Persons Identified in Schedule 1 v Equiti Capital UK Limited [2025] EWHC 3422 (Ch)

[2025] EWHC 3422 (Ch)

Case No BL-2024-001184

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST

Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NL

Date 17 July 2025

Before

DEPUTY MASTER GLOVER

Between

THE PERSONS IDENTIFIED IN SCHEDULE 1Claimants

TO THE PARTICULARS OF CLAIMClaimant

EQUITI CAPITAL UK LIMITEDDefendant

MR SIMON HATTAN and MR OLIVER JONES (instructed by Faegre Drinker Biddle & Reath LLP) for Claimants

MR PATRICK GOODALL KC and MR TOM WOOD (instructed by Herbert Smith Freehills LLP) for Defendant

Hearing Hearing dates: 17 July 2025

Approved Judgment

This judgment was given orally on 17 July 2025 at a hearing at which the parties were present

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DEPUTY MASTER GLOVER:

[1]The hearing today is a Case Management Conference. It was originally listed for one and a half days. The parties have been able to agree on a large number of issues that would have occupied the court’s time and have drafted directions down to trial that incorporate such agreements. The parties’ approach has embodied the overriding objective and Rule 1.3 of the Civil Procedure Rules, and the court commends the parties for their conduct in that regard.

[2]The parties have agreed that there should be two experts in this claim, one to deal with issues of foreign law and the other to address issues in the field of foreign exchange trading and prime brokerage. The directions which I will make also provide the parties with liberty to apply for permission to rely on expert evidence in the field of forensic accountancy and any such application has to be made by 17 April 2026.

[3]Unfortunately, the parties have not been able to agree on all the issues for the foreign exchange trading and prime brokerage expert (the “FX Expert”) to opine upon. There are two issues for the FX Expert that are in dispute. That being the only contentious business remaining for this listed CMC, the parties informed the court in the days leading up to the hearing that only half a day was required for today’s hearing. That has invariably meant that other court business has been placed in my diary for the second half of today, which we are now running into, as well as, of course, for tomorrow. The entirety of the morning session has been occupied by counsel’s submissions on the two disputed expert issues for the FX Expert, the court rising at 1.30pm for a late and short lunch adjournment. A consequence of all of this is that my ruling on the expert issue must be relatively brief.

[4]The court has been greatly assisted by the parties’ detailed written and oral submissions. For the avoidance of any doubt, I have read the parties’ skeleton arguments. Mr Hattan made oral submissions on behalf of the claimants and Mr Goodall KC made oral submissions on behalf of the defendant.

[5]The parties are familiar with the background to this matter and I will keep my summary short, without intending any discourtesy to the complexity of the parties’ cases. The 47 claimants are all investors who came to invest in what they now say was a fraudulent scheme operated through three corporate entities known as: Mediatrix Capital Inc; Blue Isle Markets Inc, and; Blue Isle Markets Limited. Standing behind those corporate vehicles were three individuals: Michael Young; Michael Stewart, and; Brian Sewell. I understand that various of those individuals have been subject to criminal proceedings in the United States of America.

[6]The investment was in foreign exchange trading, with the claimants investing their money with Mediatrix in its “MAFEF” or “Mediatrix Fund”, with Blue Isle providing brokerage services to Mediatrix. The defendant is a London based foreign exchange broker that provided services to the Blue Isle entities. It is said that the defendant assisted the principal wrongdoers and that it is liable in dishonest assistance and knowing receipt. It is alleged that the defendant, whilst not a party to the fraud, had constructive knowledge of the fraud. This is not intended to be a comprehensive analysis of the pleaded case between the parties and again no discourtesy is intended by the brevity of my summary of the background.

