on whether expert evidence was appropriate in the cases with which Judge Havelock-Allan was dealing, it seems to me that on the facts of this case expert evidence is not warranted. I shall therefore decline to give permission for it.