CASE MANAGEMENT, NECESSITY AND EXPERTS: BA -v- SPENCER: IS EXPERT EVIDENCE "REASONABLY REQUIRED"?

August 21, 2015 · by · in Case Management, Expert evidence, Uncategorized

In his decision today in British Airways Plc -v- Spencer [2015] EWHC 2477 (Ch) Mr Justice Warren made important observations about the need for expert evidence.  The judge overturned a case management decision that expert evidence was not necessary and allowed expert actuarial evidence to be called.  There is a very full and careful examination of the circumstances in which the courts will consider whether expert evidence is necessary.

“A judgment needs to be made in every case and, in making that judgment, it is relevant to consider whether, on the one hand, the evidence is necessary (in the sense that a decision cannot be made without it) or whether it is of very marginal relevance with the court being well able to decide the issue without it, in which case a balance has to be struck and the proportionality of its admission assessed. In striking that balance, the court should, in my judgment, be prepared to take into account disparate factors including the value of the claim, the effect of a judgment either way on the parties, who is to pay for the commissioning of the evidence on each side and the delay, if any, which the production of such evidence would entail (particularly delay which might result in the vacating of a trial date).”

KEY POINTS

  • The first question is whether expert evidence is necessary. If the evidence is necessary it should be admitted.
  • If it is not necessary then the question is whether the evidence will be of assistance to the court.
  • If  it is of assistance, then the question is whether it is reasonably required to resolve the proceedings.

THE CASE

The claimant was bringing an action against the trustees of a pension fund, alleging inter alia that they had acted wrongfully in increasing the benefits to be paid under the pension fund.  The claimant applied for permission to call expert evidence as to the appropriate practice of trustees. The Deputy Master (referred to as “DM” in the judgment) held that no expert evidence was necessary. The claimant appealed.

THE RELEVANT LEGAL PRINCIPLES

  1. The starting point is CPR 35.1. It provides:
“Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings.”
  1. There is an instructive note at para 35.1.1 p 1161 of the White Book which repays reading. I do not propose to set it out at length but note the underlying policy objective of this rule which is to reduce the incidence of inappropriate use of experts to bolster cases. It is also to be noted that the rule refers to evidence required “to resolve the proceedings”. It does not refer, as well, to evidence required “to resolve any issue within the proceedings”. I will have more to say about this distinction later.
  2. In the context of a suggestion that expert evidence is necessary in order to help understand the impact of actuarial considerations on how the Trustees should have acted, it is helpful to bear in mind what Aikens J said in his judgment in JP Morgan Chase v Spingwell [2006] EWHC 2755, [2007] 1 All ER (Comm) 549 at [23]:
“I should mention one further practical matter, which I think is relevant to large commercial disputes. It is inevitable when there is a dispute between commercial entities that covers a long period of time (as this case does) and concerns a very large sum of money, that a huge amount of documents will have to be considered. There is a natural tendency of parties and their advisors to consider employing experts to assist in digesting this material, particularly if it relates to any area that might be recondite, such as trading in Russian debt in the 1990s. There is a tendency to think that a judge will be assisted by expert evidence in any area of fact that appears to be outside the “normal” experience of a Commercial Court judge. The result is that, all too often, the judge is submerged in expert reports which are long, complicated and which stray far outside the particular issue that may be relevant to the case. Production of such expert reports is expensive, time-consuming and may ultimately be counter-productive. That is precisely why CPR Pt 35.1 exists. In my view it is the duty of parties, particularly those involved in large scale commercial litigation, to ensure that they adhere to both the letter and spirit of that Rule. And it is the duty of the court, even if only for its own protection, to reject firmly all expert evidence that is not reasonably required to resolve the proceedings.”
  1. Mr Tennet (for BA) did not, in his oral submissions, go so far as to suggest that BA should be entitled to adduce the expert actuarial evidence which it wishes to rely on simply to help the judge understand some of the actuarial matters which, on its case, will arise. What he says is that BA ought to be allowed to adduce such evidence in the light of the pleaded issues and that one benefit of such evidence will be to help the judge in his or her general understanding of the technical complexities of the case. I bear that in mind; but I do not think that vague and generalised appeals to the assistance which might be given to the court in understanding actuarial matters should render admissible that which would otherwise be excluded. In any case, if there are areas where either of the parties thinks that the court would be helped by explanation, rather than the expression of a professional opinion, I would be surprised if it were not possible to produce an uncontentious explanation agreed by both sides to present to the Court.
  2. As is clear from the authorities, most recently as it is put in Chartwell Estate Agents v Fergies Properties SA [2014] EWCA Civ 506 at [62], “appellate courts will not lightly interfere with a case management decision. Robust and fair case management decisions by first instance judges are to be supported”. I do not dissent from that but any exercise of a case management power must accord with the overriding objective. I do not suggest that there is any tension between the overriding objective and the restriction of expert evidence to that which is reasonably required to resolve the proceedings. But I do suggest that what is reasonably required is informed by the overriding objective and that the court should not be over-zealous in excluding evidence in order to save time and cost.

THE JUDGE’S DECISION

Grounds of Appeal
  1. Ground 1 is that the DM erred in fact and/or law in failing to take into account or even record in the Judgment that the Trustees had conceded the need for some actuarial evidence. Mr Tennet submits that this was not a minor matter and, if it is right that the relevant material should be admitted, it lends support to other material being admitted.
