Change Red Limited v Barclays Bank Plc

The court considered whether the defendant bank was obliged, under its agreement with the Financial Conduct Authority, to have regard to the claimant's voluntarily revised statutory accounts for 2007 when deciding whether the claimant met the threshold of "turnover" in s.382 Companies Act 2006 and thus fell outside the FCA review. The issue turned on the proper construction of the term "turnover" in the FCA agreement and the admissibility of expert accountancy evidence under CPR Part 35. The master held that the meaning of "turnover" is a question for the court to decide and that proposed expert accountancy evidence was not admissible because it sought to answer the very question of construction for the judge. Non-expert opinion evidence on accounting treatment was likewise inadmissible, and the master indicated he was minded to strike out specific opinion passages in the claimant's witness statement.

The claimant, a sub-prime money lender, challenged the defendant bank's decision that the claimant was ineligible for a voluntary FCA review of mis‑sold interest rate hedging products. The dispute turned on whether, for the 2007 accounting year (the year of the sale), the claimant's "turnover" as used in the FCA agreement met the Companies Act 2006 thresholds in s.382 and the ancillary definition of "turnover" in s.474. The claimant had filed revised statutory accounts in 2013 which recorded "net interest income" materially lower than the earlier stated turnover. The claimant sought declarations that the bank breached the FCA agreement by failing to have regard to those revised accounts.

Nature of the application: A case management conference ruling on whether the defendant should be permitted to adduce expert accountancy evidence and on the admissibility of parts of the claimant's director's witness statement containing non‑expert accounting opinion.

Issues framed:

• Whether the defendant was obliged to have regard to the claimant's revised 2007 statutory accounts in determining "turnover" for the purposes of the FCA agreement.
• Whether expert accountancy evidence (and non‑expert opinion on accounting matters) was admissible under CPR Part 35.

Reasoning and outcome: The master considered the relevant Companies Act provisions (notably s.382, s.474 and s.454) and the statutory mechanism for revision of accounts. He analysed authorities on the admissibility of expert evidence where the question is one of construction, including Camden v IRC and LHS Holdings v Laporte, and applied the Part 35 principle that expert evidence is confined to what is reasonably required to resolve proceedings. He concluded that the meaning of "turnover" in the FCA agreement is a question for the judge and that expert accounting evidence was inadmissible because it sought to tell the court what the contractual term meant in substance. For the same reason non‑expert opinion passages in the claimant director's witness statement were also inadmissible, and the master was minded to strike specified passages subject to submissions.

The master noted the claimant's acceptance that any revision must comply with s.454 and the Revision Regulations, and recorded procedural background including the alternative Part 7 claim and the existence of the FCA review agreement and supplemental agreement modifying the sophisticated customer criteria.

The court refused to admit the defendant's proposed expert accountancy evidence because the accounting treatment and the question whether "turnover" (as used in the FCA agreement) was met in 2007 is a matter of contractual/statutory construction for the court to decide. Non-expert opinion evidence in the claimant's first witness statement on accounting matters was likewise inadmissible and the master was minded, subject to submissions, to strike specified paragraphs. The refusal was justified by authorities limiting expert evidence where the expert would be addressing the core issue of meaning for the judge and by application of CPR Part 35 principles.