CLAIMANT’S (LATE) APPLICATION TO RELY ON EXPERT EVIDENCE DISMISSED:”LITIGATION NEEDS TO BE CONDUCTED EFFICIENTLY AND AT PROPORTIONATE COST”

In IlliquidX Ltd v Altana Wealth Ltd & Ors [2024] EWHC 2191 (Ch) Chief Master Shuman dismissed the claimant’s application to rely on expert evidence.  It was held that the application was made too late and, in any event, not necessary to conduct the action. If it had been necessary then the claimant would have made the application far earlier.

“The burden is on the claimant to persuade the court that such evidence will assist the court. It is envisaged in the rules that this issue will be addressed at an early stage of the proceedings, indeed the parties are asked to state whether expert evidence is required in the directions questionnaire. The danger of course in applying at a late stage is that if the court gives permission that may cause the trial date to be lost.”

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Matters to be considered include:

• Experts reporting outside their expertise
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• Compliance with the rules
• Conduct and alleged misconduct.

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THE CASE

The action related to the business opportunity of monetising Venezuelan national debt. The claimant alleges breach of contract, breach of confidence, breach of trade secrets and copyright infringement.   Proceedings were issued in July 2020. The case had been subject to extensive amendment of the pleadings and a CCMC had been held in December 2022. The action is listed for trial in the latter part of 2024.

THE CLAIMANT’S APPLICATION TO RELY ON EXPERT EVIDENCE

The judge heard a number of applications.  One of the matters being considered was the claimant’s application to rely on expert evidence. The claimant had instructed an expert and prepared a list of issues for experts to consider. The defendant objected to expert evidence being adduced.

THE JUDGMENT ON THE CLAIMANT’S APPLICATION

The judge refused the application.  Firstly it was doubtful whether the proposed evidence came within the relevant criteria for expert evidence to be of use to the court. Secondly the application was made far too late. Admitting such evidence at this stage would most likely imperil the trial date.

(6) The claimant’s application for permission to adduce expert evidence

1. 1. The claimant seeks permission under CPR 35.4 to adduce written and oral expert evidence in the field of the investment market in Latin American sovereign and corporate debt instruments. In the draft order they propose to rely on an expert named Daniel Osorio and that the defendants have permission to instruct their own expert. The claimant attaches to the draft order schedule A which lists two issues for the experts: what was/is the market perception of investment in Venezuelan distressed debt and the extent to which all or part of the “business opportunity” was generally known by market professionals who were/are not specialists in Latin American/Venezuelan sovereign and corporate debt. This in turn refers to schedule B which is the claimant’s definition of what constitutes “business opportunity”.

1. 1. This it is submitted is relevant to the trial issues of whether the market had ignored and/or avoided and/or undervalued the “Opportunities” as defined in the NDA and whether the “confidential information” that the claimant contends it provided to the defendants is confidential and/or a trade secret or was as the defendants assert “generally known among or readily accessible to person with[in] the circles that normally deal in such information”^[12].

1. 1. In British Airways v Spencer [2015] EWHC 2477 (Ch) 57, [2015] Pens LR 519 at paragraph 68, Warren J identified three important questions for the court to ask itself in approaching the issue of whether to grant a party permission to rely on expert evidence,

“(a) The first question is whether, looking at each issue, it is necessary for there to be expert evidence before that issue can be resolved. If it is necessary, rather than merely helpful, it seems to me that it must be admitted.

(b) If the evidence is not necessary, the second question is whether it would be of assistance to the court in resolving that issue. If it would be of assistance, but not necessary, then the court would be able to determine the issue without it …

(c) Since, under the scenario in (b) above, the court will be able to resolve the issue without the evidence, the third question is whether, in the context of the proceedings as a whole, expert evidence on that issue is reasonably required to resolve the proceedings.”