  2. The alleged concession goes to the scope of Mr Pardoe’s role. As I have explained, it is said that he went beyond his professional role in expressing a personal opinion. The Trustees then relied improperly on that expression of opinion. It is said that the Trustees conceded before the DM that expert actuarial evidence was needed on this point. I have been referred to passages in the Transcript at p 50, (lines 2-5) p 58, (lines 2-5) p 62 (lines 1-3) and p 70 (lines 7-13). There is no doubt that a concession – said to be a very narrow concession by counsel representing the Trustees at the hearing before the DM and a very narrow concession in my view – was made. The concession went, however, only to what Mr Pardoe said at a meeting or meetings. It did not go to anything written in any Towers Watson report and not to what is said in the boxes which I have referred, as to which I do not think the court will be assisted by expert evidence since the box can be read for what it is. The DM was in (minor) error, in my view, in failing to deal with this concession. Expert evidence should be allowed on this very narrow point. I am sceptical that the issue will actually arise once it is clear what Mr Pardoe actually did or did not say and write. It is highly likely that it will be shown either (i) that he qualified what he said in a way which made it clear that it was an expression of personal opinion on which the Trustees could not rely (so that what he said was not even purportedly in the furtherance of his advisory role) or (ii) that he did express a personal opinion and should have known that the Trustees might rely on it as advice given in furtherance of his advisory role. I would be surprised, in either case, to find expert disagreement about whether what he did was within the scope of an actuary’s role. I totally reject, however, Mr Tennet’s submission that, because this evidence is admissible, it lends support to the admission of evidence going any wider. Whether the Trustees did or did not rely on Mr Pardoe’s expression of opinion is a different issue. Expert evidence will not assist in its resolution.
  3. Ground 2 asserts that the DM applied the wrong test. In particular, it is said that he wrongly considered that in order to admit expert evidence it must be reasonably required in order to determine a specific issue in dispute. What he said can be found at [22], [23], [24] and [26]:
(a) [22]:
“…expert evidence must be relevant to specific issues…which require to be determined in order to resolve the proceedings, and be reasonably required in order to determine the issues”
(b) [23]:
“Counsel for the Trustees makes the point that the resolution of the proceedings does not turn on any issue which requires expert evidence… It is not, in his submission, a case in which the resolution of the proceedings requires expert evidence for the determination of either of the Amendment Decision, or the Pension Increase Decisions”. He then referred to Counsel’s submission that there is a “duty to restrict expert evidence to that which is reasonably required to resolve the proceedings…… The point taken is that the validity of the decisions made by the Trustees should not be the subject of expert evidence as it is the validity of such decisions which is being challenged, not any actuarial evidence of negligence arising therefrom. It is submitted that the Court does not need the assistance of an expert in order to reach a proper conclusion on the facts and legal issues in the case.”
(c) [24]:
“….I reject the submissions made on behalf of BA that the Court would not be able to properly understand or resolve the important issues in the case without the assistance of such expert evidence.”
(d) [26] (in considering the reliance placed by BA on Pitt v Holt):
“…. … |It is suggested that actuarial evidence would assist in this regard in that the Trustees are not entitled to rely on the “safe harbour” approach as they deliberately shared the advice they received and sought advice inappropriately. In my judgment these assertions are supremely matters of fact and law and do not require the assistance of expert evidence in order to resolve the issues which are raised.”
  1. Mr Tennet submits that expert evidence need only be helpful in resolving an issue justly.He refers to Barings Plc v Coopers & Lybrand (No 2)[2001] PNLR 22, per Evans-Lombe J at [45]. What the judge actually said is that evidence can be excluded if the court comes to the conclusion that it would not be helpful in resolving an issue which needs to be decided where it is one of law or one on which the court can come to a fully informed decision without hearing such evidence but, whichever way one looks at it, evidence is admissible if it might be helpful. But that is not, in my view, to say that it must be admitted even if helpful because it may be disproportionate in the light of the overriding objective to admit it. I accept, of course, that evidence can be helpful even if it is not determinative of any issue: see Andrew Mitchell MP v News Group Newspapers Limited [2014] EWHC 3590 (QB), where Warby J held at [24]:
“Here, the trial judge could arrive at a decision on the central issue in these cases without reference to expert or any analysis of speech rates, but instead by assessing the witnesses, their credibility, and the probabilities in the light of all the other evidence including the CCTV. It is naturally a matter for concern that the position adopted on one side of the issue is that evidence of this kind, if adduced, will be inconclusive. In that event, the evidence would not have been helpful but its admission would have been wasteful. It does not follow, however, nor could I take the view, that this evidence will not be helpful in resolving the issue justly.”
  1. Mr Tennet’s submission has some force. But Warby J’s observations must be read in the light of what he said later, being mindful of CPR 35.1 which also requires that the evidence must be “reasonably required to resolve the proceedings”. Thus at [27] he stated that he did not regard CPR 35.1 as imposing a test of absolute necessity. As he said,
“a judgment has to be made in the individual case, and it has to be made before the evidence is heard and evaluated. My conclusion is that evidence which it was credibly said could conclusively determine the single most important issue in the case meets the criterion in the rule.”
  1. This, it seems to me, is saying something very different from the proposition that, because expert evidence may prove of assistance, it should be admitted. A judgment needs to be made in every case and, in making that judgment, it is relevant to consider whether, on the one hand, the evidence is necessary (in the sense that a decision cannot be made without it) or whether it is of very marginal relevance with the court being well able to decide the issue without it, in which case a balance has to be struck and the proportionality of its admission assessed. In striking that balance, the court should, in my judgment, be prepared to take into account disparate factors including the value of the claim, the effect of a judgment either way on the parties, who is to pay for the commissioning of the evidence on each side and the delay, if any, which the production of such evidence would entail (particularly delay which might result in the vacating of a trial date).
