Mr Justice Warren :
- On 21 November 2006, a CMC was held. Two principal issues were raised first, the Claimants' requests for further disclosure and secondly, whether there should be a selection of lead cases and, if so, which they should be.
- The Claimants had issued one application for disclosure covering aspects which my previous order did not. The Defendants had not had time properly to consider the application in order to respond to it. The Claimants also said that there had been inadequate compliance with the previous order; but no formal application had been made and the Defendants were unclear precisely what it was alleged they had failed to do. In any event, there was, as it turned out, inadequate time to give any consideration to the issues of disclosure. Accordingly, disclosure is to be dealt with on another occasion on a date to be fixed.
- At the CMC in July of this year, the common view of the Claimants and the Defendants appeared to be that the selection of half a dozen lead cases would be sensible, although that was not the view of all of the Additional Parties. It appeared to me at that time that the selection of lead cases would be appropriate. It appeared then that the selection of this number of cases ought to enable a sufficient range of factual scenarios to be dealt with as would, in practice, give the remaining Claimants and the Defendants a very good idea of the outcome of their own cases to enable settlements to be reached. The lead case approach had also been the approach adopted by Master Weingarten at an earlier stage, although he had envisaged a larger number of lead cases being selected.
- It was not appropriate, at the July hearing, actually to select any lead cases. The Claimants considered that it would not be possible to do so until disclosure had been given at least to the extent that I ordered disclosure on that occasion.
- The selection of lead cases is complicated by the contribution claims by the Defendants against the Additional Parties. With one exception, none of the Additional Parties wishes the case in which it/he/she is involved to be a lead case and each produces reasons why others should be selected as lead cases. This is not a surprising attitude since none wishes to have to incur the expense of preparing and attending a full trial. In this context, it is said by many of the Additional Parties that the lead case approach is unfair to those involved in the selected lead cases: in reality, it will be nothing short of a lottery, they say, whether one case rather than another is selected as a lead case and it is thus a lottery as to which of the Additional Parties is to bear the burden of trial. There are two suggested ways of avoiding this unfairness.
a. First, there should not be lead cases at all, but the claims of all the Claimants should be prepared and be listed together, although, as a matter of trial management, it would not be expected that all Claimants and all Additional Parties would need to attend all of the trial. Further, the trial Judge may, as a matter of trial management, decide to select a small number of cases to deal with first.
b. Secondly, all of the claims by the Defendants against the Additional Parties should be stayed pending the outcome of the claims (whether or not a selection of lead cases is made) by the Claimants against the Defendants.
- I would add a third possible solution which is for the Additional Parties to enter into a cost-sharing agreement (or to have one imposed). However, for reasons which I will come to, this is not a realistic solution.
- I am told that several of the IFAs are considering bringing strike out/summary judgment applications against the Defendants. That needs to be taken account of in the selection of lead cases since, it is said by some of the Additional Parties, that there is no point selecting their cases as lead cases at this stage only to find that those cases no longer have an IFA involved.
- There is one other factor to be taken into account in deciding whether to proceed with lead cases which was not appreciated until very recently and certainly not at the time of the July hearing. It relates to the funding of the Claimants' claims. Many, if not all, of the Claimants lack the means to pursue their claims against the Defendants. Indeed, the risk for a single Claimant in pursuing his or her claim in isolation might be seen as disproportionate to the potential recovery which would result even if the prospect of success was regarded as strong. Accordingly, the Claimants' advisers had always seen all of the claims proceeding together but so that, if lead cases were selected, all of the Claimants would contribute to the costs incurred by the Claimants in those lead cases.
- To cover the risk of losing, each of the Claimants has taken out After the Event insurance ("ATE"). Mr Yell, who appears for the Claimants, says that each Claimant has taken out ATE cover for £100,000; it was anticipated that the total of this cover (some £4.5 million, there being some 45 Claimants) would be available even if lead cases were selected so as to cover the risk of a costs order against them. The insurers take the view, however, that that is not what the policies provide and assert, as I understand it, that each Claimant can claim only in respect of the costs of his own action. Top-up insurance is, according to Mr Yell, available but only at huge expenses, the premium for each extra £1 of cover being close to £1. I have not been provided with any further explanation about the top-up cover but assume that it is, unlike the existing ATE cover, to be available in relation to selected lead cases.