1. 1. The burden is on the claimant to persuade the court that such evidence will assist the court. It is envisaged in the rules that this issue will be addressed at an early stage of the proceedings, indeed the parties are asked to state whether expert evidence is required in the directions questionnaire. The danger of course in applying at a late stage is that if the court gives permission that may cause the trial date to be lost. As Warren J observed at paragraph 63,

“A judgment needs to be made in every case and, in making that judgment, it is relevant to consider whether, on the one hand, the evidence is necessary (in the sense that a decision cannot be made without it) or whether it is of very marginal relevance with the court being well able to decide the issue without it, in which case a balance has to be struck and the proportionality of its admission assessed. In striking that balance, the court should, in my judgment, be prepared to take into account disparate factors including the value of the claim, the effect of a judgment either way on the parties, who is to pay for the commissioning of the evidence on each side and the delay, if any, which the production of such evidence would entail (particularly delay which might result in the vacating of a trial date).”

1. 1. The engagement of the court’s case management powers and in particular the overriding objective was considered in Yesss (Electrical) UK v Martin Warren [2024] EWCA Civ 14. The judge below had allowed a late application for permission to rely on expert evidence in a new discipline that had not been addressed by the existing directions. The appeal ultimately failed but at paragraph 25 Birss LJ said,

“25. The critical starting point, as the appellant’s submissions recognise, is a breach of a rule, practice direction or order. It may seem trite to say that if there has been no breach of a rule, practice direction or order then the relief from sanctions provisions do not apply, but it is worth emphasising. That is because in some contexts it appears that the concept of “relief from sanctions” has been used as a label simply to characterise the tougher approach to case management and compliance which can be found in Mitchell and Denton. That is not right. The courts today do apply an approach to case management in general which is less tolerant of delays than before. The modern approach has a greater emphasis on compliance and the need for efficient conduct of litigation at proportionate cost. There is recognition that the need for efficiency and proportionate cost applies both in the given case and in relation to knock on effects on other cases. The basis in the rules for this general approach, as I mentioned in Lufthansa at [23], is not r3.9 and relief from sanctions, rather it is that the two principles identified are now embedded in the overriding objective (r1.1(2)(e) and (f)) and they play an important part in its application. That is why it can be said that the “ethos” of Denton applies even when r3.9 (relief from sanctions) is not engaged (c.f. FXF paragraph 76^[13]).”

1. 1. This is undoubtedly a late application, and the timing of the application has a flavour of harking back to pre-CPR days. It was therefore somewhat remarkable for the claimant to criticise the defendants for “now” opposing the expert evidence application. Reference was made to the costs and case management conference on 7 December 2022 when Mr Moody-Stuart KC on behalf of the defendants had stated that, “there will be an issue between the parties as to what is known and what is trite what is generally out there. It may be that there would be a need for someone who is an expert in the bond markets to say look, this is all known. We cannot formulate that yet”. The claimant’s position at this time, as set out in Counsel’s skeleton argument, was that expert evidence was not necessary in these proceedings.

1. 1. What this reveals is that in 2022 the parties were considering this point. There has been no material change to the defendants’ case. By way of an example the amended defence dated 18 May 2022 at paragraph 57A pleads, “the only information conveyed by the claimant to the defendants prior to the NDA was in the nature of high-level concepts or ideas that were already in the public domain.” The defendants made no application for permission to rely on expert evidence, neither did the claimant until the application dated 29 April 2024, that is currently before the court. The draft list of issues for trial remain in the same form as 7 December 2022.

1. 1. The claimant’s counsel was not able to provide any adequate explanation as to why if this expert evidence was necessary, as the claimant now contends, this epiphany had occurred so late in the day. Certainly, leading Counsel for the claimant at this hearing also represented the claimant at the costs and case management conference on 7 December 2022, which took place before me. It is also compounded by the manner in which the claimant’s solicitors have sought to raise this issue. Rather than engage with the defendants’ solicitors in advance of the application being made they merely copied the defendants’ solicitors into a letter to the court dated 26 April 2024 seeking a listing of its then unissued application.