  2. Let me get one point out of the way. CPR 35.1 refers to “the proceedings”. In the present case, a large number of pleaded issues arise. It may, in the end, be unnecessary to resolve some, perhaps many, of those issues and I rather suspect that that will be the case. But it is only at the trial that it will become apparent what issues actually need to be decided. I say “trial” but that needs to be qualified because the court can, in the exercise of its case management powers, restrict the issues for determination at a CMC: see CPR 3.1(2)(k). But no one has sought, thus far, to exclude any of the pleaded issues from consideration. Accordingly, it cannot be said, at present, that it will not be necessary to decide any particular pleaded issue in order to resolve the proceedings. It must follow that, if expert evidence is reasonably required to resolve a pleaded issue, it will also be reasonably required to resolve the proceedings. However, unless the evidence is necessary in order to resolve an issue, whether it should be admitted needs to be assessed in the context of the resolution of the proceedings as a whole. There would be nothing inconsistent in accepting that particular evidence ought to be admitted in resolving an issue within the proceedings if that issue stood alone but deciding, in the context of the proceedings as a whole, that such evidence was not reasonably required in resolving the proceedings (unless that evidence was necessary to resolve the issue).
  3. Thus in Mitchell, the expert evidence was not necessary but it was, or might have turned out to be, helpful. Because the issue to which it went was central to the case and because the evidence might be conclusive, it was admitted. But if in another case a similar issue were to arise which, instead of being central, was merely peripheral, the court might take the view that the expert evidence was not reasonably required to resolve the proceedings. The balance could come down in favour of refusing to admit that evidence.
  4. In the context of the points I have just made, Mr Rowley submits that if the actuarial outcome of an issue cannot affect the outcome of the ultimate case, then you do not admit the evidence. I would agree if it is possible to say that the outcome of an issue cannot affect the outcome of the ultimate case. But in that case, the issue should not feature at all: it should be struck out or be excluded from consideration. In any case, no argument has been advanced that any pleaded issue cannot affect the ultimate end result of this litigation so Mr Rowley’s submission takes us nowhere.
  5. In the present case, I have a great deal of sympathy with the view, which the DM obviously held, that resolution of the central issues will not turn on whether Mr Pardoe’s advice was right or wrong. They will turn on what his advice actually was, and how it changed, and on how the Trustees (i) understood that advice and (ii) put pressure on him to give the advice which would allow them to award discretionary increases. And they will turn on the critical question of whether the Trustees had predetermined that they would grant increases and that, come what may, they would find a way to justify that course. I agree with the DM that, if one looks at the case that way, the court will be well able to resolve the proceedings without the expert evidence which BA seeks to adduce and possibly that the court would not even find the evidence of assistance.
  6. But that is not the correct approach to the admissibility of the evidence. Instead, it is necessary to look at the pleaded issues and, unless and until a particular issue is excluded from consideration under CPR 3.1(2)(k), the court must ask itself the following important questions:
(a) The first question is whether, looking at each issue, it is necessary for there to be expert evidence before that issue can be resolved. If it is necessary, rather than merely helpful, it seems to me that it must be admitted.
(b) If the evidence is not necessary, the second question is whether it would be of assistance to the court in resolving that issue. If it would be of assistance, but not necessary, then the court would be able to determine the issue without it (just as in Mitchell the court would have been able to resolve even the central issue without the expert evidence).
(c) Since, under the scenario in (b) above, the court will be able to resolve the issue without the evidence, the third question is whether, in the context of the proceedings as a whole, expert evidence on that issue is reasonably required to resolve the proceedings. In that case, the sort of questions I have identified in paragraph 63 above will fall to be taken into account. In addition, in the present case, there is the complication that a particular piece of expert evidence may go to more than one pleaded issue, or evidence necessary for one issue may need only slight expansion to cover another issue where it would be of assistance but not necessary.
  1. Further, although CPR 35.1 does not refer to issues, but only to proceedings, if evidence is not reasonably required for resolving any particular issue, it is difficult to see how it could ever be reasonably required for resolving the proceedings. I therefore see a test directed at issues as a filter. That, at least, is an approach which can usefully be adopted.
  2. Mr Tennet submits that the DM applied the wrong test in saying that evidence should only be admitted if it was reasonably required to determine an issue. Mr Tennet thus reads Judgment [22] as saying that evidence is only admissible if it would be determinative, rather than helpful. I do not read the DM as saying, and do not think he can sensibly be read as saying, that evidence should only be admitted which (if accepted) would be determinative of an issue. The words he used reflect the words of CPR 35.1. He was simply saying that the evidence must be reasonably required; and what it must be reasonably required for is the determination of “the issues”. Nor, I think, can the DM be taken to have failed to understand that evidence might be admitted where it might be of assistance. Towards the end of Judgment [24] he expressly bases his decision on the proposition that the Judge will not be assisted by expert evidence. However, his reasoning appears as follows:
(a) He considers the examples given by BA (including Appendix 1) as being “unsupportable” (by which I understand him to mean to give no support to BA’s case to adduce expert evidence).
(b) He determines that the various points raised on the pleadings are “eminently capable of being determined by the Judge at trial as issues of fact and law without the assistance of expert evidence”. So he is saying that this is not a case where expert evidence is necessary to resolve any of the pleaded issues.
(c) Having so decided, he concludes that the Judge will not be “assisted by expert evidence”.
(d) And so he rejects what he records as BA’s submission “that the Court would not be able properly to understand or resolve the important issues in this case without the assistance of such expert evidence”.
  1. The difficulty, as I see it however, is that it is far from clear that, in this paragraph, he actually applied the test which he had identified, or if he did so, he did not explain clearly in the Judgment how he had done so. This is quite apart from his alleged failure to actually properly address BA’s arguments and the content of Appendix 1, a matter which arises under Ground 5 which I will come to in due course. It appears that he saw the question as turning on the submission recorded by him at sub-paragraph (d) of paragraph 70 above. But the question is not whether the court would be able to resolve the important issues in the case without the assistance of expert evidence. The question is whether the court would be assisted by such evidence (assuming in the first place that such evidence is not necessary to any pleaded issue) and whether it would be assisted on any issue, not just the important issues. I do not consider that his conclusion in paragraph (c) of paragraph 70 above can be taken as a finding that expert evidence could not even be helpful. Rather, it is part of the expressions of his decision that the evidence should not be admitted: it appears to me that he is saying that because the Judge will be able to decide the matter without expert evidence, therefore the Judge will not be assisted by it. That is not the correct approach. If the evidence might be helpful, the Court must determine whether it then falls within CPR 35.1 in accordance with the principles I have attempted to explain.