- The insurers have not given their consent to provide the policies to the Defendants which are thus not in a position to judge for themselves whether the policy provisions do have the effect which Mr Yell has explained. Mr Yell did, however, obtain the consent of the insurers to provide me with a copy of the form of the policy and one was handed up for me to look at after the hearing. On reflection, I decline to look at it. If it is to have any influence on my decision, then the Defendants should be entitled to see it. If it not to have any influence on my decision, there is no point in my looking at it. If the Claimants wish me to take it into account, then they must obtain the insurers' consent to show it to the Defendants.
- Although it was the view of the Claimants, the Defendants and myself in July that the selection of lead cases was the correct approach to case management of this litigation, the Claimants now question whether that approach is a good idea. It is important to get this right: the fact that everyone thought it was a good idea in July does not mean that a re-think should not take place before a final decision is made. The Claimants' change of view arises not just because of the difficulties which arise in relation to their ATE insurance if lead cases are selected, but also for these suggested reasons:
a. The court cannot conduct the trial with blinkers on ie through the prism of the lead cases chosen.
b. Amongst other issues that the court will have to determine is whether the Stax Scheme was a fraudulent scam and what the state of mind of BNS was.
c. The Defendants say that if they did owe a duty of care to the Claimants, they were in breach of that duty for the reasons put forward in their claims against the Additional Parties. This they say will inevitably involve looking at the entirety of the evidence and the necessity to call witnesses who will give relevant evidence about BNS's involvement in the Stax Scheme and its state of knowledge about it. Those witnesses will not be limited to those involved in the lead cases.
- The Claimants' position is that it is not possible to determine the issue whether lead cases should be selected, let alone determine which should actually be selected, until their disclosure applications have been dealt with and until such disclosure as is ordered is provided. There is also an outstanding request for further information which, for one reason and another, has not yet been answered but which Mr Herbert, for the Defendants, says will be answered by the end of this month. Mr Yell suggests deferring consideration of whether there should be lead cases (and, if so, actual selection) until a later CMC when full disclosure has been given, BNS has given the further information which it requested a long time ago, the IFAs' strike out applications have been determined and the ATE insurance position has been clarified or resolved.
- The Defendants' position is that I should continue along the path of lead cases and make a selection now. The Additional Parties have differing attitudes. There is one IFA which wishes to participate in the hearing whether or not there are lead cases. Otherwise, some Additional Parties consider that lead cases should be pursued but only if their cases are not selected, at least unless there is a cost-sharing arrangement between all of the Additional Parties.
- Let me dispose first of all with cost-sharing between the Additional Parties. This was an aspect which was mentioned at the July hearing and I had expected that there would have been discussion between the Additional Parties about putting some such arrangements in place. In fact there have been no discussions at all, apparently on the footing that some, at least, of the Additional Parties consider that selection of lead cases would be a mistaken approach. Whether or not there are lead cases, it appears to me that there is no prospect at all of the Additional Parties agreeing a cost-sharing arrangement. And for the same essential reason which has led me to that conclusion, I do not think that it is appropriate to attempt to impose any such arrangement on them. The essential reason for reaching that conclusion is that there is simply insufficient common factual ground between the cases of each of the Additional Parties to enable common issues to be identified in respect of which it would be just to impose a cost-sharing arrangement. At least, the amount of time, effort and cost involved in seeking to establish such common ground would be wholly disproportionate to the savings (if any) in time, effort and cost in proceeding with claims against each and every IFA (whose claims are not struck out pursuant to the applications which I have mentioned).
- As I have mentioned, some of the Additional Parties say that it would be unfair if lead cases were to proceed without a cost sharing arrangement being in place. I agree that it is unfair in one sense: those Additional Parties unlucky enough to be parties to litigation which does proceed will inevitably incur costs in defending their positions. (That of course assumes they do defend: there is at least one IFA which says that it simply cannot afford to do so and that if the case in which it is involved proceeds to trial as a lead case, its position will go by default so that if the Defendants loses against the relevant Claimant, that will an end of that IFA's business.) The findings in the lead claims are likely to assist in other claims being settled without further litigation and thus at much less cost to the relevant IFAs. The description of this process as a lottery is not inapposite.
- But in another sense it is not unfair at all, or at least not as unfair as is suggested. Accusations of unfairness could not be levelled if the lead case approach were abandoned and all the Additional Parties brought to trial together. In those circumstances, each and every Additional Party who remains in the proceedings will, if he defends his position at trial, incur significant costs. It must be open to serious question whether, in doing so, he would incur greater, or significantly greater, cost than if he were a participator in a selected lead case. If that is correct, then he suffers no prejudice by being a party to proceedings selected as a lead case.
