St Dominic's Limited v The Royal Bank of Scotland Plc

Expert evidence in a financial mis-selling claim is admissible where there is an established body of relevant expertise and the evidence is reasonably required, or sufficiently helpful and proportionate, to resolve the issues. Experts may address industry practice, regulatory context, product characteristics, suitability and pricing. They must not determine the content of the legal duty or interpret regulatory rules as a matter of law. Evidence about breach may nevertheless be received where it explains whether the defendant’s conduct met the relevant industry or regulatory standard. The need for expert evidence is fact-sensitive. It should be confined to genuinely disputed and material issues.

The claimant brought a negligence claim concerning the alleged mis-selling of a 15-year interest-rate swap by the defendant bank. The claimant alleged inadequate information about risks and break costs, over-hedging and unsuitability, including failure to investigate its business needs and attitude to risk.

At the first case management conference, the court had to decide whether the parties should have permission to adduce expert evidence on the characteristics of the swap and an interest-rate cap, information required to assess suitability, suitability in the claimant’s circumstances, comparative pricing and mark-to-market value.

1. Permission granted. The court permitted expert evidence on the issues specified in the amended schedule to the case management order.
2. The essential preconditions were an acknowledged body of expertise concerning the matters addressed and a conclusion that the evidence was reasonably required to resolve the proceedings under CPR 35.1. Where evidence would have only marginal relevance, it would generally be excluded.
3. The court accepted that expertise existed concerning hedging-product characteristics, banking practice, regulatory compliance, know-your-client issues and swap pricing. The central question was therefore whether the evidence was necessary or sufficiently helpful and proportionate on the particular issues.
4. The content of the legal duty and the meaning of COB or COBS rules were matters for the court. An expert could not give evidence merely stating what the expert would have done or expressing a legal conclusion. However, an expert could explain the factual and professional context in which the court construed the duty and assessed compliance with the required standard.
5. Evidence about industry practice was likely to assist, and sometimes be necessary, in a nuanced mis-selling claim. It could provide a reasoned yardstick for assessing the adequacy of the information supplied, the suitability of the product and whether the bank’s conduct fell below the applicable standard. An expert’s opinion on breach was secondary to the underlying evidence about the standard of conduct, but was not for that reason inadmissible.
6. Fairness supported permission for both parties. Banks commonly possessed extensive internal evidence about their systems and practices, whereas customers generally required independent evidence to assess those systems against wider industry practice.
7. Evidence was allowed on information needed to assess suitability and break costs, suitability itself, comparative product costs and mark-to-market value. Evidence on product characteristics alone would not have been ordered, but was useful alongside the other permitted issues.