Out-Law Analysis 3 min. read
20 Apr 2020, 3:15 pm
The case shows that putting in place physical and electronic barriers and keeping teams of experts separate, when they are appointed in relation to litigation or arbitration over the same project, will not always suitably address conflicts that arise.
Expert witnesses are routinely used in complex construction disputes. Many experts are employed by large international companies with expert teams all over the globe. That inevitably gives rise to conflict issues.
In a recent decision by the Technology and Construction Court, an injunction was granted preventing a party from appointing an expert in an ICC arbitration on the basis that there was a potential conflict. The Court also held that a fiduciary duty, and a duty of undivided loyalty, was owed not just by the expert but also by the global group of companies to which the expert belonged.
The claimant was the developer of a petrochemical plant. Following delays to the project, the contractor commenced ICC proceedings in London against the claimant. One of the issues being litigated was the additional costs incurred due the late release of construction drawings which were to be provided by a third party. The claimant made it clear that if it was found liable to pay the contractor as a result of the late issue of the drawings, it would seek to recover such costs from the third party.
The claimant then appointed one of the defendants, based in Asia, to act as an expert witness. This was done under a formal letter of instruction and the expert commenced work on his report. Shortly thereafter, the third party also commenced an ICC arbitration in London against the claimant, seeking recovery of sums due and owing in relation to the same project.
The expert appointed by the claimant wrote to the claimant to let them know that his firm had been approached by the lawyers acting for the third party with a view to the firm providing the third party with quantum and delay experts, based outside Asia. The email stated that the third party lawyers did not consider there was a conflict, when informed of the involvement in the first arbitration, and the expert also explained that in his view there was no conflict. This was, he said, because the disputes were under different contracts and the firm was able to ensure electronic and physical barriers between the two teams.
The claimant did not agree with that position and eventually issued an application in the English High Court for an injunction to prevent the experts' firm from acting for the third party.
When the matter came before the court, the defendant argued that an expert does not owe a fiduciary obligation of loyalty to its client because that would be inconsistent with the independent role of the expert. That view, however, was rejected by the judge, Mrs Justice O'Farrell. She held that where an expert is retained to provide expert services, that does give rise to a relationship of trust and confidence. As with solicitors and barristers, this is not inconsistent with the duty owed to the court.
The judge went on to find that the fiduciary duty of loyalty was not limited to the individual expert concerned but is in fact extended to the firm and could extend to the wider group. In this case, the two experts were employed by different companies but both were owned by one entity, a group managed and marketed as one global firm, and that meant that the duty of loyalty extended to the entire group.
In addition, the judge made it clear that the obligation of loyalty was not adequately addressed by the fact that the experts could place barriers in place and that the claimant accepted that breach of confidentiality was not an issue. This was because a fiduciary may not put themselves in a position where their duty and their interest may conflict. In this case she held there was a potential conflict. The injunction was therefore granted to prevent the experts' firm from acting for the third party.
It is common now to see global firms with large teams of experts based in different jurisdictions. Managing conflicts is central to their operations. In this case the conflict was identified in time, but this case emphasises the need for such global companies to manage conflicts very carefully and consider how they respond to enquiries when they are already involved in a project. The other core finding in this case was the fact that the experts' firm could not manage the conflict issue simply by putting in place physical and electronic barriers and keeping the team separate.
This decision is highly relevant not only to experts but to parties who wish to appoint experts to act in international arbitration or other proceedings too. In this case, the decision by one party to appoint the second expert despite the objections raised due to conflict led to the injunction being granted against that party, something that could have been avoided by taking a different approach to potential conflicts.