News / 22-04-2020 / Experts’ fiduciary duty of loyalty to clients: practical implications for marine and offshore sectors

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

In this case, companies of the same group were retained as experts by opposing sides in two related arbitration references in respect of an offshore construction project. The Court found that the whole company group, in its capacity as expert, owed a fiduciary duty of loyalty to their client, which was not inconsistent with an expert’s paramount duty to the Court or Tribunal. On this basis, the Court granted an injunction prohibiting the expert group of companies from acting for another party in the arbitration. 

This decision highlights the need for clients to be quick in retaining their experts when facing complex marine or offshore disputes, given that the number of experts able to give evidence in relation to these fields in courts and tribunals is very limited.

The background facts

The Claimant, a developer of a petrochemical plant, entered into two related sets of contracts: (a) a contract for engineering, procurement and construction management (EPCM) services with a third party group of companies (the “Third Party”) and (b) contracts for the construction of facilities with a contractor (the “Contractor”). 

Disputes arose under those contracts and both the Contractor and the Third Party commenced ICC arbitration proceedings against the Claimant, seated in London with an English choice of law clause (referred to as the “Construction Arbitration” and the “EPCM Arbitration” respectively). 

The disputes were interrelated since the sums claimed by the Contractor in the Construction Arbitration were in part caused by alleged delays of the Third Party in delivering their work to the Claimant. The Claimant brought a counterclaim against the Third Party in the EPCM Arbitration in respect of delay and disruption to the project (including any additional sums payable by the Claimant to the Contractor).

The Claimant retained the First Defendant for the provision of expert services in relation to the Construction Arbitration and subsequently the Third Party approached the Defendant group of companies for expert services in connection with the EPCM Arbitration.

When the Claimant was informed of this, it tried to prevent the Defendants from providing expert services to the Third Party by: (i) notifying their expert (employee of the First Defendant) that it wanted to expand the scope of its instructions to include expert witness evidence in relation to the EPCM arbitration; and (ii) obtaining an ex parte interim injunction restraining the Defendants from acting on behalf of the Third Party in the arbitration proceedings. 

On the return date, the Claimant sought to continue the interim injunction on the ground that the Defendants had breached their duty of loyalty by agreeing to provide expert services to the Third Party in connection with the EPCM arbitration in circumstances where there was a conflict, or potential conflict of interest.  

The Defendants countered that independent experts did not owe a fiduciary duty of loyalty to their clients because such duty was excluded by the expert’s overriding duty to the Tribunal. They also submitted that there was no risk that confidential material had been or would be disclosed to the third party and no conflict of interest since: 

• each expert had a duty to act independently and to assist the Tribunal; 
• the expert assisting in each case was not the company – it was the individual; 
• each individual was an expert in different disciplines and was based in completely different geographic regions; and 
• consultancy companies like the Defendants maintained confidential information barriers between experts and their teams precisely to avoid transfer of any confidential information. 

The Court considered whether each of the three Defendants could owe a fiduciary duty of loyalty to their clients and whether there was or might have been a breach of any duty of loyalty or confidence.

The Commercial Court Decision 

The Court ruled that experts may owe a duty of loyalty to their client in addition to their paramount duty to provide independent expert evidence to the court or tribunal and emphasized that those two duties were not inconsistent with each other. In doing so, it recognised that there may be occasions where experts have to act in a way which does not advance their client's case in order to satisfy their overriding duty to the court/tribunal. 

Whether a duty of loyalty arises is a fact-specific inquiry depending on the role of the expert in the proceedings. In this case, the First Defendant was engaged to provide expert services for the Claimant in connection with the Construction Arbitration as well as extensive advice and support for the Claimant throughout the arbitration proceedings. Therefore a clear relationship of trust and confidence arose which gave rise to a fiduciary duty of loyalty.

Moreover, the Court held that where a fiduciary duty of loyalty arises, it is not limited to the individual expert concerned. It extends to the firm or company and may also extend to the wider group. In this case, the Defendant group was managed and marketed as one global firm and there was a common financial interest. Therefore, any duty of loyalty was owed by the whole of the Defendant group and not only by the First Defendant.

Finally, the Court concluded that there was breach of the fiduciary obligation of loyalty given that: (i) there was significant overlap of issues between the two arbitration references; and (ii) the obligation of loyalty was not satisfied simply by putting in place measures to preserve confidentiality and privilege; a fiduciary must not place himself in a position where his duty and his interest may conflict. 

Comment 

This decision emphasizes that while experts must always keep in mind their overriding duty to the court/tribunal, they still owe a fiduciary duty of loyalty to their clients which effectively restrains them from putting themselves in situations of potential conflict of interest. 

The practical implication of this is that clients facing major disputes should be quick in getting their team of experts ready, especially given the limited number of experts in the marine and offshore fields.

This article was co-authored by Trainee Solicitor at Ince Ioanna Mitsaki.