Expert independence or client loyalty? Court restrains experts from acting in arbitration

The expression that “there is no property in a witness” recognises that courts (and, in principle, tribunals) are entitled to receive every person’s evidence to ascertain the truth in disputes before them.[1]

Expert witnesses, while often retained privately by parties to disputes, are commonly engaged on the basis that their paramount duty is to assist the court or tribunal, which overrides any obligation to those who appoint them or pay their fees. In other words, their primary role is to provide an independent opinion on matters in dispute, and by doing so, assist in their determination.

In a recent decision referred to for the sake of confidentiality as A v B,[2] the English High Court of Justice (sitting as the Technology and Construction Court) restrained the defendants from acting as experts in an ICC arbitration. It did so by finding that the global group of companies with which the defendants were affiliated, and under whose banner they marketed themselves (Expert Group), owed a fiduciary duty of loyalty to the claimant, which the defendants had breached by accepting instructions from the claimant’s opponent without the claimant’s informed consent. The Court held the duty of loyalty applied simultaneously with, and was not excluded by, the experts’ duties of independence.

The facts

The claimant is a developer of a petrochemical plant (Developer). The Developer had entered into:

• contracts with EPCM contractors for the provision of engineering, procurement and construction management services for the project (EPCM Contracts); and
  
  
• contracts with a construction contractor for the construction of facilities required for the project (Construction Contracts).

A dispute about delays under the Construction Contracts became the subject of ICC arbitration proceedings (Construction Arbitration), in which the construction contractor sought payment (among other things) for delays allegedly caused by the late release of “Issued for Construction” drawings.

The relevant drawings were produced under the EPCM Contracts. Accordingly, to the extent the construction contractor’s claims were upheld against the Developer, the Developer would seek to recover its loss from the EPCM contractors.

The Developer appointed the first defendant, based in Asia, to prepare a report containing expert programming and delay analysis in connection with the Construction Arbitration. The first defendant’s scope also included the provision of “ad-hoc support to [the Developer] and its professional team in the arbitration”.  

Disputes between the Developer and the EPCM contractors culminated in separate but related ICC arbitration proceedings between those parties (EPCM Arbitration). In the EPCM Arbitration, the Developer counterclaimed against the EPCM contractors, including for any amounts payable to its construction contractor as a result of the EPCM contractors’ alleged failure to manage and supervise the construction works.

The EPCM contractors approached another expert, also affiliated with the Expert Group but located outside Asia, to provide quantum and delay expert services in connection with the EPCM Arbitration.

The Developer was notified of the EPCM contractors’ approach, but was also informed that the defendants considered there was no conflict preventing the acceptance of instructions in the EPCM Arbitration. The defendants’ position, explained to the Developer, was that the relevant experts practised from offices in different regions and would establish information barriers to ensure their electronic, as well as physical, separation.

The Developer applied to the Court for an urgent injunction to restrain the defendants from acting as experts for the EPCM contractors. The Developer sought relief directly against the experts, alleging the Expert Group owed and had breached a fiduciary duty of loyalty to it by proposing to accept instructions from its opponent in the EPCM Arbitration without its informed consent.

Fiduciary relationship?

Broadly speaking, a fiduciary relationship arises where one party undertakes to act for or on behalf of another in circumstances which give rise to a relationship of trust and confidence. For example, this may be because the fiduciary is able to affect the interests of its principal in a legal or practical sense.[3]

A key obligation arising from a fiduciary relationship is that of loyalty: a principal is entitled to the single-minded loyalty of its fiduciary, who cannot act for the fiduciary’s own benefit or the benefit of a third person without the principal’s informed consent.[4] Well-established categories of fiduciary relationship include the solicitor-client relationship, the director and company relationship and the relationship between partners.

The parties’ arguments

The Developer argued that the Expert Group owed it a fiduciary duty of loyalty because it had been engaged to provide advice and support in arbitration or legal proceedings as well as expert evidence. The Expert Group therefore could not, without its informed consent (which had not been given), agree to act or in fact act for a second client in a manner inconsistent with the Developer’s interests.

The defendants argued against the application of any such duty, which they said was inconsistent with, and excluded by, the overriding duty of an expert to assist the tribunal and to conduct itself independently.

The result

Having been engaged to provide “extensive advice and support for the claimant” in addition to expert services in connection with the Construction Arbitration, the Court found that the Expert Group owed a fiduciary duty of loyalty to the Developer.

The Court was unpersuaded by the defendants’ argument that the experts’ duty to the tribunal excluded the application of a fiduciary duty of loyalty. The Court reasoned that solicitors, for example, owe fiduciary duties of loyalty to their clients but a paramount duty to the administration of justice which will not always align with their clients’ interests. The defendants’ evidence was described as focusing on the physical and electronic separation of individual experts and the measures the Expert Group had taken to prevent the sharing of confidential information. As to this evidence, the Court explained:

“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 [itself] in a position where [its] duty and [its] interest may conflict.”

Because the Expert Group was managed and marketed as a global enterprise, the fiduciary duty of loyalty extended to the Expert Group as a whole and was not confined to the individual expert appointed by the Developer in the Construction Arbitration.

Accordingly, the Court restrained the defendants from providing expert services to the EPCM contractors in the EPCM Arbitration.

Implications 

The result in A v B should be carefully considered by expert witnesses and those who engage their services. The proposed scope of an expert’s engagement requires close attention by all such parties.

Experts should reflect on the obligations they may be undertaking by accepting appointments, and what conflict-checking and disclosure procedures they have in place to discharge those obligations (particularly experts who act in confidential arbitrations about which little information is publicly available).

As the result in A v B shows, a fiduciary duty of loyalty will not be discharged merely by the establishment of physical and electronic barriers to prevent access to confidential information.