  2. If that is a misreading of what the DM said – so that he is to be taken as having addressed the expert evidence and decided that it would not even be helpful – then it follows that he was right to refuse to admit the evidence provided that he could properly have decided that the evidence would not be helpful. That again is an issue which I will address when considering Ground 5.
  3. Mr Tennet further submits that the DM erred in considering that expert evidence was to be ruled out where the issues the court has to decide are all questions of fact. He relies on passages in Judgment [24] and [26], in particular the latter where the DM referred to certain matters as being “supremely matters of fact and law”. This was in the context of BA’s arguments in relation to Pitt v Holt. BA’s case is that the Trustees cannot rely on the “safe harbour” of professional advice because, among other matters, Mr Pardoe, in expressing his own view, went beyond the role of a professional actuary. This is the point which gives rise to Ground 1 of the appeal, considered already above. For reasons already given, expert evidence of a very narrow compass is necessary. It was not, however, rejected by the DM because it went to an issue of fact but because it was not needed to resolve the issue. It seems to me, however, that the DM was well aware that expert evidence might, in principle, assist in relation to factual issues; he recognises this in Judgment [21] in noting cases where expert evidence has been excluded “notably in cases where the issue in dispute is factual and “obvious” and where the Court is unlikely to benefit from expert evidence”. He could not have written that if he had thought that, in principle, expert evidence was simply inadmissible in relation to a factual issue. I therefore reject this particular argument advanced by Mr Tennet.
  4. I do not propose, at this stage, to express a final view on Ground 2 since it is closely linked with Grounds 4 and 5 which I wish to consider before doing so.
  5. Ground 3 asserts that the DM was wrong to refuse to admit the expert evidence because he thereby tied the hands of the trial judge, preventing BA from presenting its case properly. Mr Tennet relies on Rich v Hull [2014] EWHC 1978 at [21]-[25]. It is right, of course, that a case-management decision may tie the hands of the trial judge and even result in a party being unable to present the case he wishes. A direction which has that effect must be viewed with great caution as Mr Tennet submits (referring me in addition to passages from Phipson on Evidence (18th ed) at 33-35). This is particularly so in relation to evidence where it is the trial judge (or perhaps an assigned judge on a CMC) who will be in the best position to assess whether evidence should be admitted. That the hands of the trial judge may be tied is, however, an inherent part of our system; the mere fact that that is so does not, obviously, mean that there is no case where a Master, on a CMC, could decline to permit expert evidence to be adduced even if it might be of assistance. Mr Tennet’s real point, I think, is that the DM went outside the range of reasonable decisions open to him in failing to accept, on the facts of the present case, that the hands of the trial judge should not be tied.
  6. One of the points raised before the Master, and repeated before me, goes to the cross-examination of Mr Pardoe. Without expert evidence, it is said that counsel will be hampered in cross-examination unless there is material (in the shape of expert evidence) to enable BA to challenge answers which Mr Pardoe gives. He, of course, will be a witness of fact, but it is inevitable that his evidence will include actuarial material. Mr Tennet gives as example:
“It is plain that in relation to the question of predetermination and the prudence (or otherwise) of the actuarial methodologies adopted at various times by Mr Pardoe and/or the Trustees, the absence of a proper evidential basis for cross-examination of Mr Pardoe will be a real and substantial disadvantage to BA in the presentation of its case. If Mr Pardoe denies under cross-examination that his later advice was based on less prudent methodologies than his earlier advice or denies that the way in which the subsequent advice was “watered down” facilitated the justification of discretionary increases, it will be difficult for BA to challenge his answers without any independent expert evidence to substantiate the submissions that BA will be looking to make to the Court on these issues. “
  1. The DM’s answer to that was that BA’s expert would be able to brief counsel on all of the relevant matters which would otherwise go into an expert report and would be able to sit behind the cross-examiner and feed material to assist the cross-examination. Mr Tennet says that that is no answer at all, and I think there is considerable force in his submission. The point is that BA will want evidence before the court about the true position so that it will be possible to resolve any issue which Mr Pardoe raises by way of non-expert testimony but which raises a point of expertise and Mr Pardoe’s understanding. Although there is force in the point, it raises a difficulty, namely the scope of the evidence which is to be prepared. But the answer, in turn, to that difficulty is for the scope of the evidence which BA is to be given permission to adduce to be carefully circumscribed in any order which the court makes.
  2. Mr Tennet makes the point that where evidence is needlessly called, there can be a remedy in costs. In the present case, BA will ultimately be liable for the costs of adducing the expert evidence on both sides for two reasons. First, since it is BA’s covenant which underpins the Scheme, the burden of the Trustees’ costs falls on BA to the extent that they are entitled to be indemnified for their costs out of the Scheme. Secondly, BA has, since the date of the Judgment, admitted the Trustees’ counterclaim, the effect of which is that it is liable, under Clause 17(b) of the Trust Deed, to indemnify the Trustees for the costs of the proceedings. The second of those reasons will be a very powerful consideration if it comes to re-exercising the power under CPR 35.1 to admit expert evidence. At the time of the hearing before the Master, however, BA had made no such admission and indeed, as I understand it, it was not even accepted by BA that the Trustees would, in fact, be entitled to an indemnity out of the assets of the Scheme.
  3. As with Ground 2, I do not propose to express a conclusion on Ground 3 until I have considered Grounds 4 and 5.
  4. Ground 4 is to the effect that the DM erred in reaching his conclusion concerning the safe harbour principle in that (i) he failed properly to understand BA’s case and (ii) thus failed properly to understand the importance of actuarial evidence in establishing that case.
