The RBS Rights Issue Litigation
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hildyard |
| Judgment Date | 26 November 2015 |
| Neutral Citation | [2015] EWHC 3433 (Ch) |
| Docket Number | In Claims entered in the Group Register |
| Court | Chancery Division |
| Date | 26 November 2015 |
[2015] EWHC 3433 (Ch)
The Honourable Mr Justice Hildyard
And Chief Master Marsh
In Claims entered in the Group Register
(HC-2013-000484 and others)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Nash QC, Peter de Verneuil Smith and Ian Higgins (instructed by Signature Litigation LLP) for the SG Group of Claimants
Andrew Onslow QC, Adam Kramer and Scott Ralston (instructed by Stewarts Law LLP) for the SL Group of Claimants
Alex Barden and Max Schlote (instructed by Quinn Emanuel Urquhart & Sullivan LLP) for the QE Group of Claimants
David Railton QC, Sonia Tolaney QC, David Blayney QC, Adam Johnson and David Murray (instructed by Herbert Smith Freehills LLP) for the Defendants
Hearing dates: 5 – 7 October 2015
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Scope of Judgment
Further to the eighth CMC in this matter I reserved for further consideration two procedural issues: (1) whether to permit the parties to adduce expert evidence on "investment information/equity analysis", and (2) whether to adjourn the trial presently fixed to commence on 7 December 2016. The balance was and remains a fine one.
In this judgment I seek to explain my reasons for (1) refusing permission to call an additional expert at least for the present, whilst not precluding the parties adducing evidence going to the issue through the existing slate of experts and (2) agreeing with very considerable reluctance to an adjournment of the trial until 6 March 2017.
I address each question in turn. In doing so, I refer to RBS Group and the individual defendants together as "the Defendants": they were all represented by Mr David Railton QC, Ms Sonia Tolaney QC and Mr David Blayney QC, with Mr Adam Johnson of Herbert Smith Freehills LLP and Mr David Murray of Counsel. I refer to the various lead claimants in this group litigation by the names that have become common usage in the context of the numerous CMCs as follows, or otherwise collectively as "the Claimants":
(1) the SG Group, represented by Mr Jonathan Nash QC leading Mr Peter De Verneuil Smith and Mr Ian Higgins, who it was agreed between the Claimants should present their arguments against the admission of further expert evidence;
(2) the SL Group, represented by Mr Andrew Onslow QC, Mr Adam Kramer and Mr Scott Ralston, who it was agreed between the Claimants should present their arguments against an adjournment of the trial; and
(3) the QE Group, represented by Mr Alex Barden and Mr Max Schlote, who the Claimants agreed should present their arguments on other matters not addressed in this judgment.
Issue (1): whether to admit further expert evidence of an equity analyst
As Mr Nash QC, Counsel for the SG Group acknowledged, the Claimants have until recently supported permission being given to the parties to adduce evidence on what was described as "investment information/equity analysis".
Indeed, and as Mr Railton QC naturally emphasised, it was common ground by March 2014, and (for example) at the fifth CMC when directions for expert evidence were given, that evidence of this kind would be required, and provision for such evidence was made accordingly.
However, that permission was expressly stated to be " Subject to review by the Court as to the necessity therefor when the list of [expert] questions … has been provided".
When re-considering the draft List of Questions for Experts at the seventh CMC, I raised the question whether evidence in the field of what was described as "Investment Information/Equity analysis" was " properly justified as expert evidence". After some general discussion, it was accepted by the Court that the Claimants would want to consider the point further.
Having reconsidered the position the Claimants concluded that such evidence is not only unnecessary but a potentially misleading distraction: the "expert" evidence of an analyst or trader would tend to be inherently personal and subjective, reflecting their own practice and views rather than those of investors as a whole, whereas the statutory test encompasses (and treats as addressees of any prospectus) the whole gamut of investors from sophisticated institutions through to inexperienced individuals.
The Defendants, on the other hand, have continued to maintain that "Investment Information/Equity Analysis" is an appropriate subject for expert evidence. They contend that such evidence would be of valuable assistance to the Court in deciding both what was "necessary information" to be included in the Prospectus for the purposes of section 87A(2) FSMA to "enable investors to make an informed assessment of…the assets and liabilities, financial position, profits and losses, and prospects" of RBS and also the issue as to whether matters omitted by the Defendants were reasonably believed by them to have been properly omitted for the purposes of the "reasonable belief" defence provided by Schedule 10 FSMA.
Test to be applied
Even where the parties are agreed, and a fortiori when they are not, it is for the Court to determine whether to give permission for particular expert evidence.
The test to be applied is set out in CPR 35.1 which is headed "Duty to restrict expert evidence" and is in mandatory terms. There are two elements: (i) is the evidence admissible, and (ii) is the evidence reasonably required to resolve the proceedings?
The Claimants suggest that the answer to both questions is "no". The Defendants suggest a positive answer to each.
The admissibility of expert evidence (as an exception to the general rule that opinion evidence is inadmissible) was summarised by Evans-Lombe J in Barings Plc v Coopers & Lybrand [2001] PNLR 22, §45 as follows:
"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."
Thus, the first issue is whether there is a recognised body of expertise governed by recognised standards and rules of conduct relevant to the question which the Court has to decide. Unless there is, the Court should decline to admit evidence which ex hypothesi is not evidence of any body of expertise but rather the subjective opinion of the intended witness.
There are two further restrictions:
(1) An expert is not to find facts but to express an expert opinion on the basis of assumed facts ( JP Morgan v Springwell [2007] 1 All ER (Comm) 549; [2006] EWHC 2755 (Comm)§21).
(2) An expression of the opinion of what the expert would have done in the hypothetical situation is inadmissible ( Midland Bank Trust Company Ltd v Hetts Stubbs & Kemp [1979] 1 Ch 384, 402).
If the evidence is admissible, CPR 35.1 provides:
" Expert evidence shall be restricted to what is reasonably required to resolve the proceedings."
In determining whether particular evidence is reasonably required a key question will be:
"…whether the subject matter of the opinion is such that a person without instruction or experience in the area of knowledge or human experience would be able to form a sound judgment on the matter without the assistance of witnesses possessing special knowledge or experience in the area."
See R v Bonython (1984) 38 SASR 45 at 46, cited in JP Morgan Chase v Springwell at [20] and Barings at [38].
The burden of establishing that expert evidence is both (i) admissible and (ii) reasonably required (i.e. not just potentially useful) is on the party which seeks permission to adduce the evidence concerned (see JP Morgan Chase at [19] per Aikens J (as he then was)). He continued (at [23]):
"I should mention one further practical matter, which I think is relevant to large commercial disputes. It is inevitable when there is a dispute between commercial entities that covers a long period of time (as this case does) and concerns a very large sum of money, that a huge amount of documents will have to be considered. There is a natural tendency of parties and their advisors to consider employing experts to assist in digesting this material, particularly if it relates to any area that might be recondite, such as trading in Russian debt in the 1990s. There is a tendency to think that a judge will be assisted by expert evidence in any area of fact that appears to be outside the 'normal' experience of a Commercial Court judge. The result is that, all too often, the judge is submerged in expert reports which are long, complicated and which stray far outside the particular issue that may be relevant to the case. Production of such expert reports is expensive, time-consuming and may ultimately be counter-productive. That is precisely why CPR Pt 35.1 exists. In my view it is the duty of parties, particularly those involved in large scale commercial litigation, to ensure that they adhere to both the letter and spirit of that rule. And it is the duty of the court, even if only for its own protection, to reject firmly all expert evidence that is not...
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