- In this context, I am of the view that the issue of lead cases and the selection of them if a lead case approach is adopted, is principally a matter of case management of the actions between the Claimants and the Defendants. The position of the Additional Parties must, of course, come into the balance as a factor: but the position of the Additional Parties should not be allowed to dictate the proper approach as between the Claimants and the Defendants unless such an approach would cause injustice to the Additional Parties.
- I want, now, to consider the position of the Additional Parties on the alternative scenarios that there are, and are not, lead cases.
- One possibility is to allow all of the claims of all of the Claimants to go forward without selection of lead cases. If that were to happen, should the Defendants claims against the Additional Parties be stayed?
a. The argument against taking this course is that, in relation to claimants who succeed in their actions against the Defendants, the Defendants' claims against the relevant IFAs would then need to proceed to a hearing or hearings (save where settlement is reached). It is inevitable that a hearing of a Defendants/Additional Party claim would cover significant amounts of ground which had been covered in the relevant Claimant/Defendants claim. In particular, the Defendants may rely on the involvement of the IFAs which they allege as a defence to the claims against them. The court will need to make findings, in the absence of the IFA as parties (although some may give evidence), about the involvement of the IFA in the events which led to the Claimant participating in the Stax Scheme. There is therefore a risk of inconsistent findings of fact when issues about that same involvement arise in the proceedings between the Defendants and the Additional Party.
b. Significantly, the relevant Claimant (who, ex hypothesi, will have won his claim against the Defendants) may be reluctant to come to court for a second hearing which is of no concern to him. And, although he may be compelled to come by a witness summons, the relevant Additional Party who calls him will be at a disadvantage in being unable to cross-examine him (unless the court directs otherwise).
c. On the other hand, staying the claims against the Additional Parties will have the advantages of (a) shortening the trial process and (b) putting off until after the trial the incurring of time and expense by each Additional Party in defending the claim against it, time and expense which will never need to be expended if the Defendants are successful in their defence against the relevant Claimant. Further, even if the defence is unsuccessful, the Additional Party may accept the evidence which was given, and the findings made, as correct even though not strictly bound by them, and settlement of claims by the Defendants against the Additional Party will be assisted.
d. Whichever argument prevails, I think it would be right to allow any case to proceed where the relevant Additional Party wishes it to do so: such a case should not be stayed.
- Similar considerations apply if a lead case approach is adopted. Although the cases which are not lead cases would be stayed (both as between the relevant Claimants and the Defendants and between the Defendants and the relevant Additional Parties), the question whether to stay the claims against the Additional Parties in the lead claims is, it seems to me, similar to the question whether to stay all of the claims against all of the Additional Parties if the lead case approach is not adopted.
- Before deciding whether or not a stay is the correct approach, I wish to address the question whether the lead case approach would be appropriate absent the claims against the Additional Parties.
- As to that, it is clear that a trial of 45 different actions is to be avoided if possible provided that justice can be done between the Claimants and the Defendants in some other way. What is needed is a fair procedure pursuant to which the real issues between the Claimants and the Defendants can be identified and dealt with without the need to investigate in depth the individual facts of 45 separate cases. The most obvious way of achieving that objective is to have a number of lead cases. I do not accept Mr Yell's submission that, in adopting that approach, the Court would be conducting the trial with blinkers on if lead cases were chosen. To the extent that the facts of a case which is not a lead case may assist in resolving issues relevant to a lead case, the Claimants in the lead cases will be able to place that evidence before the Court. In particular, evidence which goes to the knowledge of the Defendants about the Stax Scheme from time to time may come from individuals who are Claimants in cases which are not lead cases or, indeed, who are not Claimants at all. What will not be necessary in a lead case is for the Court to receive the totality of the evidence which would be adduced if each and every case were adjudicated on. That, at least, is my understanding of the position. If, however, it is the Claimants' position that the totality of their evidence against the Defendants will be adduced whether or not there are lead cases, that would be a powerful argument against lead cases. If the totality of the evidence is to be adduced in any event, there would not appear to be any saving of preparation time for the Claimants or the Defendants, or any saving of Court time. I wish to be informed as soon as possible if my understanding is incorrect.