  5. In Judgment [26] the DM recorded that BA alleged that the Trustees had, among other things, deliberately shaped the advice received with the result that the safe harbour was not available, describing this as an essential feature of BA’s case. He concluded that expert evidence would not assist in determining this dispute and refused to admit the evidence. Mr Tennet criticises the DM for failing to record that the safe harbour argument was not, in any event, available to the Trustees on the majority of BA’s case and says that he was therefore wrong to rely on the finding that expert evidence would not assist in resolving the safe harbour argument as the principal, or an important, ground for his decision not to permit BA to adduce any expert actuarial evidence.
  6. For my part, I think that this Ground of Appeal is based on a misunderstanding of what the DM was deciding. Before getting to Judgment [26] he had already determined that expert evidence should not be admitted. Judgment [26] was, if I may describe it in this way, an “add-on” which, as I read it, was directed at expert evidence which might assist in the resolution of a single aspect of the case, namely the allegation relating to the shaping of the advice received by the Trustees and their seeking advice inappropriately. The DM was not saying that, because expert evidence would not assist in resolving that issue, it should be rejected on all aspects of BA’s case. In other words, he was rejecting a particular argument that expert evidence should be received in relation to a particular aspect of BA’s claim.
  7. Were it correct to read Judgment [26] in the way that Mr Tennet reads it, then I would agree with him that the DM could not properly have refused to admit the entirety of the expert evidence on the footing that expert evidence would not assist in the determination of the safe harbour issue.
  8. It is further submitted by Mr Tennet that the DM was wrong to say that expert evidence would not assist on the issue whether, in relation to BA’s argument based on Hastings-Bass, the Trustees are entitled to rely on the safe harbour. BA’s case will be (and I accept for present purposes that this is arguable) that the safe harbour principle is only available where trustees have reasonably and properly obtained advice and have acted on that advice, in which context BA will rely on, for example, Top Brands Limited v Sharma [2014] EWHC 2753 (Ch) at [33]. Expert actuarial evidence will, it is said, assist BA in making good its case that the Trustees’ did not properly obtain or follow advice but rather tailored the advice they received over time to the end of justifying a discretionary increase, such that the Pitt v Holt safe harbour is unavailable. Expert evidence will, it is said, assist the court in assessing (i) how the advice changed over time; (ii) the impact of those changes; (iii) why the advice might have changed; and (iv) what those changes therefore tell us about the Trustees’ states of mind.
  9. Save to the extent, if any, that any pleaded issue should lead to the admission of expert evidence, I do not find this general appeal of assistance to the court or at all persuasive. The advice was just that, advice. Precisely what that advice was, and how the Trustees reacted to it, and indeed the extent to which the Trustees shaped or tailored it will be established, as a matter of fact, by the documents and the oral evidence from witnesses who will or may include Mr Pardoe and some at least of the Trustees. For my part, I do not see how the court will, apart from a specific pleaded issue which may need resolving (and which I have already addressed in detail), be assisted at all by expert evidence in determining the safe harbour issue (let alone that the evidence is reasonably required to determine the proceedings).
  10. Ground 5 alleges a number of procedural irregularities stemming from the suggestion that the DM failed to address, or even record, BA’s case.
  11. The first point, in essence, is that the DM failed properly to address Appendix 1 making no mention of it in the Judgment. As to that last point, I hope I have not misunderstood the position in thinking that Appendix 1 (ie to Mr Tennet’s skeleton argument) is the same document as Appendix 2 to the skeleton argument on behalf of BA before the DM. The DM did refer to this document at Judgment [13] which is one of the paragraphs referred to in Judgment [24]. I am not clear what point Mr Tennet is making when he says that no mention was made of Appendix 1 in the Judgment. Of course, whether the DM properly addressed or had properly in mind the contents of Appendix 1 is an entirely different matter.
  12. It is, however, certainly the case that the DM did not deal with the content of Appendix 1 at all in the Judgment. And so, Mr Tennet says, with some justification, that the DM instead proceeded on the basis of an overview of BA’s case on the desirability of expert evidence at the highest possible level, his submission then being that this did not do justice to the particular issues identified by BA in relation to which expert evidence would assist.
  13. The content of Appendix 1 was addressed by both counsel for BA and for the Trustees during oral submissions. As can be seen from the Transcript, the issues in relation to which expert evidence was said in oral submissions to assist included:
(a) whether the Pension Increase Decisions were inconsistent with the Subsidiary Funding Objective;
(b) whether the evolution of the actuarial advice evidenced the Trustees not following the advice given;
(c) whether the evolution of the actuarial advice evidenced the Trustees tailoring and watering down the actuarial advice;
(d) whether the Trustees based their decision on professional advice for the purposes of Rule 15.1;
(e) whether the Trustees are right to assert that the MNTs’ decision to vote for discretionary pension increases in 2011 was not contrary to the actuarial advice obtained by the Trustees or whether the advice obtained was capable of justifying such a decision;
(f) the actuarial cost of the decisions taken in terms of the impact on the increase to the liabilities of the Scheme and whether that cost is £12 million (as the Trustees assert) or £800 million (as BA asserts);
(g) whether Mr Pardoe acted outside the scope of the role of a professional actuarial advisor;
(h) the significance of the fact that even prior to the Pension Increase Decisions the Trustees had already adopted in 2011 new actuarial factors based on the same pension increase of 50% of the difference between RPI and CPI being granted; and
(i) the extent to which the granting of discretionary increases was inconsistent with the Trustees’ own concerns about BA’s covenant during the funding negotiations.
  1. In his reply submissions before the DM, counsel for BA again addressed the detail of Appendix 1, specifically enquiring whether the DM wanted any further assistance on any specific point from the list, and was told that this was not necessary. Notwithstanding this, the Judgment did not provide any reasons as to why expert evidence would not assist the court to dispose of each of the above issues.
