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Are expert witnesses bound to be loyal?

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United Kingdom

Where an expert witness for one side in arbitration proceedings has previously provided services for the other side in separate but related proceedings, fiduciary obligations may arise.

  In a recent High Court judgment, A v B [2020] EWHC 809 (TCC) (anonymised to maintain the confidentiality of two ongoing arbitrations), Mrs Justice O'Farrell DBE continued an interim injunction restraining the defendant group of companies, a consultancy firm, from providing expert services to a party in arbitration proceedings, where an entity in the group had already been engaged by the opposing party (the claimant), in separate but related proceedings.

Significantly, O'Farrell, J. dismissed the consultancy firm's argument that an independent expert cannot owe a fiduciary obligation of loyalty to his/her client and made clear that, in appropriate circumstances, the engagement of an expert witness by a client may give rise to a fiduciary relationship between them.

On the facts, a fiduciary relationship had arisen and a duty of loyalty was owed by the consultancy firm to the claimant.

By accepting instructions to provide expert services to the claimant's opponent in related proceedings, the consultancy firm had created a potential conflict of interest in breach of that fiduciary duty.

Background

In 2012-2013, the claimant, the developer of a petrochemical plant, entered into contracts for engineering, procurement and construction management (EPCM) services and, with a separate contractor, for construction works in relation to the plant.

The project was delayed and disputes arose between the developer and the works contractor. The works contractor commenced London-seated ICC arbitration proceedings against the developer, seeking costs incurred due to the delays, including the late issue of certain construction drawings by the EPCM contractor.

In May 2019, the developer engaged the first defendant, an Asia-based company forming part of the defendant group, to provide expert services in connection with the works arbitration. The first defendant was to provide an independent expert report, as well as advice and support to the developer throughout the arbitration proceedings.

That summer, the EPCM contractor also commenced London-seated arbitration proceedings against the developer for sums due under the EPCM agreements. The developer counterclaimed in respect of delay and disruption to the project, including any sums payable to the works contractor as a result of the EPCM contractor's late issue of the construction drawings.

A few months later, the EPCM contractor approached the defendant consultancy firm (outside of Asia) to provide expert services in the EPCM arbitration.

Despite the developer's objections, the consultancy firm accepted the EPCM arbitration engagement.
In March 2020, the developer issued an application for an injunction on the ground that the consultancy firm's provision of services to the EPCM contractor breached the consultancy firm's duty of loyalty to the developer. At an ex parte hearing on 23 March, the Court granted an interim injunction in favour of the developer until the return date hearing on 31 March.

Judgment

A key issue in the case was whether independent experts can owe a fiduciary duty of loyalty to their clients.
The judge referred to the definition of a fiduciary set out in Bristol & West Building Society v Mothew [1998] Ch 1 (CA) as "someone who has undertaken to act for or on behalf of 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" (per Millett, L.J. at p. 18).

The consultancy firm argued that no such fiduciary duty could be owed by an independent expert to his/her client, because this would be inconsistent with the expert's overriding duty to the tribunal.

Having reviewed the relevant case law, O'Farrell, J. distilled the following general principles in relation to expert witnesses:
  1. In principle, an expert can be compelled to give expert evidence in arbitration or court proceedings by any party, even if they have provided an opinion to another party.
  2. When providing expert witness services, an expert has a paramount duty to the court or tribunal, which may require the expert to act in a way that is not beneficial to his/her client's case.
  3. Where no fiduciary relationship arises, depending on 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.
  4. The case law does not support the proposition that an independent expert cannot owe a fiduciary obligation of loyalty to his/her client. Depending on the circumstances, the engagement of an expert to provide litigation or arbitration support services could give rise to a relationship of trust and confidence and a fiduciary duty of loyalty. As with barristers and solicitors, the paramount duty owed by the expert to the court or tribunal is not inconsistent with an additional duty of loyalty owed to the client.
Applying these general principles to the facts, O'Farrell, J. held that, the first defendant having been engaged to provide both an independent expert report and extensive advice and support to the developer throughout the proceedings, a "clear relationship of trust and confidence arose [between the developer and the first defendant], such as to give rise to a fiduciary duty of loyalty" (para 54).

O'Farrell J further concluded that it would be "unrealistic" to limit the duty of loyalty to the first defendant, and that the duty was owed by the whole defendant group (para 59). This was on the basis that the three defendants were part of a group that held itself out as one global firm, the group took a common approach to conflict management, and the group's shareholders had a "common financial interest" in all three defendant companies (para 57).

In rejecting a suggestion by the consultancy firm that the position of the defendant group of companies was equivalent to that of barristers from the same chambers, who commonly appear on the opposite side of disputes despite their common marketing and interest in each other's success, the judge noted in particular that "it is common knowledge that barristers are self-employed individuals working from sets of chambers and that different barristers from a set of chambers may act on opposing sides. In this case, the defendants did not inform the claimant that they might take instructions to act both for and against the claimant in respect of the dispute. If they had done, the claimant would not have instructed the defendants" (para 58).

Having identified the existence of a duty of loyalty on the part of the consultancy firm, the judge then moved on to consider whether, by accepting instructions from the EPCM contractor to provide expert services in the EPCM arbitration, the firm had breached that duty.

The consultancy firm argued that it had not, including because the defendant companies were separate commercial entities and because physical and ethical walls had been put in place to prevent inappropriate sharing of information.

The judge held that this was relevant to the protection of the developer's confidential and privileged information, but did not satisfy the consultancy firm's fiduciary obligation of loyalty, as a fiduciary must not place him/herself in a position where his/her duty and interest may conflict.

Since the first defendant had been advising and assisting the developer in the formulation and presentation of its defence in the first arbitration and given the "significant overlap in the issues" in the second arbitration, which was concerned with the same delays, O'Farrell, J. concluded there was "plainly a conflict of interest" for the consultancy firm in acting for the developer in the first arbitration and against the developer in the second arbitration.

The judge therefore decided to continue the injunction restraining the consultancy firm from providing expert services to the EPCM contractor in the EPCM arbitration pending full trial of the developer's claim for permanent relief.

Comment

This decision brings important clarity to the relationship between a client and an expert witness under English law, both in arbitration and litigation proceedings.

It confirms that, as a matter of principle, fiduciary obligations may arise.

The judgment also makes clear that, if such a duty has arisen, measures commonly put in place by larger organisations to prevent inappropriate sharing of information in a potential conflict situation, such as the use of separate teams (sometimes in different geographical locations) and information barriers, will not necessarily be sufficient to prevent a firm finding itself in breach of its fiduciary obligations.

It should serve as a reminder to firms providing expert witness services of the importance of effective conflicts identification and management.

The judgment is likely to be welcomed by users of litigation and arbitration, who could well be surprised by, and uncomfortable with, the possibility of their appointed expert firm also appearing on the other side of a related dispute.

As mentioned above, user expectation appears to have been a factor that O'Farrell, J. found persuasive when rejecting the defendants' analogy with the operation of barristers' chambers.
 

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