Background
IBP Markets Ltd, an FCA-regulated investment bank providing wholesale brokerage services, entered special administration in October 2023. Joint Special Administrators were appointed to manage its client money pool of approximately £30.1 million. All Blue Investments North Star 1 Limited, an investment fund that traded securities through IBP, submitted a claim for £21.2 million, asserting these funds qualified as “client monies” entitled to statutory protection under the FCA’s Client Assets Sourcebook (CASS 7).
The special administrators disputed this characterisation, contending that All Blue’s funds were transferred pursuant to a title transfer collateral arrangement (TTCA), a transaction type permitted under CASS rules whereby a client transfers full ownership of money to a firm as collateral for trading obligations. If TTCAs applied, All Blue would rank as an unsecured creditor rather than as a protected client. The parties agreed to resolve specific issues of contractual interpretation and factual application at trial, scheduled for January 2027.
During directions, All Blue sought permission to adduce expert evidence on market practice and trading data analysis to challenge the special administrators’ Trading Report, which compared All Blue’s cash deposits against its market exposure on open positions. The special administrators opposed this application, arguing the issues required only contract construction and application of FCA rules, not expert testimony.
The Court’s Holding
Mr Justice Hildyard dismissed All Blue’s application for permission to adduce expert evidence. The court held that All Blue had failed to demonstrate that expert evidence was “reasonably necessary” to resolve the proceedings under Civil Procedure Rule 35.1. The Trading Report’s factual analysis—comparing the arithmetic of cash deposited versus market value of positions—does not constitute expert opinion requiring specialised knowledge and does not warrant expert rebuttal merely to express disagreement with the administrators’ conclusions.
The court found that expert evidence on market practice would only be justified if it identified an established market practice offering an alternative explanation for the trading pattern observed in the data. However, All Blue had not identified any such practice and appeared unable to articulate what alternative explanation expert evidence would provide. Permitting expert evidence under those circumstances would risk usurping the court’s interpretive function and importing expert opinion on factual matters where none is appropriate.
Nevertheless, the court left open a pathway for a renewed application. If All Blue could produce a draft expert report by 15 September 2026 demonstrating that market practice supports an alternative explanation for the observed trading pattern, and if the trial timetable could be preserved, the court would consider a second application. The renewed application must be served on the special administrators along with the draft report, at All Blue’s risk as to costs.
Key Takeaways
- Expert evidence on contractual interpretation and regulatory compliance will not be admitted merely to contradict or second-guess factual analysis and conclusions already before the court; it must point to established market practice that illuminates an ambiguity or alternative reading.
- Arithmetical comparisons from documented facts (cash deposited versus position values) do not constitute expert evidence and do not require expert rebuttal when no alternative market-based explanation is proposed.
- Courts will scrutinise closely whether proposed expert evidence addresses a genuine gap in the factual or evidentiary record or instead provides a vehicle for restating dispute as expert opinion.
- Applications for expert evidence must articulate with specificity what expertise would assist the court; vague assertions that an expert “may be helpful” do not satisfy the “reasonably necessary” test under CPR r35.1.
- Where expert evidence on market practice is sought for contractual interpretation, the evidence must illuminate genuine background knowledge or established practice relevant to the meaning of disputed terms, not merely support one party’s preferred reading.
Why It Matters
This decision addresses a recurring procedural challenge in commercial disputes: when expert evidence on market practice or trading data may be deployed in contractual interpretation. CASS compliance and title transfer collateral arrangements are of systemic importance to financial markets, yet case law on the proper interpretation and application of TTCA terms remains limited. The outcome determines distribution of £30.1 million to competing classes of creditors: if TTCAs applied, disputed clients receive nothing; if not, they share 38% of the pool while undisputed clients’ recovery falls from 56% to 38%.
The judgment establishes that expert evidence will not be permitted as a means to challenge factual analysis merely by invoking expertise, nor to express disagreement with an insolvent administrator’s conclusions without identifying a gap or ambiguity that expert knowledge would fill. This approach maintains the boundary between fact-finding (the court’s role) and expert opinion (the expert’s role) while preserving the possibility that genuine market practice evidence will be heard if properly articulated. The court’s provisional openness to a renewed application reflects awareness of the case’s systemic importance and the stakes for all creditors involved.