[7]Turning to the issue that occupied the court today in relation to expert evidence, I have been helpfully taken by Mr Hattan to an example of the type of client trading account statement that was provided from time to time to individual claimants. The particular client trading account statement that I was taken to was for a Mr Sanchez for the month ending May 2016. That statement tends to suggest to a reader that a profit had been made on that account for that month. However, Mr Hattan pointed out to the court that the statement does not in fact record the position in respect to whether a profit or a loss had accrued in relation to “open” trading positions. The parties well understand what is meant by “open positions” in this regard. In short, that phrase encompasses foreign exchange trades where the investment in a particular currency has not yet crystallised in a final profit or a loss, because the particular currency has not yet been sold on. This is in contrast to “closed positions” where the deal is completed and a final profit or a loss can be ascertained in relation to that particular dealing. In short, Mr Hattan says that the statement is only recording for the individual client investor the monthly outcome on closed positions and, on this example, the statement shows a profit in relation to closed positions. As such, it is only presenting half of the story to the individual investor; it is not showing a real snap-shot of the investor’s trading account month to month with the ongoing potential loss or gain on open positions.

[8]A core complaint in the claimants’ case is that by failing to report on open positions, the wrongdoers were creating a false impression to the individual investors that their investments were performing well. That, Mr Hattan submits, was intentional to encourage investors to continue investing more capital into their individual investment accounts.

[9]I was also taken by Mr Hattan to an example of an account statement that would have been sent by the defendant to Blue Isle. Blue Isle was acting as a broker in the triangle of companies being used by the wrongdoers and the defendant was in turn providing brokerage services to Blue Isle. It is said by Mr Hattan that this account does show open positions and the losses standing on those positions. In short, the recipient of the account statements sent to Blue Isle would have a much better and more accurate overview as to the true success or failure of investments on a month to month basis.

[10]Mr Hattan’s position is that if the court were to take all the individual investor statements and total them up month by month, they would not correlate with the statements being provided by the defendant to Blue Isle and the impression of profit or loss being conveyed to Blue Isle. In short, it would, Mr Hattan says, demonstrate that individual investors were being grossly misled as to the true performance of their individual investment accounts, whereas the wrongdoers would know full well how the overall investments were performing.

[11]Mr Goodall KC, counsel for the defendants, placed the complainants’ complaints into two camps which Mr Hattan tended to accept as illustrative for today’s purposes. Firstly, there is a complaint by the claimants of what is called “dishonest solicitation” which concerns two specific complaints of the wrongdoers presenting a picture of a false trading record and providing misleading client account statements. The second camp was “inappropriate application” which was broken down into three allegations that the wrongdoers have engaged in(i) direct misappropriation of investor money;

(ii) trading that was inconsistent with promises made in the prospectus provided to investors, and;

(iii) taking inappropriate performance fees.

[12]I was not taken to a copy of the prospectus provided to the claimants and I understand there is not one in the CMC bundle. However, it seems uncontroversial, certainly for today’s purposes, that the scheme advanced to the claimants was said to, firstly, use a “conservative approach” and adopted a policy which involved a “well defined and carefully managed downside risk.” It is claimed that the manner in which investors were persuaded to invest in the scheme operated by the wrongdoers was by them presenting a picture of the investment being a conservative investment with managed risk. In fact, the claimants claim it was simply a fraudulent scheme.

[13]There are five issues for the FX Expert in the list of issues for that expert. The two disputed issues in relation to the FX Expert are as follows:

“1.4. Were the Client Account Statements provided to MAFEF investors in respect of the accounts being traded on their behalf misleading and/or did they fail to reflect the true position on the underlying investor accounts?” “1.5: Was trading on the Blue Isle Brokerage Accounts properly described as: (i) conservative and/or (ii) adhering to a policy which involved a well-defined and carefully managed downside risk?”

