REUTERS | Shamil Zhumatov

Expert witnesses – what is the scope of their duty?

In a case that might cause alarm to firms providing expert witness services, the Technology and Construction Court (TCC) issued a judgment this month finding that experts may owe a fiduciary duty to their clients preventing their firms acting for other parties in related proceedings.

In A Company v (1) X, (2) Y, (3) Z, O’Farrell J granted an injunction to prevent an expert witness from acting for a party in arbitration proceedings in circumstances where a colleague from the same global consultancy firm was already acting for the other party in separate arbitration proceedings.

The facts

The first arbitration proceedings were between the employer and contractor in relation to works packages for a petrochemical plant (Works Package Arbitration). The contractor was claiming additional costs for delay, which it alleged was caused by the late release of the IFC drawings. The employer engaged the services of X to provide delay expert services in the Works Package Arbitration.

Subsequently, a second arbitration was commenced by the EPCM contractor against the employer in relation to unpaid fees (EPCM Arbitration). The employer brought counterclaims for delay and disruption caused by the EPCM contractor’s alleged negligence, including for any additional sums payable to the contractor caused by the EPCM contactor’s alleged late issue of the IFC drawings. The EPCM contractor sought to engage the services of Y to provide quantum and delay expert services in the EPCM Arbitration.

X and Y were both members of the same global consultancy firm, Z, albeit they were located in different offices in different countries.

The employer sought an injunction preventing Y from representing the EPCM contractor against it in the EPCM Arbitration.

The standard position

An expert’s overriding duty is to the court or tribunal. Therefore, at all times the expert must be and must remain independent.

Experts normally also have a duty of confidentiality to their client. This is commonly set out in the expert’s letter of engagement. In this case, the expert in the Works Package Arbitration was required to treat:

“… all information, facts, matters, documents and all other materials … as confidential.”

The key issue for the court

The court had to decide whether the expert owed a fiduciary duty of loyalty, as this would mean that, absent informed consent, it could not agree to act, or act for a second client in a manner that was inconsistent with the interests of the first client.

The expert firm opposed the injunction arguing that independent experts do not owe a fiduciary duty of loyalty to their clients, as such a duty is excluded by the expert’s overriding duty to the tribunal.

The law

The definition of a fiduciary was set out in Bristol & West Building Society v Mothew as follows:

“… a fiduciary is someone who has undertaken to act for another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty.”

The court identified that there is a distinction between existing client conflicts, where the issue is whether there is a potential breach of the fiduciary obligation of loyalty, and former client conflicts, where the issue is whether there is a risk of misuse of confidential information.

The court then set out the following general principles in respect of expert witnesses:

  • In principle, an expert can be compelled to give expert evidence in arbitration or legal proceedings by any party, even in circumstances where that expert has provided an opinion to another party.
  • When providing expert witness services, the expert has a paramount duty to the court or tribunal, which may require the expert to act in a way that does not advance the client’s case.
  • Where no fiduciary relationship arises, having regard to the nature and circumstances of the expert’s appointment, or where the expert’s appointment has been terminated, the expert is not necessarily precluded from acting or giving evidence for another party.

Decision

The court found that, as a matter of principle, the circumstances in which an expert is retained in relation to litigation or arbitration services could give rise to a relationship of trust and confidence. Even though an expert has a paramount duty to the court that may not align with the interests of their client, that is not inconsistent with an additional duty of loyalty to the client. The terms of the expert’s appointment will encompass that paramount duty to the court and therefore there is no conflict between the duties that the expert owes to their client or to the court.

The court decided that in this case a relationship of trust and confidence arose between the expert firm and the employer in relation to the Works Package Arbitration because not only was the expert engaged to provide an independent expert’s report, it was also engaged to provide extensive support and advice throughout the arbitration proceedings. This gave rise to a fiduciary duty of loyalty.

The court also confirmed that a fiduciary duty of loyalty is not limited to the individual alone but extends to the firm or company and potentially to the wider group with which the expert is associated. In this case, the court considered that as the expert firms had common shareholders and were managed and marketed as one global firm with a common approach to identification and management of conflicts, the whole expert group was covered by the duty of loyalty.

The experts had sought to argue that their position was akin to barristers. It is of course common for barristers from the same chambers to act on opposing sides in litigation. However, this analogy was rejected by the court because even though barristers have common funding and marketing, they do not share profits and therefore do not have a financial interest in the performance of their colleagues. It is also common knowledge that they are self-employed individuals and that different barristers from a set of chambers may act on opposing sides. The court noted that if the employer had been aware that the expert firm might take instructions to act both for and against it in respect of disputes arising out of the project, it would not have instructed that firm.

Even though the defendants went to pains to illustrate the physical and technological systems in place to prevent confidential information being inadvertently transmitted between the two experts, the court made it clear that this was insufficient to discharge the fiduciary duty of loyalty. The court noted that:

“… the fiduciary obligation of loyalty is not satisfied simply by putting in place measures to preserve confidentiality and privilege. Such a fiduciary must not place himself in a position where his duty and his interest may conflict.”

The court held that there was plainly a conflict of interest for the expert firm in acting for the employer in the Works Package Arbitration and against it in the EPCM Arbitration and so granted the injunction.

Practical considerations

Expert firms are becoming larger, increasingly multi-national and used to deploying supporting teams to their experts for the biggest disputes.

These firms will no doubt be concerned that this decision may limit the scope of their ability to act on large projects that involve a number of separate disputes between different parties. This decision is likely to prevent firms of experts providing individuals to act for and against the same party on a project, irrespective of how good their information barriers may be.

However, it is likely that clients would have been surprised if this decision had gone the other way. Clients increasingly see the size, reputation and supporting teams available from an expert’s firm as an important part of identifying an appropriate expert. As in this case, clients are unlikely to be best pleased to see other individuals from the same global firm acting against them.

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