  2. Whether or not actuarial evidence directed at those issues would assist the Court is not, for the moment, the point. The point is that they were not addressed by the DM. Mr Rowley relies, of course, on the reference in Judgment [24] to the pleadings and to Appendix 1. But this, in my judgment, is wholly inadequate to show that the DM properly considered the pleadings in a way which it was necessary for him to do in order for him properly to judge whether expert evidence should be admitted. It is simply not possible to infer from that reference that he even embarked upon the exercise of examination of the pleaded case which I have carried out above. As I have said, I have great sympathy with his view of what the case is really about. But it is not by reference to what the case is really about that the admissibility of expert evidence is to be assessed. I do not say that he had to refer in his Judgment to each and every point. But I do consider that BA is entitled to see him address at least a few of the issues to show that he has actually applied his own approach and how his approach has led him to his conclusions.
  3. Indeed, it appears to me that, following a rather dismissive and unreasoned rejection of reliance on the matters he referred to in Judgment [9] to [13] as “not supportable”, the DM moved away from the specific pleaded issues to the larger picture and asked himself whether the evidence would be reasonably required for the court to decide the issues (that is to say the proceedings as a whole) rather than address the relevance of the expert evidence to each separate pleaded issue.
  4. Thus he referred, with apparent approval, to the argument of counsel for the Trustees. Counsel observed that BA had failed to address a fundamental aspect, namely the duty to restrict evidence to that which is reasonably required to resolve the proceedings. The DM recorded the point taken which was (to repeat the quote:)
“that the validity of the decisions made by the Trustees should not be the subject of expert evidence as it is the validity of such decisions which is being challenged, not any actuarial evidence of negligence arising therefrom…”
  1. And so, it seems to me, he actually applied his own test to the wrong item, namely the ultimate issue of the validity of the decisions rather than the pleaded issues which may or may not, at trial, turn out to be of significance. The overwhelming impression which I gain from the Judgment is that he focused on the big picture without giving proper consideration to whether the evidence was either necessary or of assistance in resolving the pleaded issues.
  2. The next point relates to costs. The DM failed, it is alleged, adequately to deal with, or even to record, the accepted fact that BA would ultimately end up paying for any expert evidence (called by either side). It is true that counsel explained that BA would not recover its own costs even if it were to win everything. As to the Trustees’ costs, the position as counsel for BA put it was that the Trustees had made it absolutely clear that they were not going to defend the proceedings unless they were indemnified out of the Scheme and that was the basis on which they sought Beddoerelief. As the ultimate sponsor of the Scheme it would be BA which would bear the burden of those Trustees’ costs. That, at least, is what counsel said, but there was certainly no direct indemnity from BA at that stage. I do not know (and I do not know whether the DM was told) whether theBeddoe relief which the Trustees already had would entitle them to an indemnity for their cost of commissioning expert evidence out of the funds of the Scheme. Mr Tennet submits that the recognition of the ultimate costs burden ought to have been a weighty factor in the exercise of the DM’s discretion, particularly in the light of the special need for caution in refusing to permit expert evidence to be adduced to which I have already referred: and yet the DM did not even mention it.
  3. The next point is that the DM, in his Judgment at [23], appears to have adopted the Trustees’ submission that BA did not address the nature of the court’s role in controlling expert evidence to that which is reasonably required to resolve the proceedings pursuant to CPR 35.1. Mr Tennet’s submission is that BA did in fact expressly address this argument in its submissions. He has referred to the Transcript at p 25 (lines 19-23). Quite clearly the point was referred to by counsel – “The starting point of course is that the court has power to control expert evidence at all stages of litigation and evidence must be reasonably required to resolve the proceedings”. A considerable part of counsel’s submissions was directed at demonstrating why expert evidence was appropriate in the resolution of the proceedings. I do not know what the Trustees’ counsel, or indeed the DM, consider that BA’s counsel should have done other than to recognise that the court has ultimate control and then to submit why the evidence would be helpful and should be admitted.
  4. There is one other point which I should mention in relation to Ground 5. Mr Rowley suggests that Appendix 1 has been superseded. We now have, according to him, a totally confused situation because something different appears in paragraph 15 of BA’s skeleton argument for this appeal which is stated to be, but is not, a summary of Appendix 1 and something different again appears in BA’s supplemental skeleton argument. As to paragraph 15.1, I do not detect any radical departure from Appendix 1: it is simply an attempt to shorten and simplify the rather complex contents of Appendix 1 for the purpose of the hearing although it does contain one additional element. After all, the document is only a skeleton of the argument. As to the supplemental skeleton argument, this was produced to rebut the suggestion that BA was asking for a roving brief and to make clear the specific questions which the expert would be asked. It has attached to it a document headed “Actuarial issues for experts” and is an attempt to show how the actuarial issues on which BA now wishes to adduce expert evidence would translate into a relatively short and concise set of instructions to the expert. If I were to allow the appeal, then the areas on which I should then, in the exercise of the court’s discretion under CPR 35.1, allow expert evidence to be adduced will need to be identified; if the appeal is allowed, it does not follow that every bit of expert evidence which BA wishs to adduce should be adduced. The “Actuarial issues for experts” is BA’s attempt to articulate those areas. If I allow the appeal, I may or may not agree with it. That it may differ from Appendix 1 is neither here nor there when it comes to deciding whether the DM did, or did not, err in the way in which he considered it.
  5. Ground 6 is a sweep up ground of appeal – the DM was in error in failing to order expert evidence. It adds nothing to Grounds 1 to 5 in that, if none of Grounds 1 to 5 were to succeed, the appeal could not succeed on Ground 6. Really what is said is that, once the appeal is allowed, the court should re-exercise its powers under CPR 35.1 by admitting the evidence.
