Do experts owe a duty of loyalty?

9 minute read
21 April 2020

In A v B [2020] EWHC 809 (TCC), the Technology and Construction Court restrained three defendants from giving expert services in an ICC arbitration where one of them had also provided expert services to another party in a separate arbitration arising from the same project. In this article, we consider what the decision means, both for experts and for those appointing them.

Factual Background

The claimant in the High Court proceedings was the developer of a petrochemical plant (the "Developer"). It had contracts with various groups of companies for engineering, procurement and construction management services (the "EPCM Contractors"), and contracts with another contractor (the "Works Contractor") for construction works.

Disputes arose out of delays to the construction works, and the Works Contractor brought ICC arbitration proceedings ("the Works Arbitration") against the Developer. In that arbitration, the Works Contractor claimed additional costs incurred due to delay to its works, caused in part by the late release of construction drawings from the EPCM Contractors. The Developer's position was that if it was found liable to pay sums for delay to the Works Contractor, it would seek to recover those from the EPCM Contractors.

The Developer engaged the first defendant (a consulting firm in Asia) to provide expert services in the Works Arbitration. The parties entered into a confidentiality agreement and an engagement letter, and the first defendant provided expert services thereunder through a senior member of the team, 'K'.

Subsequently, the EPCM Contractors brought ICC arbitration proceedings against the Developer for sums due under the EPCM contracts ("the EPCM Arbitration"). The EPCM Contractors approached the three defendants (i.e. the same group of consultancy firms engaged by the Developer in the Works Arbitration) to provide expert services (outside of Asia) in quantum and delay in the EPCM Arbitration.

The defendants notified the EPCM Contractors that they were already engaged by the Developer (albeit acting through another office) in another dispute on the same project; and notified the Developer that the EPCM Contractors were seeking to appoint them in the EPCM Arbitration. The Developer considered this created a conflict of interest contrary to the terms of its engagement with the first defendant. Further correspondence ensued, but ultimately the second defendant company accepted the engagement and started work for the EPCM Contractors, working out of a different office and through another individual expert, 'M'.

The Developer sought an injunction in the High Court restraining the defendants from acting for the EPCM Contractors.

Do independent experts owe a duty of loyalty to clients?

The key issue for the court was to decide whether independent experts, who are engaged by a client to provide advice and support in arbitration or legal proceedings, in addition to expert evidence, can owe a fiduciary duty of loyalty to their clients, and whether such a fiduciary duty arose (and had been breached) in this case.

The Developer's position was that their engagement of the defendants as experts gave rise to a fiduciary duty of loyalty, which the defendants had breached by agreeing to provide expert services to the EPCM Contractors in circumstances where there was a conflict, or potential conflict of interest. The defendants contended that independent experts do not owe a fiduciary duty of loyalty to their clients because this is excluded by the overriding duty they owe to the arbitral tribunal.

After reviewing leading authorities on the expert's role, including the House of Lords' decision in Prince Jefri Bolkiah v KPMG [1998] and the Supreme Court's decision in Jones v Kaney [2011], Mrs Justice O'Farrell drew the following general principles:

  • 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 which does not advance the client's case
  • The nature and circumstances of the expert's appointment may mean that no fiduciary relationship arises. In these circumstances, or where the expert's appointment has been terminated, the expert's ongoing obligation to preserve confidential and privileged information does not necessarily preclude them from acting or giving evidence for another party.

However, the judge found no support in the authorities cited for the defendants' proposition that an independent expert does not owe a fiduciary obligation of loyalty to his or her client:

  • In principle, the circumstances in which an expert is retained to provide litigation or arbitration support services could give rise to a relationship of trust and confidence.
  • In common with lawyers, an independent expert owes a paramount duty to the court that may not align with the interests of the client.
  • However, as with lawyers, the duty owed to the court is not inconsistent with an additional duty of loyalty to the client.
  • Therefore, there is no conflict between the duty that the expert owes to his client and the duty that he owes to the court.

Did the defendants owe (and breach) a duty of loyalty?

The judge went on to apply these principles to the facts of this case, and found that the defendant companies:

  • shared profits and had a financial interest in the performance of their colleagues;
  • could choose which cases to accept; and
  • did not inform the Developer (from the outset) that they might take instructions to act both for and against them - had they done so, the Developer would not have instructed them.

In those circumstances, the judge accepted the Developer's submissions that any duty of loyalty to the Developer was not limited to the first defendant - it was owed by the whole of the defendant group.

Accordingly she concluded that the defendant group owed a fiduciary duty of loyalty to the claimant arising out of its engagement to provide expert services in connection with the Works Arbitration, and that the defendant group had breached that fiduciary duty by accepting instructions to provide expert services to the EPCM Contractors in EPCM Arbitration. She therefore continued the injunction restraining the defendants from providing expert services for the EPCM Arbitration.

Consequences for experts

The defendant experts' arguments appear to have majored, unsurprisingly, on the commercial measures that they, in common with many large consultancies, had in place, including physical and ethical screens; and the fact that work on the two arbitrations was being conducted by different individuals in different jurisdictions. However, the judge considered that these measures only addressed the risk that confidential information might be shared inappropriately - they did not address the defendants' obligation of loyalty to the Developer. The judge made plain that "a fiduciary must not place himself in a position where his duty and his interest may conflict", and that the measures instituted by the defendants could not guard against this risk.

In light of this decision, those providing expert support services for dispute resolution should:

  • ensure they have adequate conflict checking procedures in place to identify potential conflicts of interest (including across global affiliates); and
  • seek informed consent from parties before accepting instructions that may give rise to a conflict (or otherwise as soon as any possible conflict comes to light).

Whilst those will not be major changes for most firms, the case arguably signals a shift of emphasis and may militate towards making more cautious assessments of potential conflicts. Of course, in industries where there is a relatively small pool of experts, that may be more challenging and raise access to justice issues. This is a hot topic in arbitration at the moment, as we await the Supreme Court's decision in Halliburton Company v Chubb Bermuda Insurance Ltd on when an arbitrator can accept multiple appointments in related disputes.

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