Braintree Leisure Ltd v Nationwide Building Society

Permission to adduce expert evidence should be granted where the evidence relates to a pleaded issue and is relevant to testing opposing expert evidence, even if the court has reservations about its ultimate usefulness. Expert evidence must remain relevant to the contractual issue actually pleaded. Where a contractual provision requires a party to act in accordance with its usual practice, the relevant inquiry concerns that party’s actual usual practice, rather than an objective standard of what its practice ought to have been.

Braintree Leisure Ltd applied, approximately nine weeks before trial, for permission to adduce evidence from a derivatives expert. The evidence was intended to support its pleaded case that an interest-fixing arrangement in a loan agreement was in substance a swap and therefore had to comply with applicable FSA rules and regulations.

The claimant also sought permission to amend its pleading. Nationwide Building Society opposed both applications, arguing that the proposed expert evidence was irrelevant and that the amendment was insufficiently satisfactory.

1. Expert evidence. The application was granted. The question whether the arrangement was a fixed or floating interest-rate swap, or another fixed-rate product, was expressly included in the agreed list of issues. The proposed evidence was therefore directed to a pleaded issue.
2. The bank’s evidence could be understood as expressing an opinion that the arrangement was not a swap. In those circumstances, fairness and equality of arms required the claimant to have an opportunity to adduce expert evidence with which to test that opinion and support its own case.
3. The court nevertheless emphasised that expert evidence should be excluded where it is irrelevant or unnecessary. The contractual wording requiring Nationwide to act in good faith and in accordance with its usual practice concerned the bank’s actual usual practice, not an objective assessment of what its usual practice ought to have been. The expert report appeared substantially to proceed on that mistaken basis.
4. Amendment. Permission to amend was also granted. The proposed pleading was arguable, and aspects of it were implicit in the existing pleading. Other aspects could properly be explored in cross-examination and would provide advance notice of the matters concerning how the interest rate had been fixed.
5. The permission was granted with reluctance. The trial judge was invited to consider whether the claimant’s reliance on unnecessary or irrelevant expert evidence should have costs consequences.