[14]The legal principles to be applied by me today are not in dispute. Part 35 of the Civil Procedure Rules deals with expert evidence and I have had particular regard to the notes to that part in the White Book in addition to the skeleton arguments that have been provided by the parties. The White Book at paragraph 35.0.1.1 states as follows:

“Role of an expert Whilst giving the unanimous decision of the Supreme Court in Griffiths v TUI UK Limited [2023] UKSC 48 at 36, Lord Hodge stated that: ‘It is trite law that the role of an expert is to assist the court in relation to matters of scientific, technical or other specialised knowledge which are outside the judge’s expertise by giving evidence of fact or opinion but the expert must not usurp the function of the judge as the ultimate decision-maker on matters that are central to the outcome of the case.’”

[15]Rule 35.1 states as follows:

“Duty to restrict expert evidence Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings.”

I note and stress the phrase “reasonably required”. Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings.”

[16]For the avoidance of any doubt, I have also had particular regard to paragraph 35.4.2.2 of the White Book where the editors set out the test for permission to adduce expert evidence. In that section of the White Book the editors reference the well-known decision in British Airways v Spencer

[2015] EWHC 2477 (Ch)

. Mr Hattan’s skeleton argument helpfully also directs the court to that authority and, in particular, the following guidance:

“68. 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.”

Mr Hattan, as I understand his submissions, submits that evidence on the two issues is not “necessary”, but rather would “assist” the court, under the approach in British Airways.

[17]Turning to the first issue in contention which I simply refer to as “Issue 1.4”, I am not at this juncture going to order Issue 1.4. My reasons are as follows.

[18]In my judgment it is likely that at trial it will be necessary for the underlying financial information to have been marshalled and distilled into a form that will assist the judge to determine, amongst other matters, whether accounts provided to investors and the accounts provided to Blue Isle by the defendant, correlated with one another. That will better enable a judge to determine whether a false trading record was presented and therefore whether client-investor account statements were misleading. However, I am not at this point persuaded that this is a task best carried out by an expert in foreign exchange trading and prime brokerage as opposed to, for example, a forensic accountant.

[19]I am also concerned that Issue 1.4 is not sufficiently defined including to capture the exercise that is actually intended, whether it be a vanilla accounting exercise or more. In the course of Mr Hatton’s clear and helpful submissions it became apparent that the claimants believe that the way in which the investor accounts were presented should have raised a suspicion or concern on behalf of the defendant. That includes the fact that those account statements do not provide both open and closed positions. It may well be that the market practice in relation to the content of client-investor statements is an issue for the FX Expert and the lack of such information, in particular if it is normal practice to include it, might cause a judge to conclude that the statements were misleading. However, that refined issue is not at this moment captured by Issue 1.4.

[20]I am also concerned by what might become the costs of this exercise if undertaken without some clear parameters. Mr Hattan noted that the exercise in the first instance would only have to be carried out in relation to the sample group of claimants that will be selected under the directions that I will be making today, so in short there may be some six or eleven sample claimants depending on how the directions machinery is followed through for sample claimants. Each of those sample claimants will have traded in the scheme for a period of time, although until the sample claimants are selected it is not clear what that period of time would be for any one of the sample claimants. Accordingly, it is not at this moment in time clear how many months of statements there might be for any given sample claimant and therefore how many months of underlying statements given to Blue Isle by the defendant will need to be analysed and correlated.

[21]In short, it is still uncertain what the exercise proposed for an expert will involve in relation to the period of time and the number of claimants’ statements that will need to be marshalled, distilled and correlated. It is not a criticism of the claimants, but it is understandably very difficult for them to even begin to provide a realistic estimate as to the cost of that exercise. It is also difficult for the claimants to address whether an FX Expert would be best placed to undertake that exercise, as opposed to a different expert or specialist, who might be able to perform the analytical task at a lower cost whether by assisting the FX Expert or in their own right.

[22]I pause at this stage to note that there is liberty for the parties to come back to court to seek permission to rely on a forensic accountant. I am not seeking in any way to restrict or constrain the issues for such a forensic accountant, or to address whether there may be some overlap between the role of the forensic accountant and the role of the FX Expert that could be addressed in the way that information might be provided by a forensic accountant to an FX Expert. It remains that at this juncture it is too early to be confident that an expert dealing with Issue 1.4 is reasonably required in this case.

