Claverton Holdings Ltd v Barclays Bank Plc

In June 2007 the Claimant, Claverton Holdings Ltd, a property holding company based in the British Virgin Islands, purchased an interest rate swap from its bankers, Barclays. In these proceedings Claverton claims that Barclays mis-sold the swap. It is alleged that two employees of Barclays Capital, Messrs Bulloch and Challis, made numerous misrepresentations and, having assumed a duty to advise Claverton, provided negligent advice and recommendations in relation to the swap and its suitability for Claverton’s needs. Claverton seeks rescission of the swap and restitution of all monies paid under its terms or, alternatively, damages. Barclays denies each element of the claim.

The parties have given standard disclosure and the matter is set down for a 5-day trial in June 2016.

Claverton now applies for specific disclosure from Barclays, pursuant to CPR 31.12, of documents relating to other allegations of complaints of mis-selling swaps involving Messrs Bulloch and Challis, including complaints involving the FCA and the Financial Ombudsman Service, court proceedings and disciplinary processes. In this regard Claverton refers to the fact that the FCA review of swaps mis-selling identified that Barclays had been obliged to offer redress to 2,896 customers to date. Claverton invites the inference that a significant number of complaints will have related to the conduct of Messrs Bulloch and Challis, given their role at Barclays Capital. Indeed, Claverton has obtained copies of Particulars of Claim in two other sets of proceedings, each of which make allegations of mis-selling against Mr Bulloch.

Claverton submits that documents relating to complaints against Messrs Bulloch and Challis should be disclosed as, although they are not directly relevant to the matters in issue, they establish collateral facts which will be or may be admissible at trial as similar fact evidence, supporting the claims advanced by Claverton.

Also before the court is an application by Claverton for an order that Barclays provide Further Information pursuant to CPR Part 18 in the terms requested by Claverton on 27 May 2015. However, Ms Bayliss, counsel for Claverton, accepted that such information would add nothing of significance to what would be apparent from the disclosure, if ordered, and that, in the absence of further disclosure being ordered, the Further Information would be of no assistance to Claverton. It was therefore accepted that the Part 18 application added nothing to the application for Specific Disclosure and did not require separate consideration.

In support of the contention that evidence of other allegations and complaints would be admissible as similar fact evidence, Ms Bayliss relied on the House of Lords decision in O’Brien v Chief Constable of South Wales Police [2005] 2 AC 534. Lord Bingham set out the 2-stage test for determining whether evidence of collateral matters should be admitted as similar-fact evidence at pages 540 to 542 as follows:

“4.

That evidence of what happened on an earlier occasion may make the occurrence of what happened on the occasion in question more or less probable can scarcely be denied. If an accident investigator, an insurance assessor, a doctor or a consulting engineer were called in to ascertain the cause of a disputed recent event, any of them would, as a matter of course, enquire into the background history so far as it appeared to be relevant. And if those engaged in the recent event had in the past been involved in events of an apparently similar character, attention would be paid to those earlier events as perhaps throwing light on and helping to explain the event which is the subject of the current enquiry. To regard evidence of such earlier events as potentially probative is a process of thought which an entirely rational, objective and fair-minded person might, depending on the facts, follow. If such a person would, or might, attach importance to evidence such as this, it would require good reasons to deny a judicial decision-maker the opportunity to consider it. For while there is a need for some special rules to protect the integrity of judicial decision-making on matters of fact, such as the burden and standard of proof, it is on the whole undesirable that the process of judicial decision-making on issues of fact should diverge more than it need from the process followed by rational, objective and fair-minded people called upon to decide questions of fact in other contexts where reaching the right answer matters. Thus in a civil case such as this the question of admissibility turns, and turns only, on whether the evidence which it is sought to adduce, assuming it (provisionally) to be true, is in Lord Simon's sense probative. If so, the evidence is legally admissible. That is the first stage of the enquiry.

5.

The second stage of the enquiry requires the case management judge or the trial judge to make what will often be a very difficult and sometimes a finely balanced judgment: whether evidence or some of it (and if so which parts of it), which ex hypothesi is legally admissible, should be admitted. For the party seeking admission, the argument will always be that justice requires the evidence to be admitted; if it is excluded, a wrong result may be reached. In some cases, as in the present, the argument will be fortified by reference to wider considerations: the public interest in exposing official misfeasance and protecting the integrity of the criminal trial process; vindication of reputation; the public righting of public wrongs. These are important considerations to which weight must be given. But even without them, the importance of doing justice in the particular case is a factor the judge will always respect. The strength of the argument for admitting the evidence will always depend primarily on the judge's assessment of the potential significance of the evidence, assuming it to be true, in the context of the case as a whole.

