Expert owes a duty of loyalty to his client!

A Company v X, Y, Z [2020] EWHC 809 (TCC)

The case does not just affect multidisciplinary or multinational consultancies but has the potential touch on the work of every expert.

We are grateful to Jessica Stephens KC of 4 Pump Court for permission to distribute her note on the recent decision in A Company v X, Y, Z [2020] EWHC 809 (TCC) where it was held “the defendant [Expert consultancy] group owes a fiduciary duty of loyalty to the claimant [Client company] arising out of its engagement to provide expert services in connection with the Works Package Arbitration”.

As the attached note highlights:

“Whilst the TCC did not decide that all experts owe their client a fiduciary duty, confining its decision to one that the circumstances in which an expert is retained could give rise to such a duty, nevertheless, the implications are clear. Particularly as the TCC went on to find not only that the first defendant owed such a duty to the claimant but that the defendant group owed such a duty thereby potentially precluding employees of other companies within that group from acting for anyone against the claimant. That seems very broad-reaching and as expert services firms have become much more multi-disciplinary in nature, likely to present real hurdles in practice…

The Court then concluded that the fiduciary duty had been breached because the two arbitrations were concerned with the same subject matters and there was an overlap of issues so “plainly” a conflict of interest…

This judgment will not be welcomed by consultancy firms.

First, whilst the ratio of the decision is that the existence of a fiduciary duty depends on the nature of the particular retainer, a fiduciary relationship was nevertheless found in what were fairly common circumstances. Appointing parties and experts would expect their relationship to give rise to a duty of confidentiality rather than one of loyalty… This judgment would preclude firms that provide expert services from accepting instructions on any dispute where a conflict of interest may (rather than will) arise and could prevent an appointed expert from ever acting against that appointing party on any other project.

… acceptance of instructions by one office of a global firm is likely to conflict out the entire firm.”

The judgment can be found at:

This is an important judgment for expert consultancies and is centred on a multinational, multidisciplinary, provider of expert witness services.

Conflict of interest

From the limited detail set out in the judgment, it appears that in Oct-19 solicitors for the claimant stated that they considered that there would be a conflict if the defendants accepted third party instructions. The defendant’s response to that was that “… we do not consider it to be a true conflict.” No further discussion took place.

In response to the claimants seeking to expand the defendants expert role in the first appointment, the defendant’s confirmed in Mar-20, 5 months after the claimant noted their objection to the third party approach in the belief that a conflict did exist, that they had been engaged and were already working for the third party in the face of a perceived conflict and, seemingly, without the claimant’s express knowledge. Members are referred to The Academy of Experts fact sheet 2016/02 (civ) Conflicts, which can be accessed here  in conjunction with their own professional guidelines.

Whilst the approach to identification, notification and management of potential conflicts is a central issue throughout the exchanges between claimant and defendant leading ultimately to the application for an injunction, the finding of a fiduciary relationship that brings an obligation of loyalty on the part of the expert is of wider significance.

We are all aware that the key function of an expert witness is to express his independent expert opinion with an overriding duty to the court or tribunal. One of the key duties of a fiduciary is the duty to act in the interest and for the benefit of his client.

What is a fiduciary relationship?

A fiduciary relationship occurs under common law where the Consultant and the Client agree that the Consultant will act for, or for the benefit of, the Client in a relationship involving trust and confidence. The Consultant has some discretion or power which affects the Client’s interests. The Client relies on the Consultant for information or advice.
Fiduciary duties are owed by, amongst others, professional advisers.

Fiduciary duties

A fiduciary has a duty to act for the benefit of and in the interests and his client. That includes, amongst other things:

  • No conflict
    The Consultant must not allow his interests to conflict with those of the Client.
  • Undivided loyalty
    A fiduciary owes a duty of ‘undivided loyalty’ to his client. The Consultant’s duty to another client must not conflict with his duty to the Client.
  • Confidentiality
    Information obtained in confidence from the Client must only be used for the benefit of the Client.

A fiduciary relationship exists between a client and their professional adviser. That relationship ends on termination of the appointment. There is no obligation on the part of the adviser to either defend or advance the interests of his former client thereafter. There is a continuing duty to preserve confidentiality and that survives termination of the appointment. Experts and/or advisers are generally poor at formally closing out appointments and thereby closing off that potential running obligation.

As to confidentiality and the expert please see TAE Factsheet 2017/01 (civ) Confidentiality.

Exclusion clauses and clauses defining the fiduciary duty

When deciding if a relationship is fiduciary, the relationship, obligations undertaken, and its commercial context is analysed. You cannot opt-out by simply labelling the relationship as being non-fiduciary.

A party may seek to define the scope of the fiduciary duties through the express terms of the contract.

Exclusion clauses must be clear and unambiguous as, generally, they will be construed against those seeking to rely upon them. Attempts to modify fiduciary duties are likely to be strictly interpreted.

How do you reconcile ‘loyalty’ and ‘independence’

It was argued “that independent experts do not owe a fiduciary duty of loyalty to their clients. Such duty is excluded by the expert’s overriding duty to the tribunal”, and “an expert witness does not owe a fiduciary obligation of loyalty to his client because such duty would be inconsistent with the independent role of the expert.”

The court considered Jones v Kaney where the Supreme Court abolished immunity for expert witnesses in relation to evidence that they gave, noting that “Lord Phillips explained that there is no conflict between the duty that an expert owes to his client and the duty that he owes to the court when giving evidence”.

Central to the finding of a fiduciary relationship was that the first defendant, whilst being appointed to provide expert services, which were referenced to the CIArb Expert Witness Protocol, to the claimant, the first defendant was also engaged to provide extensive advice and support for the claimant throughout the arbitration proceedings, i.e. advisory services alongside expert witness services.

It is those services as an adviser to the claimant, “to provide extensive advice and support for the claimant throughout the arbitration proceedings” that gave rise to a clear relationship of “trust and confidence”, which established the fiduciary duty of loyalty.

The court found that the fiduciary duty of ‘loyalty’ owed to his client when providing that advisory function was not inconsistent with an expert’s primary function of expressing his ‘independent expert opinion’ or his overriding duty to the court.

A fiduciary duty of loyalty to his client is not limited to the individual providing those services but extends to the company and may extend to the wider group.

As noted at the outset, this case does not just affect multidisciplinary or multinational consultancies but has the potential touch on the work of every expert. On the facts of the case, the fiduciary duty of ‘loyalty’ attaches to advisory or consultancy services provided by the expert to the Client. It is a relatively simple matter for the terms of appoint for an independent expert witness, or subsequent communication from those instructing, to be framed in a fashion that incorporates a requirement amounting to ‘advice’ or comment on issues or approach beyond the direct expert opinion instructed. Experts should be alive to the prospect that that additional step may attach a corresponding fiduciary duty of loyalty.

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