[23]Turning to the second issue in contention which I simply refer to as “Issue 1.5”, the claimant pleads that the prospectus claimed that the investment would be conservative, but in fact the investments were anything but conservative. Indeed, they were, it is claimed, ultimately fraudulent. The claimants have pleaded that they were told in the prospectus that the investment scheme they were entering into had a policy that provided for a defined and carefully managed risk. The claimants say that was simply not the case.

[24]In my judgment it is extremely likely that if the claimants are right that this was a fraudulent scheme, then they would be right that the prospectus was misleading, and that the investments were anything but conservative or risk managed. However, that broad proposition does not provide the parameters for the intended role of an expert on Issue 1.5.

[25]The claimant has not sought to define in its pleaded case within the specialist context of foreign exchange trading what the claimants would contend is meant or understood within that market by the phrase “conservative” in relation to investing, or what a policy of managed downsize risk would be. Conservative investing within, for example, the bond market might be very different to conservative investing within the FX exchange market, and conservative investing in the AIM market might likewise be a very different concept again.

[26]Mr Goodall makes a forceful point that whatever is meant by “conservative” or the policy of managed downsize risk, it is for the claimants to first plead or make clear by way of further particulars or further information, whether volunteered under Part 18 or otherwise, what their case is. Mr Goodall says it is not fair to expect the defendant to try to hit what might be a moving target. In my judgment, there is force in that submission.

[27]The court has not to date been provided with a draft expert view, or other independent insight, on what might be meant by the phraseology adopted in the prospectus within the specialist arena of the FX market. As already indicated, there is no pleading on the meaning that such phrases might have in that market and on which an expert might opine.

[28]Again, at this juncture, I am not satisfied that the expert evidence on this point is reasonably required. I do not intend to shut out the claimants from advancing an issue for the expert to consider in relation to Issue 1.5, whether that is by way of further agreement with the defendant or an application back to a judge. It may be prudent for the claimants to first provide better particulars of their case on what they understood the relevant phrases in the prospectus would mean in the FX market, and to then ascertain whether their position is contentious with the defendant, but that would be a matter for the claimants to further consider. Plainly, if the parties can agree a position on meaning, the need for expert input on Issue 1.5 may abate in part or in whole. However, it remains that at this juncture, in my judgment, it is far from clear that a judge at trial will need assistance in concluding, if there was an underlying fraud, that the investment scheme was neither conservative nor well defined.

[29]That may not, of course, go to the core of the issue that the claimants want to be resolved by the FX Expert, which may be whether the defendant should have known that it was neither conservative nor a carefully managed risk. Again, however, it has not been made clear to me that the defendant was made aware that these representations were being made to the claimants in the prospectus provided to potential investors.

[30]I have not understood from Mr Goodall’s submissions today that he is seeking to shut out the claimants from raising further issues for the FX Expert. Rather, the underlying theme of Mr Goodall’s submissions has been that his client simply requires better particularisation and care in identifying precisely what it is that the experts are being asked to opine upon, where necessary with pleadings being amended to encapsulate the issue and/or further and better particulars being given in a formal way to the defendant.

[31]In my judgment, it would be premature for me today to seek to perfect issues for the expert that might seek to encompass the matters that the claimants may indeed want to have considered by the FX Expert, such as whether or not a party in the position of the defendant should have had a “suspicion” because of the way in which Mediatrix and Blue Isle were presenting client accounts statements to their investors. In fairness to the defendant, if that is to be an issue that is intended to be captured by Issue 1.4 or Issue 1.5, then that would need to be more clearly stated before it is put to experts. It is for the claimants to reconsider their approach to Issue 1.4 and Issue 1.5, in light of this judgment. Digital Transcription by Marten Walsh Cherer Ltd 2nd Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP Tel No: 020 7067 2900. DX: 410 LDE Email: info@martenwalshcherer.com Web: www.martenwalshcherer.com