1. 1. Is this evidence necessary? The claimant submits that it is, the court will need an overview of the state of the market’s interest and knowledge that can only be provided by an expert witness. There is a difference between evidence of fact and evidence of opinion. Sometimes it is difficult to identify which side of the line the evidence falls on. Here what the claimant appears to be suggesting is that Mr Osorio will be giving evidence of his direct observations and perceptions of the market. Even then it is not just his, the claimant seeks to expand the people within the confidentiality club by another 4 identified individuals, presumably members of his team. It therefore follows that expert evidence is sought by the claimant is not necessary. This is a point that has been raised by the defendants although the claimant’s retort is to say well if the evidence is given by witnesses of fact it will necessarily be anecdotal and biased towards the side calling them. Ultimately it will be a matter for the trial judge about the knowledge within the marketplace. It seems to me that this evidence can be dealt with by witnesses of fact, it is not necessary for the evidence to be given by an expert. That this is the correct analysis is reinforced by the claimant’s own conduct. The claimant has not identified any material change in the issues for trial and as I have already said there has been no change in the defendants’ position. Ultimately issues of confidentiality in this case are issues of fact for the court.

1. 1. Will this evidence be of assistance to the court? The court will need to have an overview of the state of the market and the knowledge within the market. That evidence can be resolved by witnesses of fact, which the trial judge will be able to evaluate following cross-examination.

1. 1. The question then is whether the expert evidence is reasonably required. The claimant criticises the defendants as conflating three issues, the market, what the defendants knew and what occurred between the parties. It is accepted that the expert will only be able to give an overview of the market, the latter issues being a matter for factual witnesses. However, the claimant has not limited the expert in this way, even a cursory reading of schedule A and schedule B reveals the extent of the scope, fairly described by Mr McKenna in his fourth witness statement, paragraph 10.6(a) as “sweeping”. There is some force in his point that what is sought seeks to cover the entire breadth of the claimant’s case on confidential information, both as to individual elements and as a whole. This problem is of course of the claimant’s own making. What they should have done is to engage with the defendants at an early stage not posit the claimant’s unilateral view on what constituted the issues that an expert should consider and their own definition of “business opportunity”.

1. 1. It is also of concern that the expert’s finalised or almost finalised report has been prepared on the claimant’s unilateral analysis of the issues and characterisation of the “business opportunity”. As to the latter that appears to be a differently nuanced paraphrased version of that set out in re-amended confidential Annex 1.

1. 1. The claimant submits, having identified an expert, that his and his team’s fees together with associated legal fees would be approximately £300,000. That it is argued in a claim for sums in excess of £10 million is proportionate. The claimant maintains that this application will cause little prejudice to the defendants and can be managed within the existing time frame so that there is no risk to the trial date. It was clear at the hearing before me that the claimant’s experts report was either in a finalised or almost finalised form. The Claimant’s letter dated 10 May 2024 suggests that their proposed expert had only started work in late March, it having taken them 6 weeks to find such an expert. So, by the middle of February 2024 the claimant was actively looking for an expert, but no mention was made of this to the defendants until 2 ½ months later.

1. 1. Litigation needs to be conducted efficiently and at proportionate cost. I do not accept the submission that the defendants would be caused little prejudice. The timing of this application is such that I consider that if permission were granted the work required by the defendants would indeed lead to the trial date being vacated. The defendants submit that if permission were granted the defendants’ witnesses of fact would wish to respond to matters of fact raised in the report. There must be a strong likelihood of that, not least when I consider that the evidence that the claimant suggests the expert will opine on will be matters of fact. I also bear in mind the current trial time estimate of 10 days. Given the way in which the parties argue every point permitting two experts to provide reports and in all probability being required to attend court to be cross-examined together with the additional witness evidence will not be accommodated within the current trial listing. The defendants are also sceptical about the estimated costs and consider them to be far too low on any objective view.

1. The claimant’s application for permission is dismissed.