The England and Wales High Court finds that experts may sometimes owe a fiduciary duty to their clients: A Company v X, Y, Z  EWHC 809 (TCC) ||| MTECC News 20.10
The claimant was the developer of a petrochemical project. It entered into two EPCM agreements with a third party, and two construction facility agreements with a contractor.
The contractor brought a works package arbitration against the claimant, seeking additional costs arising from project delays, including the late issue of for construction drawings by the third party pursuant to the EPCM agreements. The claimant engaged the first defendant to provide delay expert services. The claimant sought to pass on to the third party any costs it might be ordered to pay.
The third party brought an EPCM arbitration against the claimant, seeking monies owing under the EPCM agreements. The claimant counterclaimed for delay and disruption for the third party’s failures under the EPCM agreements, and sought to pass on to the third party, any amounts the claimant might be ordered to pay to the contractor. The third party engaged the defendants to provide quantum expert services.
O’Farrell J identified three general principles from the authorities:
- an expert can be compelled to give expert evidence in arbitral or legal proceedings by any party, even if the expert has provided an opinion to another party (i.e., there is no property in an expert witness);
- expert witnesses have a paramount duty to a court or arbitral tribunal which may require them to give evidence which does not advance their client’s case; and
- where a fiduciary duty does not arise, the obligation to preserve confidential information does not prevent an expert witness from acting or giving evidence for another party.
She said none of those principles precluded expert witnesses from owing a fiduciary duty of loyalty to their clients. She concluded that, as a matter of principle, a relationship of trust and confidence could arise depending on the circumstances of the retainer.
She held that a clear relationship of trust and confidence arose, giving rise to a fiduciary duty of loyalty, because the first defendant:
- was engaged to provide expert services to the claimant in relation to the works package arbitration;
- was instructed to provide an independent report and comply with the duties set out in the CIArb Expert Witness Protocol; and
- was engaged to provide extensive advice and support to the claimant throughout the arbitration proceedings.
O’Farrell J also found that the duty of loyalty was owed not only by the first defendant, but by the whole of the defendant group. This was because the defendant group shared profits and hence had a financial interest in each member, the defendant group was managed and marketed as one global firm, and there was a common approach to identify and manage any conflicts.
The defendants relied on physical and ethical screens between members of their group. Her Honour gave little weight to this because the fiduciary duty of loyalty is not satisfied simply with measures to preserve confidentiality and privilege. Instead, the fiduciary must not place himself in a position where his duty and his interest may conflict.
The first defendant advised and assisted the claimant in formulating and presenting its defence to the contractor’s claims in the works package arbitration, including the provision of advice as to the cause of project delays. In the EPCM arbitration, the claimant sought to pass on to the third party any claims arising from the late provision for construction drawings by the third party. Hence, the arbitrations were concerned with the same delays and there was a significant overlap in the issues. Her Honour concluded that there was plainly a conflict of interest for the defendant in acting for the claimant in the works package arbitration, and against the claimant in the EPCM arbitration.
Liability limited by a scheme approved under professional standards legislation