The case has confirmed that expert consultancy firms can owe a fiduciary duty of loyalty to their clients and such duty can be owed by the whole corporate group rather than just an individual expert. In addition, such duty will likely be breached if the firm or its affiliates accept new instructions from a party whose interests are not aligned with the original client if the instructions concerns related proceedings.
Background – one expert instructed by one party; another expert from the same group appointed by another party in respect of connected proceedings
The claimant instructed the first defendant, based in Asia, to provide delay expert services in respect of an ICC arbitration it was a party to concerning the construction of a petrochemical plant (the “First Arbitration”). The claimant and first defendant signed a confidentiality agreement and formal instructions which confirmed that there were currently no conflicts of interest and this was to be maintained.
Shortly after, a third party (“Third Party”) connected to the project which the First Arbitration concerned commenced a separate ICC arbitration against the claimant (the “Second Arbitration”).
The Third Party sought to retain the second defendant as an expert to provide quantum and delay expert services in connection with the Second Arbitration. The second defendant was employed by a different entity within the same corporate group as the first defendant. The second defendant accepted the instructions.
When the claimant discovered what had occurred, they wrote to solicitors representing the Third Party objecting to the second defendant’s appointment and informed the first defendant that the appointment by the Third Party had created a conflict of interest contrary to the terms of its engagement by the claimant. The expert defendants denied that there was a conflict and maintained the position that they were able to act for both the claimant and Third Party.
On 23 March 2020 the claimant successfully applied to the court for an injunction to restrain the defendant group from acting as experts for the Third Party in the Second Arbitration arguing that the defendants had breached their fiduciary duty of loyalty which arose from the agreement to provide expert services in relation to the First Arbitration.
Continuing injunction to restrain the defendant expert group from acting
At the return hearing, the court considered 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 in this case there had been a breach of any duty of loyalty or confidence.
The court held that whilst there is no property in a witness, as a matter of principle an independent expert could owe a fiduciary duty of loyalty to a client. The court accepted however that it would depend on whether the circumstances in which an expert was retained to provide litigation or arbitration support services gave rise to a relationship of trust and confidence. The court held that this duty of loyalty runs alongside the expert’s duty to the court and relied on Jones v Kaney to confirm that there is no conflict between both duties.
After deciding that independent experts could owe a fiduciary duty of loyalty to a client the court held that such a duty existed in the present case, as the first defendant was engaged to not only provide expert services but also, to provide extensive advice and support for the claimant throughout the arbitration proceedings. The court held that in these circumstances a clear relationship of trust and confidence arose, such as to give rise to a fiduciary duty of loyalty.
In this instance the judge found that the duty of loyalty was not limited to the first defendant but was owed by the whole group. The judge commented that “Where a fiduciary duty of loyalty arises, it is not limited to the individual concerned … It extends to the firm or company and may extend to the wider group.” The judge determined that the defendant’s group is managed and marketed as one global firm, has a common financial interest across the group and has a common approach to the identification and management of any conflicts. As such, the duty of loyalty extended to all defendants.
Finally, the court held that there was plainly a conflict of interest for the defendants in acting for the claimant in the First Arbitration and against the claimant in the Second Arbitration. The arbitrations concerned the same delays and there is a significant overlap in the issues. Accordingly, the judge continued the injunction restraining the second defendant from acting as expert.
The decision is a useful illustration of the need for parties to take careful considering when appointing their experts to ensure they face no conflicts of interest. This need is ever more present in the case of larger organisations that provide expert services. Expert organisations will no doubt be looking at their terms and conditions to exclude fiduciary duties of loyalty. But where such a duty is found, it will not be enough for the instructing party and expert to say that they have sufficient confidentiality and Chinese wall procedures in place to address the issue if they have not obtained the requisite consent of both clients. As Millett LJ surmised in Bristol & West Building Society v Mothew  Ch 1 (CA)
“The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; …he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal … A fiduciary who acts for two principals with potentially conflicting interests without the informed consent of both is in breach of the obligation of undivided loyalty; he puts himself in a position where his duty to one principal may conflict with his duty to the other”