6.

While the argument against admitting evidence found to be legally admissible will necessarily depend on the particular case, some objections are likely to recur. First, it is likely to be said that admission of the evidence will distort the trial and distract the attention of the decision-maker by focusing attention on issues collateral to the issue to be decided. This is an argument which has long exercised the courts (see Metropolitan Asylum District Managers v Hill (1882) 47 LT 29, 31 per Lord O'Hagan) and it is often a potent argument, particularly where trial is by jury. Secondly, and again particularly when the trial is by jury, it will be necessary to weigh the potential probative value of the evidence against its potential for causing unfair prejudice: unless the former is judged to outweigh the latter by a considerable margin, the evidence is likely to be excluded. Thirdly, stress will be laid on the burden which admission would lay on the resisting party: the burden in time, cost and personnel resources, very considerable in a case such as this, of giving disclosure; the lengthening of the trial, with the increased cost and stress inevitably involved; the potential prejudice to witnesses called upon to recall matters long closed, or thought to be closed; the loss of documentation; the fading of recollections. It is, I think, recognition of these problems which has prompted courts in the past to resist the admission of such evidence, sometimes (as, perhaps, in R v Boardman [1975] AC 421) propounding somewhat unprincipled tests for its admission. But the present case vividly illustrates how real these burdens may be. In deciding whether evidence in a given case should be admitted the judge's overriding purpose will be to promote the ends of justice. But the judge must always bear in mind that justice requires not only that the right answer be given but also that it be achieved by a trial process which is fair to all parties.”

Ms Bayliss further relied on the following observation of Lord Hobhouse of Woodborough in R v Z [2002] 2 AC 485 at 508, referred to by Lord Carswell at paragraph 74 of O’Brien:

“Similar facts are admissible because they are relevant to the proof of the defendant's guilt. The evidence relating to one incident taken in isolation may be unconvincing. It may depend upon a straight conflict of evidence between two people. It may leave open seemingly plausible explanations. The guilt of the defendant may not be proved beyond reasonable doubt. But, when evidence is given of a number of similar incidents, the position may be changed. The evidence of the defendant's guilt may become overwhelming. The fact that a number of witnesses come forward and without collusion give a similar account of the defendant's behaviour may give credit to the evidence of each of them and discredit the denials of the defendant. Evidence of system may negative a defence of accident. This is the simple truth upon which similar fact evidence is admitted: it has probative value and is not merely prejudicial.”

Lord Carswell further stated at paragraph 76 of O’Brien:

“The appellant's fourth suggested requirement, that evidence of the allegations proposed to be adduced as similar facts will be admitted only if they are proven facts, is in my view wrong both in principle and on authority. It is refuted by the analysis which I have quoted of Lord Hobhouse of Woodborough in R v Z of the cumulative strength which may be built up from a number of relatively frail strands. It is inconsistent with the remark of Lord Mackay of Clashfern LC in R v H [1995] 2 AC 596, 605 that the judge is not to be held to have accepted that the evidence is true. It is also inherent in the decision in Director of Public Prosecutions v P [1991] 2 AC 447 that the allegation was unproven, as both incidents in that case were the subject of the trial of the defendant. Moreover, section 109(2) of the Criminal Justice Act 2003 expressly recognises that the truth of the allegation may not have been formally established. The strength of the allegations, which may be evidenced by their having been established as proven facts, may come into the scales in the second stage, but it is not necessary in the first stage to require that they be so proven.”

Ms Bayliss submitted that following the above approach, evidence of other complaints and allegations against Messrs Bulloch and Challis would clearly and obviously be probative of matters alleged in the present case. She acknowledged that in JP Morgan Chase Bank v Springwell Navigation Corporation [2005] EWHC 383 (Comm) Gloster J (as she then was) had struck out pleaded allegations that a bank official, engaged in selling a financial product to the defendant, had made similar statements to other shipping customers at the bank in a similar position, on the basis that they were not logically probative of any of the following matters:

“34 … (a) that the contractual relationship was in any case the same as in the case of Springwell and Chase; (b) that each had the same investment objectives or attitude to risk, or that each had the same views on emerging markets; (c) that each had the same level of sophistication; or (d) that each dealt with Chase in the same way.”

