IBP Markets LTD (Investment Bank Special Administration Regulations 2011), Re

Under the Civil Procedure Rules 1998, expert evidence must be reasonably required to resolve the proceedings. Market-practice evidence may assist contractual construction where it identifies an established practice or understanding that illuminates the disputed terms. An expert may not merely express a view on contractual meaning or disagree with a conclusion drawn from admitted facts. An application should identify the proposed expertise, issues and evidence with sufficient cogency. A renewed application may be permitted where a draft report identifies a genuine market-based alternative explanation, subject to preservation of the trial timetable and appropriate costs protection.

IBP Markets Ltd, an FCA-regulated wholesale broker, entered special administration. All Blue contended that assets and funds transferred during their trading relationship were client money protected under the Client Assets Sourcebook. IBP’s special administrators contended that they were held under a title transfer collateral arrangement. The proceedings required construction of the terms of business and application of those terms to the transactions. At the first contested directions hearing, All Blue sought permission for expert evidence on market practice and trading data, together with a direction concerning disclosure of complete communication chains. The central issues were whether the expert evidence was admissible and reasonably required, and whether the proposed disclosure proviso should be imposed.

The application for permission to rely on expert evidence was dismissed in its present form. A further application was permitted on specified conditions, and an amended disclosure direction was made.

1. Under the Civil Procedure Rules 1998, r35.1 requires expert evidence to be restricted to what is reasonably required to resolve the proceedings. Rule 35.4(2) requires an applicant to identify the estimated cost, field and issues, and, where practicable, the proposed expert. The court must consider both admissibility and reasonable requirement. The evidence must fall within recognised expertise, concern an issue arising on the pleadings, and address a subject on which the court could not form a sound judgment without special knowledge or experience. It need not be necessary or determinative, but mere helpfulness is insufficient. The approach in The RBS Rights Issue Litigation [2015] EWHC 3433 (Ch), Mitchell v News Group Newspapers Limited [2014] EWHC 3590 (QB) and British Airways Plc v Spencer [2015] EWHC 2477 (Ch), [2015] Pens LR 519 was applied.

2. For contractual construction, evidence of market practice may be received where it supplies relevant background knowledge. As explained in Crema v Cenkos Securities plc [2011] 1 WLR 2066, such evidence may extend beyond trade usage or custom to the way business is transacted. The applicant must identify both the difficulty in understanding the disputed term without the evidence and an established, illuminating practice or understanding relevant to that difficulty. An expert’s opinion on what the contract means would usurp the court’s function.

3. The Trading Report principally compared admitted or apparently undisputed figures for cash deposited and market exposure. The proposed expert had not been shown to offer a market-practice explanation for that comparison or an alternative reason for the difference between funds posted and the value of trades. Expert evidence consisting only of disagreement with the JSAs’ provisional conclusion would not be reasonably required and would risk usurping the court’s function. The case was unlike American Airlines Inc v Hope [1973] 1 Ll Rep 233, where expert evidence was needed to explain an unusual market practice.

4. The refusal did not preclude a further application. It could be made by 15 September 2026, accompanied by a draft report, at All Blue’s risk as to costs, provided that the trial date and a sensible timetable could be preserved and any prejudice addressed in costs. On disclosure, a request for a complete email or communication chain had to be accompanied by an explanation why it was or might be relevant. The JSAs were to respond within 14 days, with liberty to apply if necessary.