Discussion and conclusions
  1. I do not propose to lengthen this already overlong judgment by an elaborate discussion. It seems to me that Grounds 2 and 5 are closely interlinked and that Ground 4 raises similar points. Subject to the safe harbour issue, taking Grounds 2 and 5 together, it is my view that the DM’s wholesale decision to reject any expert evidence is flawed. Whether that is because he applied the wrong test (in the sense discussed in relation to Ground 2) or because he failed to apply that test to the right issues (in the sense discussed in relation to Ground 5) does not matter; the answer, in any case, depends on where one starts the enquiry. I am satisfied that he did not give adequate consideration to Appendix 1 (alternatively, if he did do so, he did not adequately express his reasoning). The exercise of his discretion was flawed and his decision must be set aside (alternatively, it is entirely unsafe to leave his decision in place and it must be set aside).
  2. So far as the safe harbour issue is concerned, Judgment [26] provides, as I read the Judgment as a whole, a separate reason why expert evidence should not be admitted on that issue. It goes no further.
  3. In the light of these conclusions, Ground 1 adds nothing. Grounds 2 and 5 taken together succeed so that nothing turns on Ground 4. As to Ground 3, nothing now turns on this either since, in exercising the discretion under CPR 35.1, I will certainly be cautious in tying the hands of the trial judge.
Exercise of discretion
  1. It will be apparent from my discussion of Appendix 1 and the few other issues raised by Mr Tennet the areas where I consider that the pleadings to which I was referred raise issues where actuarial evidence might be of assistance. I should emphasise that I have only considered those parts of the pleadings to which I was referred at the hearing or which are expressly mentioned in the body of the skeleton arguments. I have not carried out a full review of each and every paragraph mentioned in Appendix 1. Mr Tennet took me to the paragraphs which are important and which between them would provide the foundation for the totality of the evidence which BA wishes to adduce.
  2. In my judgment, in all of the instances where actuarial evidence might be of some assistance to the court, it should be admitted and should not be excluded on grounds of proportionality or otherwise. In cases where actuarial evidence is necessary to resolve a pleaded issue, it should clearly be admitted; it should be excluded only if the issue is struck out or excluded from consideration pursuant to the court’s case management powers. In areas where the evidence would be of assistance, but not necessary, to the resolution of an issue, it should be admitted. I do not propose to set out an exhaustive list of factors, but the following point strongly in favour of admitting the evidence:
(a) A very large sum of money turns on the outcome of the case for BA. Provided that this does not result in oppression or other unfairness to the Trustees, or to a disproportionate allocation of court time, BA should be entitled to put its best case and adduce the evidence which it reasonably considers will advance that case.
(b) It is undesirable to tie the hands of the trial judge if that can sensibly be avoided. Although, of course, the discretion under CPR 35.1 is there to prevent a party simply trying to bolster its case by the inappropriate use of expert evidence, that is not, as I see it, the present case. On some aspects of the case, it is appropriate that any doubt about the amount of assistance which the court might gain is best resolved in favour of BA as the person wishing to adduce it, subject to the same proviso as just expressed.
(c) If the trial judge decides at an early stage of the proceedings that the evidence will not assist him – and he or she will be in a far better position having read into, and perhaps even commenced, the case than any unassigned case management judge – the judge will be able at that stage to decline to receive the evidence in accordance with the wide-ranging trial management powers available.
(d) The costs of the exercise will be borne by BA in any event, even if none of the evidence is eventually adduced or relied on in court. The Trustees will be at no financial risk.
  1. Against that conclusion, however, it can be suggested that the result is oppressive and unfair. In my view, the only points of any substance in relation to that suggestion are these:
(a) To allow expert evidence would give BA a roving brief to commission any amount of actuarial evidence involving not only its own expert but also the Trustees’ expert in trawling through thousands of pages of documents which will be of no, or at best only the most marginal, relevance. This will be a total waste of time and cost.
(b) It will result in lengthy expert reports which, far from assisting the court, will be burdensome for the court and a waste of judicial time and energy.
(c) It would also result in undue disruption of, and pressure on, preparation for trial.
  1. I do not think that there is much in those points and certainly not enough to displace the factors in favour of admitting the evidence. As to (a) and (b) I do not anticipate wide-ranging instructions. Even the single-page “Actuarial issue for experts” will not, I consider, result in an over-burdensome report from BA’s expert even if that were the scope of the evidence to be admitted. I have not yet addressed the precise scope of the admissible evidence: my order must clearly be one which precludes the sort of roving brief which Mr Rowley fears and reflects a proportionate response to BA’s application. Quite apart from that, this is a case where the experts’ reports will be dealt with sequentially. Before the Trustees’ expert finalises a report, BA’s expert’s report will be available. Further, my order should be open to variation to allow for the possibility that BA’s expert’s report is overlong and tangential. If it transpires that the report is excessively long and goes to matters in relation to which the court will not really be assisted when a much shorter report covering less ground would enable the court to resolve a relevant issue, then it must be possible to refuse to admit it, or to redact it, at that stage.
  2. As to (c), the trial is fixed for 25 days in February 2016. That time estimate was agreed on the footing that expert evidence would be adduced. I have not been given any indication that the estimate would need revision if BA is permitted to adduce the evidence which it wishes to adduce. The possibility of expert evidence being in the frame was thus in the contemplation of the parties when the trial date was fixed. It is true that BA did not want the date fixed: it was concerned that the timetable was too tight, but the date was nonetheless fixed on the basis that it could be re-fixed if that was necessary. The Trustees certainly do not want to lose the date, not least because many of the pensioners are elderly and some may not live to see the fruits of what they hope will be a successful defence of BA’s claim. It is important not to attach too much weight to that last point. Although the total sum at stake to BA is significant on any view and very substantial indeed on a worst-case scenario from BA’s perspective, individual beneficiaries will not receive large sums of money, but only a very modest increase in their annual pensions, in many cases only tens of pounds.
