Summary

In an action arising out of the rogue activities of an investments trader, the court was prepared to accept, at least at this early interlocutory stage, that there was a body of expertise in the management of investment banks from which expert evidence could emerge capable of assisting a court considering claims in negligence arising from the management of such a bank.

Facts

Claimants' applications in two actions to strike out the whole or parts of three expert reports filed by the defendants and directed to banking management issues. The two actions arose out of the losses caused by the rogue derivatives trading activities of Nick Leeson, which led to the collapse of the Barings group, and involved claims in negligence by certain group companies against their respective auditors for alleged failure to discover and report on Leeson's activities. The expert evidence was directed towards that part of the defendants' case which alleged a lack of causation and/or contributory negligence. The thrust of that case was that Leeson's record of derivatives trading, and in particular the balance of risk and reward, was so incredible that any reasonably competent investment bank would or should have realised, by the application of its own internal supervisory procedures and hence without the assistance of the defendants, that an investigation was called for. The evidence was filed pursuant to an earlier order of the judge giving "preliminary" leave to the defendants to serve expert evidence as to banking management issues, by which was meant expert evidence directed to the conduct by Barings of a derivatives trading business primarily dealing on the Singapore futures market. The purpose of that order was that the claimants should have the opportunity of seeing the nature of the expert evidence upon which the defendants would seek to rely before themselves being put to the cost of answering it, so that they might apply to strike it out if not satisfied as to its admissibility under s.3 Civil Evidence Act 1972. The essential ground of the application to strike out was that the evidence filed by the defendants was not properly the subject of expert evidence, since it was not based on any objective standards of recognised banking practice, but merely upon the individual author's own experience.

Held

The court was prepared to accept, at least at this early interlocutory stage, that there was a body of expertise in the management of investment banks in relation to the conduct and administration of futures and derivatives trading from which expert evidence could emerge capable of assisting a court considering claims in negligence arising from the management of such a bank. United Bank of Kuwait v Prudential Property Services Ltd (1995) (Unreported, CA, 27/11/95) considered.

Applications dismissed.