Summary
The judge determined that the proposed expert evidence, to support the existence of a money laundering scheme, was not admissible and, even if admissible, was neither necessary nor of assistance to the court.
Learning points
Learning points for experts
Learning points for instructing parties
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If you want to adduce expert evidence in an area where expert evidence is not often or typically adduced, you should provide appropriate precedents to assist the judge.
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You should provide your expert witness with any new evidence filed after they have prepared their reports so they can consider whether the new evidence changes their opinion.
The case
The case related to two claims. The first was a claim for repayment of loans of £500,00 by Ivan Norman from N & CJ Horton Property. The second a claim by three of the Hortons’ businesses ('the Hortons’) for breach of director duties by Ivan Norman’s son, Dean Norman. Dean counterclaimed for repayment of a loan of £75,000 and a personal indemnity from Mr Horton.
The Hortons made applications to amend their statement of case in the two claims to introduce an allegation of a money laundering against Dean, with ancillary applications for permission to rely on expert evidence.
The three issues were:
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The legal test for establishing money laundering when the party alleging it cannot directly establish a predicate criminal offence,
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Whether the Hortons had a real prospect of satisfying that test, and
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Whether the Hortons claim is sufficiently particularised to permit it to proceed.
The legal test for money laundering
The judge determined that the test to be applied in civil cases alleging money laundering was the full test set out in R v Anwoir [2008] EWCA Crim 1354, [2009] 1 W.L.R. 980. The judge noted that test is that “the person alleging money laundering must show that the circumstances in which the property was handled were such as to give rise to an irresistible inference that it could only have been derived from crime.”
Expert evidence
In making their case, the Horton parties applied for permission to rely on three reports by Tim Care which, they submitted, were expert evidence.
Expert evidence – legal principles
The judge provided an overview of the legal principles for adducing expert evidence.
Section 3 of the Civil Evidence Act 1972 provides:
“3.— Admissibility of expert opinion and certain expressions of non-expert opinion.
(1) Subject to any rules of court made in pursuance of this Act, where a person is called as a witness in any civil proceedings, his opinion on any relevant matter on which he is qualified to give expert evidence shall be admissible in evidence.
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(3) In this section “relevant matter” includes an issue in the proceedings in question.”
CPR 35.1 provides:
“Expert evidence shall be restricted to what is reasonably required to resolve the proceedings.”
The judge noted that the first task for the court was to determine whether the proposed issues for expert evidence are issues arising on the statement of case. The judge adopted the broader test set out by Bingham LJ in R v Robb (1991) 93 Cr which requires the court to assess whether the witness is skilled and has the relevant expertise by reason of their study (knowledge) and experience in the relevant field. He noted that this test more accurately reflects the current practice in litigation.
If the evidence is admissible, the court needs to determine if the evidence is reasonable required. A key question in determining that will be:
“…whether the subject matter of the opinion is such that a person without instruction or experience in the area of knowledge or human experience would be able to form a sound judgment on the matter without the assistance of witnesses possessing special knowledge or experience in the area.”
The burden of establishing whether expert evidence is both (i) admissible and (ii) reasonably required (i.e. not just potentially useful) is on the party which seek permission to adduce that evidence.
The judge noted that in British Airways Plc v Spencer [2015] EWHC 2477 (Ch), [2015] Pens. L.R. 519 Warren J (at [68]) set out a three-stage test for the application of CPR 35.1 which brings out the sliding scale implicit in the assessment of what is “reasonably required”, from the essential to the useful:
“(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.”
The proposed Expert Evidence
The judge noted that the starting point was to identify the issue to which the expert evidence is said to be directed which was set out in the PoC as “whether the existence of Dean’s money laundering scheme is to be inferred from the facts and circumstances set out in that paragraph.” The judge noted that this was not sufficient, and the Hortons would have to plead an irresistible inference.
On the admissibility of Mr Care’s evidence, while there was no evidence that Mr Care has a recognised expertise governed by recognised standards of rules and conduct, this was not an absolute bar to its admissibility under the test in Re Robb.
Mr Care’s expertise
Mr Care described himself as a “financial crime subject matter expert with a background in law enforcement, retail banking and financial services enforcement”. His relevant qualifications were an Anti-Money Laundering Diploma (International Compliance Association) and a BTEC Professional Diploma in Financial Investigation (Met Police). He had 20 years of experience in investigating and prosecuting financial crime and money laundering.
The judge noted that whether an inference can be drawn will depend on the detailed circumstances of the case and drawing an inference of money laundering from those facts is a matter of law, to be determined by the judge. Mr Care had knowledge and experience of factual situations in which a judge may (or may not, if no judicial determination has been made) have found money laundering. However, that does not, the judge decided, “confer expertise on him to give an opinion as to whether money laundering has occurred. [The Hortons] did not refer me to any case in which expert evidence as to money laundering was adduced; and it was not adduced in the cases to which the other parties referred me.”
The judge also considered that Mr Care’s evidence, even if admissible, was “neither necessary nor of assistance to the court” because it is for the judge once they have found the facts as to the detailed circumstances of the case, to decide whether the required irresistible inference can be drawn. Mr Care had no role to play in this process.
This was highlighted by the fact that Mr Care’s first and second reports did not apply the appropriate legal test because he only addresses whether certain facts are “indicative” of money laundering, and did not consider whether the test of “irresistible inference” would be met. Mr Care only amended the test applied by him in his third report.
Finally, Mr Care was not provided with the evidence filed after he prepared his third and final report.
The judge decision
The judge therefore decided to approach Mr Care’s evidence on the basis that he put forward arguments that could have been put forward by the Hortons, but those arguments were not matters of expert opinion.