  3. In any case, BA must take steps to serve its evidence just as quickly as possible. I see no reason why this cannot be done so as to give the Trustees time to respond in good time for the trial and, if BA’s expert’s report covers matters which do not really assist the court much, a judge (possibly me) can review the report to see whether it can sensibly be curtailed in its scope.
  4. One solution would be for me to allow expert evidence to be adduced on the basis of the paper “Actuarial issues for experts”. Mr Rowley, however, has a number of criticisms of that.
  5. Paragraph 1 is directed at the extent to which the Trustees failed to follow methodologies proposed by Mr Pardoe and whether those methodologies were flawed. Mr Rowley contends that this is not part of, and does not flow from, BA’s pleaded case. Mr Tennet’s response to that is that, on the contrary, it is part of the Trustees’ own case that the methodologies were not flawed, and this point is in issue. I agree with Mr Tennet. The disputes on the pleadings are indicated at paragraphs 4.1, 4.2, 4.3 and 4.4 of Appendix 1.
  6. Paragraph 2 is directed at the extent to which the actuarial approaches rejected by the Trustees were replaced by methodologies which were less prudent and/or more likely to justify the result which BA say the Trustees were determined to achieve. This is said by Mr Rowley to suffer from a fatal lack of precision. Who, for instance, is to be the arbiter of what it is that the Trustees have rejected? In any case, he says that the Judge will not be assisted by this evidence. I disagree with Mr Rowley’s submission. Although there may be some lack of precision, I consider that the evidence will be both relevant and of assistance.
  7. Paragraph 3 is directed at whether the AMT methodology represented an unusual and unorthodox approach. Mr Rowley contends that this is not a pleaded issue and is not relevant to any pleaded issue. Although paragraph 3.1 of Appendix 1 does not, in my view, justify expert evidence, parts of paragraph 3.4 do justify it. It is practically very difficult, if not impossible, to separate out the different paragraphs. I conclude that this evidence may be relevant and potentially of assistance.
  8. Paragraph 4 is directed at whether the AMT methodology involved advising on or reconciling competing objectives which could not be reconciled, including whether the granting of discretionary increases could be reconciled with the de-risking programme, the achievement of the SFO and the Trustees’ own concerns about BA’s funding covenant. Mr Rowley contends that what is in issue here is the Trustees’ state of mind, as to which actuarial evidence will not assist. It is true that the Trustees’ state of mind is one issue. But paragraphs 2, 5.1, 5.6 and 5.7 of Appendix 1 raise wider issues. Thus evidence about the role of the actuary and the boundary on the scope of his/her functions will be relevant and of assistance although, as noted at paragraphs 29 and 59 above, should be of limited scope. Further, as explained at paragraphs 48 ff above, the court will be assisted by actuarial evidence going to de-risking and scenario testing, in turn going to the root of BA’s inconsistency arguments.
  9. Paragraph 5 is directed at whether and if so how advice given exceeded the proper scope of what a professional actuary could advise on. As to this, see paragraphs 29 and 59 above. This overlaps with paragraph 112 above
  10. Paragraph 6 is directed at certain discrete pleaded points:
(a) The significance from an actuarial perspective of the fact that the Trustees adopted actuarial factors in 2011 based on 50% of the difference between RPI and CPI. I do not consider that expert evidence would assist the court in resolving the issues as pleaded in PoC 217-220 and PoD 253-255.
(b) Whether there was a usual practice among occupational pension schemes of rounding up increases to one decimal place and whether there was a good actuarial or administrative reason for doing so. This, as Mr Rowley points out, is a very narrow point indeed. It can, however, be resolved only with the assistance of expert evidence which must therefore be allowed.
(c) Whether the assumption of a discretionary increase cost of £12m for the purposes of the covenant advice is consistent with the approach taken in the AMT as to the sustainability of discretionary increases in future years. Mr Rowley submits that the Judge will be well able to deal with this without actuarial advice. I am not sure that the matter will be that straightforward to resolve. In any case, the test is not whether the Judge will be well able to deal with the matter without assistance but whether he would be helped by that assistance. And if he would be helped, it is then a matter for the court to decide, in effect, whether that assistance is reasonably required to resolve the issue and not, for reasons I have explained, just the proceedings as a whole. Mr Tennet relies on the pleaded issues by reference to the paragraph numbers of the PoC and PoD set out in paragraph 5.5 of Appendix 1. Much of what is pleaded in those paragraphs is purely factual and no assistance would be gained from expert evidence. However PoD 207. 3.5 refers to the design and effect of the AMT and the interaction with the Schedule of Contributions. Expert evidence would certainly be of assistance, and perhaps even necessary, to resolve that issue. Further, PoD 208 puts in issue whether the Trustees had a duty to obtain further covenant advice. BA is entitled to argue that the Trustees were under such a duty notwithstanding their pleaded defence and its logical attraction. In my view, actuarial evidence may well provide assistance to the court.
Conclusion
  1. The upshot of my long discussion is that there are many areas where expert actuarial evidence may be relevant and would assist the court, and some areas where it will not only assist but be necessary. I have identified these areas in paragraphs 27, 29, 32, 37, 38, 40, 50, 54, 55, 56 and 59 above, and in my analysis of the paper “Actuarial issues for experts”.
  2. In my judgment, that paper reflects a reasonable approach to the evidence which BA should be entitled to adduce subject to the limitations expressed in paragraphs 109 to 114 above (and in particular the omission of expert evidence directed at paragraph 114(a)).
  3. I hope that on the basis of this judgment the parties will be able to agree an order dealing with the scope of the admissible evidence and the timetable for its exchange. I will, of course, consider the matter further if an order cannot be agreed.
  4. I do, however, make clear that any dispute about the extent of the admissible evidence or the timing of its production is not to be used as a reason or excuse for not getting on with its production now. BA can prepare what it thinks is to be allowed. The Trustees can get on with production of what they recognise is to be allowed in the light of this judgment: they should not sit on their hands until the full extent of the admissible evidence is finally determined.

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