- The Claimants' difficulties in the light of the ATE insurance position inevitably have an impact on that approach. It might be said that the Claimants' funding of their litigation is no concern of the Defendants; it is – and always has been – up to the Claimants to secure their own positions; if a Claimant chooses to litigate against these Defendants, he is entitled to do but he must accept the consequences of doing so and not complain when it appears that other Claimants are unable to support him. There are four points I need to make here:
a. First, it is not the Claimants' inability to fund the litigation which is a problem. They no doubt have CFAs with their advisers or are able themselves to fund the outgoing which they hope to recover when they win their cases as they expect to do. Their problem is not in meeting their own costs but is in meeting the Defendants' costs if they lose their claims.
b. Secondly, I do not know what the cost-sharing arrangements between the Claimants are. Although the Claimants have taken out ATE insurance, I do not know whether any or all of them would, in fact, be able to meet between them the costs of taking 6 lead cases to trial (less the amount of cover, £600,000, for the 6 Claimants in the lead cases).
c. Thirdly, as already noted, I have not looked at and the Defendants have not seen the form of the ATE policy. Before account can be taken of the difficulty facing the Claimants, it seems to me that the Court is entitled to have evidence of exactly what is covered. If the actual policy is not disclosed, there has to be credible evidence about the problems facing the Claimants.
d. Fourthly, I have no evidence about what the practical consequences would be for the Claimants if, notwithstanding their ATE insurance difficulties, I were to adopt the lead case approach. One answer might be that they would take out further, expensive, top-up insurance but if they can afford to do that, they can, presumably, afford to meet the costs if they lose rather than waste the money on a hugely expensive premium.
- In relation to that last point, if the Claimants' evidence is that, in practice, they would have to abandon their claims, that would be a very important pointer towards rejecting the lead case route. If that result is to be avoided, then either all the claims would have to proceed together, or some other case management directions would need to be made. As I see matters, forcing these Claimants in this case to abandon their claims against these substantial Defendants would not be consonant with the overriding objective to deal with case justly. It would be more just – although inconvenient and more costly overall – to direct that all claims should proceed to trial together.
- I would hope that this undesirable result could be avoided. One suggestion is as follows:
a. All the actions should continue with none being stayed.
b. 6 cases should be selected (in practice, the same 6 as would be selected if the lead cases approach were adopted).
c. The Claimants should prepare for trial as if all claims were to commence and be heard on the date fixed for trial (in 2008). Accordingly, the costs of preparation will be allocated between all of the actions in the manner which the Claimants expected when effecting their ATE insurance.
d. Thus, much of the cost being incurred by the Claimants and by the Defendants would be generic in the sense that the work would be of use in all, or several, of the actions. Those generic costs would be divided on some reasonable basis between each of the 45 actions or of the several actions in relation to which the work is of use. Costs incurred in relation to a particular action (eg investigating the facts relevant the relevant individual Claimant) would be recorded separately as the costs of that action.
e. There would be a direction now that the 6 selected cases should be dealt with at the trial first and appropriate findings of fact made and rulings given. I would envisage those findings of fact and those rulings being binding on all of the Claimants in all the claims as well as on the Defendants: if this were not so, and each Claimant was free subsequently to seek a different finding of fact, it is not easy to see how any costs, at least costs incurred in respect of the hearing itself, would be generic in the sense described. Following such rulings, the remaining actions would be heard according to a time-table to be fixed after the trial of the 6 selected cases and giving opportunity (a) for settlement and (b) completion of preparation for trial. This direction would mean that other Claimants could safely defer dealing with the facts unique to their own cases until after a decision in the 6 selected cases.
[Note, this contrasts with the lead case approach where the only persons formally bound by any findings would be the parties to the each lead case as between themselves. Other Claimants would not be bound.]
f. On this basis, the generic costs would fall on all Claimants (and thus within the scope of the ATE cover as I understand the position). The fact that it is known in advance that the work which would be of use in all or several cases is first used in the 6 selected cases will, I hope, not mean that the cost is outside the ATE cover.
- Another suggestion is that a number of preliminary issues could be identified which could form the first part of any trial and which would be relevant to all or many of the claims. The costs of such preliminary issues would be apportioned across the actions of all Claimants and the apportioned part fall within the ATE cover of each Claimant. I reject that suggestion. It appears to me to be far too difficult a task to identify such preliminary issues. I would be seriously concerned that the exercise of doing so would require such a detailed review of the claims of each Claimant as to amount not so much to a mini-trial of each claim but of something closer to a full trial. I am not willing to contemplate such large satellite litigation.
- I do not propose, at this stage of the litigation, to make a final ruling on whether there should be lead cases, selected cases or full preparation of all case for trial. I remain of the view that lead cases offer the best approach as between the Claimants and the Defendants. However, provided that something along the lines of the suggestion of selected cases can be adopted – and I readily accept that further refinement is probably necessary – I would be willing to contemplate selection of 6 (or some other number) cases if that enables the Claimants to retain the same, or similar, protection in respect of their ATE cover as if all the claims proceeded together.
