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The Use of Experts in International Construction Disputes: Conflicts of Interest and Multiple Instructions
- Jun 4, 2021
- Latest News
A recent decision of the Technology and Construction Court appears to be the first reported English decision to uphold a fudiciary duty of loyalty in an expert witness appointment. The finding in this case meant that an international expert services firm was unable to act for more than one party to an international construction dispute, even through separate experts in different locations contracting via separate legal entities. Given the rise of globalisation in the expert services industry, this decision is likely to have considerable ramifications for global expert services firms and the drafting of their expert witness appointments.
A v B
The developer of a petrochemical plant appointed a consultant to provide engineering, procurement and construction management (“EPCM”) services in relation to the project. The developer also engaged a contractor for the construction of certain aspects of the project. The contractor claimed against the developer in respect of additional costs incurred due to delays arising from the late release of certain designs. These were designs which the EPCM consultant was required to produce under its appointment. The developer’s position was that it would seek to pass on to the EPCM consultant any liability it might have to the contractor.
The contractor commenced an ICC arbitration against the developer in relation to its claim (the “Contractor Arbitration”). The developer engaged a delay expert from an international expert services practice (the “Firm”) to advise and act in connection with the arbitration. Some months later the EPCM consultant commenced its own arbitration against the developer for non-payment of fees (the “EPCM Arbitration”). The developer counterclaimed against the EPCM consultant in respect of delay and disruption to the project, including any liability it had to the contractor in the Contractor Arbitration.
Solicitors acting for the EPCM consultant subsequently notified the developer’s solicitors that they were proposing to retain an expert from the Firm to assist the EPCM consultant in the EPCM Arbitration. The developer objected on the basis that the Firm had already been appointed by it in the Contractor Arbitration to consider many of the same issues which would arise on its counterclaim in the EPCM Arbitration.
The EPCM consultant and the Firm sought to justify the acceptance of both retainers on four grounds:
• Each of the experts had a duty to act independently and to assist the tribunal.
• The appointed experts were natural persons distinct from their corporate employers.
• The experts were appointed in different disciplines, based in different geographic regions and engaged through different companies within the Firm.
• Information barriers were to be maintained to avoid any transfer of confidential information.
The developer rejected these justifications and sought an injunction restraining the Firm from providing expert services to the EPCM consultant in connection with the EPCM Arbitration.
A duty of loyalty?
The principle issue before the Technology and Construction Court was whether the Firm’s appointment by the EPCM consultant was in breach of any fiduciary duty of loyalty owed to the developer through its original appointment in the Contractor Arbitration. By the time of the hearing, the developer no longer relied on any risk to confidential information and the extent of physical and informational separation between the two experts became largely irrelevant. The crucial issue was whether the Firm’s appointment in the Contractor Arbitration carried with it a fiduciary duty of loyalty.
The court concluded that such a duty did apply, emphasising that the developer had engaged the Firm to “provide extensive advice and support for the [developer] throughout the arbitration proceedings”. A previous case in which an expert was found not to owe a duty of loyalty was distinguished on the basis that the client in that case was aware that the expert would continue to provide the relevant services to others including the opposing party in question.
The Firm argued that the finding of a duty of loyalty would conflict with the independent role of an expert and the duties owed to the court or tribunal in this regard. This argument was rejected by reference to the similar position in which solicitors and barrister stand:
“In common with counsel and solicitors, an independent expert owes duties to the court that may not align with the interests of the client. However, as with counsel and solicitors, the paramount duty owed to the court is not inconsistent with an additional duty of loyalty to the client. … [T]he terms of the expert's appointment will encompass that paramount duty to the court.”
The court also rejected the suggestion that the duty of loyalty was to be confined to individual persons or companies within the Firm. The court noted that there was a common financial interest in the companies involved, that the group of companies as a whole was managed and marketed as one global firm, and that there was a common approach to the identification and management of any conflicts of interests. In those circumstances, the duty of loyalty was owed by all of the corporate entities within the Firm.
Conclusions and implications
This appears to be the first reported English decision in which an expert witness has been found to owe fiduciary duties of loyalty to its client. Although not necessarily implying the existence of such a duty in every expert witness appointment, the court’s conclusion appears to flow directly from the Firm’s appointment to provide expert witness assistance generally in arbitration proceedings. Unless the court’s findings are challenged on appeal, a similar result is likely to apply to other expert appointments to assist a party generally in court or arbitration proceedings. Different considerations may apply where an expert’s assistance is sought on a small number of discrete matters only or where there is an acknowledgement that the expert may provide services to other parties connected with the same subject matter.
The decision is of particular significance in light of the relatively recent trend toward globalisation among expert services firms, particularly in the construction and engineering sphere. Expansion in this direction has often been the result of mergers between existing local practices, bringing with it the very real potential for instructions from multiple parties to an international dispute. As in the present case, such merged entities are typically marketed as a single firm with a unified management structure and a “global presence”. The court’s reasoning in the present case means that a duty of loyalty arising from a single retainer is likely to apply across all of the entities comprising such a firm.
It will remain open to expert services firms to make clear in the terms of their retainers that no duty of loyalty arises and that they shall remain free to act for other parties provided that any risk to confidential information can be eliminated. Whether such terms will be acceptable to clients remains to be seen.
References:
A v B [2020] EWHC 809 (TCC).
Authors
Adrian Bell - Partner, Lawyer
Co-head of the Infrastructure, Construction and Energy Disputes Group | Joint Managing Director for Asia and the Middle East. Adrian is a Partner and co-head of the Infrastructure, Construction and Energy (ICE) Disputes Group and is a qualified solicitor advocate.
Phillip Ashley - Partner
Phillip Ashley is a partner and solicitor-advocate who "specialises in contentious matters relating to the oil and gas and power sectors" and has advised on “matters relating to oil and gas investments in every continent except Antarctica” (Global Arbitration Review).
Matthew Taylor - Partner, Lawyer
Matthew is a Partner in the Energy, Projects and Construction group. He specialises in dispute resolution and has experience of litigation, arbitration, adjudication and a wide range of forms of ADR.
Matthew also regularly provides live project advice to help clients effectively manage risk on their projects. He also has a particular expertise in dealing with complex, high value delay cases.
Aidan Steensman - Of Counsel, Solicitor
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