Ms Bayliss suggested that that approach was wrong, but in any event pre-dated the flood of complaints in relation to derivative products from 2008 onwards and thereafter and the general recognition that there had been systematic mis-selling of such products to unsophisticated customers.

In the course of argument, however, Ms Bayliss accepted that the mere fact that other allegations or complaints of mis-selling had been made against Messrs Bulloch and Challis was not itself probative that there had been mis-selling in this case: the facts of each case would be different and issues of duty, breach, reliance and causation would require specific determination. Neither could other complaints or allegations be relevant to the extent that the allegations in the present case were based on written communications such as emails and written presentations. The only potential relevance was if other cases contained allegations that similar oral representations or statements were made by the relevant persons, supporting the likelihood that they had been made in this case.

Ms Bayliss therefore proposed a revised form of order requiring disclosure of documents relating to complaints and allegations which involved similar allegations to those set out in paragraphs 85 and 95 of the Particulars of Claim in this case.

A further issue that arose in argument related to the use Claverton proposes to make of the documents relating to other complaints and allegations if disclosed. Ms Bayliss stressed that Claverton did not intend to call evidence to support the other allegations and complaints, but merely to refer to their nature and extent, including by way of cross-examination of witnesses called by Barclays. She contended that this removed the risk of satellite litigation derailing the trial.

However, that approach entails that Claverton would not be seeking to adduce evidence of similar facts, but merely evidence that similar allegations had been made. To the extent that evidence of allegations amounts to hearsay evidence of the underlying facts alleged, such evidence is of plainly little if any probative value. As Mr Sinclair, counsel for Barclays, pointed out, neither party had found any authority where evidence of similar allegations had been admitted. The passage from the judgment of Lord Carswell cited above, if properly understood, does not support such a course. The question Lord Carswell was addressing was whether it was necessary for similar facts to be proven facts before they can be admitted. It is clear that Lord Carswell anticipated that the admission of allegations proposed to be adduced as similar facts entailed calling evidence of those similar facts, as is apparent from his statement at paragraph 77 in O’Brien that a factor in the second stage of the test is that “the lengthening of the trial and increase of costs to which the calling of similar fact evidence will give rise must not be disproportionate”.

To meet this further objection, Ms Bayliss sought to refine further the order sought against Barclays by way of limiting it to complaints and allegations which had resulted in an admission by Barclays or a finding by the Financial Ombudsman Service against Barclays. I would add that such admission or finding would, to be probative, have to relate clearly to the specific allegations of fact said to be similar to the alleged facts of the present case.

Ms Bayliss was therefore attempting to avoid both the criticism that Claverton wishes to adduce no more than unsubstantiated allegations on the one hand and a charge that Claverton intends to engage in satellite litigation on the other. In my judgment her solution fails on both counts.

First, it is highly likely that any settlements entered by Barclays with customers who have purchased swaps will have been made without admission of liability, let alone an admission of specific factual allegations underlying any claim. Further, any determination by the Financial Ombudsman Service will be as to the Ombudsman’s view of Barclays’ responsibility to compensate the customer, not a finding of legal liability and certainly not one which would bind Barclays in these proceedings in relation to any particular allegation of fact. Findings of a court, on the other hand, if there are any, would be readily accessible in any event.

Second, to the extent that Claverton was permitted to adduce evidence of admissions or findings of the Financial Services Ombudsman, it would remain open to Barclays to adduce its own evidence to explain the admissions or findings, to re-open and contradict any admission and to seek to distinguish the facts of the case in which any admission or findings were made. The possibility of satellite issues derailing the trial remains very real to the extent that Claverton were to be permitted to rely on allegations in other cases.

The application has, at this point, in my judgment, become a fishing expedition, hoping to find an admission by Barclays or a finding of similar facts where there is no reason to believe that such exists. It would involve the bank in an extensive and expensive search and analysis of a large number of cases to determine what specific allegations were made and to what extent those allegations were “similar” to the allegations in this case, and, further, the extent to which they have been admitted or are the subject of a “finding”. In my judgment such an exercise is wholly disproportionate in the context of this claim.

In conclusion, I am not satisfied that the application, even as refined, is for documents which would be relevant and therefore admissible as similar fact evidence. I further doubt that, even if they crossed the threshold of admissibility, they would be admitted as a matter of discretion. That would be sufficient to refuse to make an order for specific disclosure of documents relating to transactions not directly in issue in these proceedings. But in any event, I am further satisfied that to require Barclays to undertake the search and disclosure exercise proposed would be disproportionate and oppressive. Claverton’s applications are therefore dismissed.