- Whether a lead case or selected case approach or a full trial of all cases is appropriate as between the Claimants and the Defendants, I do not consider that the position of the Additional Parties should prevent the adoption of what would otherwise be appropriate. The question in each case is whether some or all of the Additional Claims should be stayed. I will deal with that issue finally at a further CMC (see paragraph 30 below).
- My current thinking, however, is this:
a. If a lead case approach is adopted, claims against Additional Parties in non-lead cases should be stayed along with a stay of the action between the relevant Claimant and the Defendants. So far as the Additional Parties in the lead cases are concerned, the position is different. There is obvious sense in the claims against those Additional Parties being heard together with the claims by the relevant Claimants against the Defendants. However, the totality of the claims against the Defendants are proceeding, so it seems to me, on the basis, effectively, of a collective attack (albeit in technically separate actions) by a group of Claimants. There is an element of unfairness in a small group of Additional Parties having to shoulder the burden, in time and expense, of that attack which will have been focused, by a case management direction designed to produce proportionate litigation as between Claimants and Defendants, on the particular claims of the Claimants whom they are alleged to have advised. Given that there are some advantages, as well as disadvantages, in staying the claims against the Additional Parties, there are arguments in favour of a stay and my current inclination is towards that course. But my mind is not made up, and the final decision may be influenced by which cases are taken as lead cases if that is the approach adopted.
b. If a selected case approach is adopted, the position of the Additional Parties is, I consider, a fortiori their position in relation to a lead case approach.
c. If all cases proceed to trial at the same time and all are heard at the same time (subject of course to any directions which are made at the commencement of the trial rather than as case management directions at the present time), the point about the unfairness of a few Additional Parties shouldering the burden of the litigation is not a good one. However, a different consideration then arise which is the burden, in terms of trial process, of hearing not only 45 claims by the Claimants against the Defendants, but a considerable number of claims against Additional Parties (although the extent of that cannot be known until the various threatened strike-out applications have been made and dealt with). Again, my inclination at the present time is towards granting a stay.
d. In all these cases, it seems to me appropriate, nonetheless, to allow the case involving the Additional Party who does want the claim against it to be heard at the earliest possible time to proceed. That case should therefore be a lead case or selected case if either of those approaches is taken.
- The Defendants are entitled to know whether the lead case approach or the selected case approach can proceed, or whether they are to face a trial of all the claims. I therefore propose to hold a further CMC at the earliest possible time in the new term in January 2007. By that time, I expect the Claimants to have clarified what is and what is not possible within the scope of their ATE cover. I expect them to explain on the basis of evidence why the lead case approach is not acceptable (if it indeed remains unacceptable) and the same goes for the selected case approach. I would like them also to present the court with more information about the nature and cost of the available top-up insurance. I hope that they will be able to persuade the insurers to allow the Defendants to see the policy, but if that is not permitted, I expect to see an explanation in a witness statement, rather than in submissions, of the problem and a statement of the belief of the giver of the statement that the problem is genuine. It would help if the insurers would state their own views as to the effect of the policy in writing. Perhaps they have already done so. Absent any evidence, I may well ignore the suggested alleged ATE insurance difficulties.
- By January, the Defendants will have provided answers to the request for further information, the impact of which I will be able to factor into the final decision about lead cases or selected cases. I do not consider it is necessary to await the outcome of any strike out application which may be made by any Additional Party before making that decision. I think it unlikely that it will be necessary to await compliance with a further disclosure order, if any is made, but I will review that in January, although the parties may supplement, in writing, their existing submissions if they wish.
- If it is appropriate to make a selection of lead cases or selected cases, I have full submissions from all parties who addressed me. I do not consider that I need any further submissions on that aspect at the January hearing save to the extent that any new factors have come to light as a result of any further disclosure or response to a request for further information.
- The files for the CMC on 21 November 2006 arrived very late in the day and skeleton argument, in many cases, not in time for me to read them properly before the start of the hearing. In relation to the CMC in January, the Claimants should produce any evidence and skeleton argument 7 clear days (including a weekend) before the date of the hearing, the Defendants should produce theirs 4 clear days (including a weekend) before the date of the hearing and the other parties should produce theirs 1 clear day before the hearing. These should be e-mailed to my clerk within those time limits and sent to all other parties as well.
- I am conscious that a CMC in the present case involves a large number of parties and must cost a significant amount of money. I would ask the Additional parties to consider whether they need to attend the January hearing or, if they do feel attendance is necessary, whether some way could be found to limit the numbers. There is a limit to the submissions which can be usefully made.
